Investigation into the State of Startup Financing following Brexit

This research paper discusses the status of startup financing after Brexit in the United Kingdom. It analyzes the impact of Brexit on the startup industry and provides recommendations for improvement.

Running head: INVESTIGATION INTO THE STATE OF STARTUP FINANCING
FOLLOWING BREXIT
Investigation into the State of Startup Financing following Brexit
Name of the Student
Name of the University
Course ID

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Keywords
BREXIT
MEZZANINE FINANCE
REFERENDUM
REGRESSION
RESEARCH ONION
STARTUP
VENTURE CAPITALIST

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Abstract
The research paper pertains to discuss the status of the start-up financing after the completion
of the Brexit in the United Kingdom. The study focused on the background of the start-up
sector and discussed in the context of the Brexit. A general but detailed overview of the
Brexit has also been given in the paper and supported by the reason of the occurrence of such
an exit of the United Kingdom from the European Union. The discussion of the literature
review has been done of the basis if the effect of the referendum of the Brexit to find the
implications of the activity on the start-up in the economy. It is found that the decision of
Brexit has impacted the start-up industry negatively and positively respectively during 2016
and the later years. However, different effects of the Brexit on the start-up in the United
Kingdom made it necessary to conduct the research on the effect on the start-up financing
after the conduction of the Brexit. The primary research has been done for answering the
question of the research paper. After collecting primary data and conduction analysis of the
data it is found that the start-up financing will improve after the conduction of the Brexit.
However, the recommendation has been made so that the positive effect of the Brexit can be
assured. Along with that future scope of the study has also been discussed.

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Table of Contents
Chapter 1: Introduction..............................................................................................................6
1.1 Introduction......................................................................................................................6
1.2 Background of the study..................................................................................................7
1.3 Background of Start-ups in United Kingdom..................................................................7
1.4 Rationale of the Study......................................................................................................9
1.5 Problem Statement.........................................................................................................10
1.6 Research Aim.................................................................................................................10
1.7 Research Objective.........................................................................................................11
1.8 Research Question..........................................................................................................11
1.9 Research Hypotheses.....................................................................................................12
1.10 Significance of the Study.............................................................................................12
1.11 Structure of the Research.............................................................................................12
Chapter 2: Literature Review...................................................................................................14
2.1 Introduction....................................................................................................................14
Conceptual Framework........................................................................................................14
2.2 Understanding the general concept of Brexit.................................................................15
2.3 Start-up Financing..........................................................................................................16
2.4 Summary........................................................................................................................28
2.5 Gap in Literature............................................................................................................29
Chapter 3: Research Methodology.......................................................................................31
3.1 Introduction....................................................................................................................31

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3.2 Research Method Outline...............................................................................................31
3.3 Research Onion..............................................................................................................32
Research onion.....................................................................................................................32
3.4 Research Philosophy......................................................................................................33
3.5 Justification for the Chosen Research Philosophy.........................................................33
3.6 Research Approach........................................................................................................33
3.7 Justification for Chosen Research..................................................................................33
3.8 Research Design.............................................................................................................34
3.9 Justification of the Chosen Research Design.................................................................34
3.10 Selection of Sample Size and Sampling Methods........................................................34
3.11 Data Collection Method...............................................................................................35
3.12 Primary Research.........................................................................................................35
3.13 Data Analysis...............................................................................................................35
3.14 Research ethical consideration.....................................................................................36
3.15 Research Limitation.....................................................................................................36
3.16 Time horizon................................................................................................................36
Chapter 4: Result and Discussion............................................................................................37
4.1 Descriptive statistics.......................................................................................................37
4.2 Analysis of correlation...................................................................................................50
4.3 Analysis of regression....................................................................................................52
Chapter 5: Conclusion, Recommendation and Future Work...................................................57

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5.1 Conclusion......................................................................................................................57
5.2 Recommendation............................................................................................................59
5.3 Future Work...................................................................................................................60
References................................................................................................................................61
Appendix..................................................................................................................................66

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Chapter 1: Introduction
1.1 Introduction
Brexit is the term that generated from combination of British and exit. The word came
into popularity after a referendum on 26th June 2016 that ensured the decision of United
Kingdom to make exit from European Union as 51.9 percent of the voters voted for the exit
(Freeden 2017). Surrounding the decision of the exit of United Kingdom from the European
Union, scepticism occurred in the future assumptions of the business firms, especially in the
case of start-ups. In addition, the investors became sceptical about investing in the United
Kingdom. This doubt has risen due to the change that United Kingdom might go through in
its policies re that would affect all the industry in positive or negative way. Hence, along with
the big business sectors the Brexit might also affect start-ups (McMeeking 2016). Moreover,
in a country like United Kingdom start-ups are quite common many of the innovative works
are being done by the start-ups. Hence, start-ups are an important part of the economy as they
are the future of the world of economy. In United Kingdom, the start-ups depend on the
employees that are mostly from abroad. Thus, it is also necessary to understand the view of
the abroad employees regarding the Brexit decision.
This research aims to find the effect of the Brexit or United Kingdom’s decision to
leave European Union. Brexit has given rise to various turbulence in the states of the United
Kingdom. In the referendum, majority of Northern Scotland and Ireland voted against the
Brexit, however, when the whole country is considered then the majority found to be voted
for the Brexit (Henderson et al. 2016). Hence, there could be internal conflict among the
member states due to difference in referendum results. This also might affect the business
economy of the country. Therefore, to understand the entire start-up industry financing it is

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necessary to consider and compare the start-up industry in United Kingdom before and after
Brexit.
1.2 Background of the study
The United Kingdom wanted to leave the European Union because of various factors.
Important among the factors are immigration or migration and ineffective policies to solve
economic problems (Wadsworth et al. 2016). With Brexit the people of United Kingdom who
voted for it thought that the United Kingdom government would have the own control over
its internal affair as they do not have to abide by the terms of the European Union for taking
any steps to solve any type of social, political and economic issues. However, the immediate
effect of the Brexit on the United Kingdom was not appreciable. The economy suffered from
various negative factors such as increase in inflation and decline in income, while in the long
run the country might face decline in per capita income and the economic growth of the
country may get stunned. Hence, negative effect on the economy should affect the players
operating in the economy, and thus there is a clear possibility for the start-ups to suffer from
the Brexit (Galsworthy and Davidson 2016). Therefore, such effects and predictions
regarding the economy of the country have made it essential to study the case of the start-ups
in United Kingdom.
1.3 Background of Start-ups in United Kingdom
The start-ups in United Kingdom have increased exponentially over the years. In
2015, the number of start-ups established in United Kingdom was 608, 000, and the number
of established start-ups in 2016 was 660,000 (Ft.com 2017). Thus, it is evident that the
growth of start-ups in United Kingdom was quite high before Brexit. The growth of start-ups
have high globally even in developing countries (Acs, Szerb and Autio 2015). The United
Kingdom has always been the hub of start-ups. The top start-ups of United Kingdom are
Bulb, Simba, Mous Products, Pip & Nut, Elder Technologies, Climb Online, Syft and many

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more. The future of start-ups in the United Kingdom should have been good because the
country has always promoted and encouraged start-ups that do innovative projects and solve
the problems of the business. Considering the number of start-ups and the volume of business
the United Kingdom is the third largest country in the world. The start-ups in the United
Kingdom depend on the venture capitalists for the financing part (Manigart and Sapienza
2017). The kind of business the start-ups in the United Kingdom is involved in fintech
services and technological activities such as electronics (Romānova and Kudinska 2016).
However, the growth of the start-ups in the country has been smooth and gradually growing
at a steady pace until the referendum that occurs in the month of June 2016. The outcome of
the referendum regarding the Brexit put an astonishing effect on the economy of the United
Kingdom. Many investors were not expecting outcome of the referendum, the result created a
dilemma among them, and that lead to business unrest in the economy of the country. Along
with that, the social and political situation of the country had changed in negative way. It is
thus the reason why the investors like venture capitalist who are known as risk takers took
risk averse decision and reduced their investment in the start-ups of the United Kingdom
(Bailey, Driffield and Karoglou 2017). Thus, the fall in investment in the business sector was
so significant that many start-u went out of business and many that were in the verge of
establishment never came into existence. This bad phase was at peak during the second half
of the 2016 and it made the United Kingdom a worse state for start-ups, which was once one
of the best place to open start-ups (Goodwin and Heath 2016). The main reasons that were
behind the creation of such scenario in the United Kingdom was the sudden and unplanned
decision of Brexit without making any agenda for it and hence it made it unclear to the
business, political and social sector of the country confused of the decision, which made the
condition worse (Shroeter and Nemeczek 2016). The scepticism among the foreign investors
and immigrants that come to the United Kingdom for business and job purpose respectively

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suffered from the fear of working in the United Kingdom. Thus, the star-ups along with the
fund crunch also suffered from the employee crunch (Brown, Liñares-Zegarra and Wilson
2019). Therefore, for the start-ups in the United Kingdom the Brexit acted as the negative
decision. Hence, it is important for the United Kingdom find the exact reasons of such
happenings such that the negative effects can be mitigated and the start-ups can again be
revived and encouraged to establish more in the country such that it can contribute to the
economy of the United Kingdom like before. The start-ups are thus one of the strongest pillar
of the economy on which the technological progress and innovation of a country depends
(Bitzinger 2014). Hence, research on such topic is very much necessary and thus the effect of
the Brexit of the start-ups should be studied and analysed thoroughly, considering the period
of negotiation of the Brexit and period of its exercise.
1.4 Rationale of the Study
The purpose of the research is to find the relation between Brexit and start-up
companies in The United Kingdom. The following research is carried out to understand the
current status of start-up financing in the United Kingdom. The research aims to seek the
influence of Brexit in the minds of start-up entrepreneur. It is known that start-up financing is
highly encouraged in the United Kingdom as it helps to leverage the economy of the country
but after Brexit it will affect the volatility of pound which will ultimately affect the
purchasing and spending power of the United Kingdom. After Brexit the currency fell to low
records. In fact, it is noted that it was the worst performing currencies in 2016. Later in the
year 2017, the current scenario states the positive impact of Brexit and it has been recorded
that the startup investment is increasing by 78.2% and in overall there is a funding of $2.9
billion (UBI global 2018). Therefore, huge value is created for start-ups and innovation in
UK (Weiblen and Chesbrough 2015). However, the following data on Brexit which has been
gabed from different sources states contradictory statement hence creating in the following

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Brexit research. Therefore, the concerned research gives a brief analysis and clear statement
on Brexit that whether Brexit has put positive impact or negative impact on the start-ups in
the United Kingdom. The research also focuses on the possible changes that can occur after
the implementation of Brexit.
1.5 Problem Statement
The member countries of European Union use to abide by laws, terms and conditions
of the Union to participate in the single internal market where goods, people, service and
capital moves freely (Maltby 2013). The decision of the United Kingdom or the Britain to
exit the Union has gave birth to various problems one of them is the scepticism among the
investors regarding any further investment in United Kingdom. Therefore, less investment
definitely affect the industrial and business sector of the country. The investors become
reluctant to invest in the new ventures and try to play safe. Thus, the most affected would be
the start-ups due to the Brexit. However, the Brexit is still pending and it is likely to happen
in the last quarter of 2019 (Evans 2018). The business sectors especially the start-ups are now
in better condition than they were after the announcement of the decision of Brexit was made.
Therefore, the problem is to find what will happen to the start-ups when the Brexit happens in
real, since the start-ups faced both good and bad vicissitudes after the Brexit decision.
1.6 Research Aim
The aim of the research is to make a detailed study of the start-ups in United Kingdom
and find or predict the state of the start-ups after United Kingdom makes the exit from the
European Union officially. It is also the purpose of the research paper to emphasize on the
policies that United Kingdom formulates to support the smooth launching and running of the
start-ups after the Brexit. The stand of the business and industrial sector of United Kingdom
is also important for the analysis, as it will have impact on the expansion of the start-ups.

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1.7 Research Objective
The objective of the research includes the following aspects:
 Analysis of the reasons that lead to the decision of Brexit by conducting referendum
 The terms and conditions, legal and business rules, the United Kingdom had to abide
by to be in the European Union and operate in the internal market
 The conditions of start-ups in United Kingdom before the Brexit decision was made
by the country
 The opinion or view of the world on the decision of Brexit, especially of the business
groups or individuals that has stakes at United Kingdom
 Investment fluctuations and future prospects of start-ups in the United Kingdom
specifically after official exercise of Brexit
1.8 Research Question
The research questions are based on the objective that research papers tries to achieve
by exploring the factors that have emerged due to the Brexit and affecting the start-ups in the
United Kingdom. The research questions are given below:
 What are the reasons that lead to the Brexit?
 What are the terms and conditions that United Kingdom agreed to be in the European
Union?
 What was the status of the start-ups in the United Kingdom before Brexit?
 What is the opinion of world business leaders and experts regarding the decision of
Brexit?
 What are changes in the volume of investments in the start-up business in the United
Kingdom after Brexit?

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 What are the possible future prospects of the start-ups in the United Kingdom after
Brexit?
1.9 Research Hypotheses
H0: After Brexit, the United Kingdom will not have to abide by the terms and conditions of
the European Union, there will be changes in the socio-economic structure of the country,
and it will bring more investments for the start-ups operating or planning to launch in the
country.
H1: After Brexit, the United Kingdom will not have to abide by the terms and conditions of
the European Union, there will be changes in the socio-economic structure of the country,
and it will fail to bring more investments for the start-ups operating or planning to launch in
the country.
1.10 Significance of the Study
The research study will find the status of the start-up financing in the United Kingdom
after the Brexit. The study will also contrast between the pre and post Brexit conditions of the
start-ups in the United Kingdom (Lavery, McDaniel and Schmid 2018). The discussion on
the investments made in the start-ups along with the growth in the sector is being covered in
the paper. Then again, the state of the start-ups during the Brexit process, that means, after
the announcement of Brexit until the exercise of the same is being considered as the Brexit
process. The analysis of the finding of the research paper will help to identify the pros and
cons of the Brexit that has influence over the start-up financing and guides with suitable
recommendations that might help to mitigate the cons of the process and encourages more
investment in the start-up sector (Emerson 2017).

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1.11 Structure of the Research
The research is being divided into the following chapters in order to provide a better
understanding about the structure of the research. This can be summarized as follows:
Figure 1: Dissertation structure
Source: (Created by the Researcher)
IntroductionChapter 1
Literature reviewChapter 2
Research MethodologyChapter 3
Data AnalysisChapter 4
Conclusion and RecommnedationChapter 5

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Chapter 2: Literature Review
2.1 Introduction
It is important before conducting a research, to study other relevant studies that might
provide some insight on the various aspects of the research. This section, thus emphasizes on
the literatures that are authentic and recognised by various famous organizations and
published in acceptable journals and books or submitted in recognized and renowned
universities and institutes (Hart 2018). Therefore, in the literature review chapter, the articles,
journals or any literatures that are discussed were written with the objective of providing
deeper knowledge on relationship between Brexit and start-ups (Wolfswinkel, Furtmueller
and Wilderom 2013). The effectiveness of this chapter that from studying all the articles the
objective of the research can be visualized more clearly and the concept of the research can
be presented more convincingly. Therefore, apart from the clear representation of the concept
of the research the overview of the concerned research can be understood from the
diagrammatic presentation of the conceptual framework.
Conceptual Framework
Figure 1: Conceptual Framework
Brexit
Start-ups in United
Kingdom
Effect of Brexit in United
Kingdom
Status of Start-up financing
in United Kingdom
Impact of
Brexit on the
investments in
the Start-up
sector in United
Kingdom

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Source: (Created by the Researcher)
2.2 Understanding the general concept of Brexit
The decision on the Brexit was finalized in 2016 on 23rd June, the day was Thursday
when 26.3 million people casted vote in the referendum in United Kingdom. Apart from this,
through postal ballot the number of votes gathered was 7.2 million (Van de Vyver et al.
2018). It was therefore the highest level of political contest occurred since 1992 and the total
turnout was 72.2 per cent. Majority voted for the Brexit, around 52 per cent, however, the
number of votes casted against the Brexit was much significant in numbers (Hobolt 2016). It
is thus important to study the reasons that convinced a large number of people to vote against
the decision of Brexit. The two important factors that influenced people to vote to stay in the
European Union are the slowdown in the economic condition of the country resulting into
high unemployment, high inflation and unrest in the industrial sector and sloppy productivity
(Krugman 2014). The second factor is somewhat political as the political parties that were
enjoying benefits being in the European Union advised their loyal supporters to vote against
the Brexit.
The objective United Kingdom to make exit from the European Union is to gain self-
control over the internal and external matters of the country. The United Kingdom with
Brexit wanted to end the jurisdiction of European Court of Justice in the country and control
the administration of the country from inside (Broberg and Fenger 2014). It will remove any
barriers that were there due to the terms and conditions of the European Union and make it
easier for the other countries to do business with Britain. Even after making exit from the
European Union, the United Kingdom is eager to maintain the free and mutual travel relation
with Ireland (Goodwin and Heath 2016). The immigration in Britain will be controlled and
only those will be allowed who will add to the economy of the country positively and other
that that will not be entertained. On the other hand, the rights of the European Union

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nationals and British nationals will be maintained across the lands such that there exist good
inter-state relations between the European Union member countries and Britain.
Alternatively, even after allowing immigrants from the abroad the Britain will confirm the
full protection of the native workers. The trade objectives are also clear as the United
Kingdom would like to maintain the trade relationship with the European Union, but by
remaining outside of the single market structure of the Union such that the UK do not have to
abide by the trade compliance and law of the Union or payment of large amount of money
(Zavvos and Kaltsouni 2015). As the exiting from EU will allow United Kingdom not to
make new polices of its own to deal with its internal and external matter the country will
revamp its trade polices and make new trade agreements with the other countries that will
lead to smooth trade relations and earn more benefits for Britain. Brexit may loosen up the
bond between the EU countries and Britain, but the country is focused at maintaining
collaboration with the European partners regarding advancement in the fields of science,
technology and research and innovation (Long and Blok 2017). Although, the UK wants to
end the jurisdiction of European Court of Justice in Britain, but is eager to maintain the
relationship in future with the EU to make useful arrangements on the areas of law and
intelligence. However, to make all the objectives successful a smooth and process of Brexit
needs to be implemented without stretching it too long and making any disruptions.
2.3 Start-up Financing
To understand the start-up financing it is important to understand the types of start-
ups first. In general, there are two types of start-ups; the first kind of the start-up firm is in the
form of the pre-birth stage that means the potential entrepreneur has the concept and working
plan for a firm but yet to convert it into profitable venture (Eesley and Wang 2014). On the
other hand, the firm that has been established and operating for a while but yet to achieve the
status of company as the volume of business and number of employees is not enough to

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entitle it under the company category. Therefore, the type of start-up decides the kind of
financing it will receive. However, there are also different types of start-up financing and are
relevant to different stages of firm life cycle. During the first stage of firm life cycle, the type
of finance that is relevant to the firm is known as Seed Financing (Al-Hadi, Hasan and Habib
2016). In the subsequent stages of firm life cycle, the respective types of financing are Start-
up Financing, First Round Financing, Second Round Financing and Mezzanine Financing.
A study on start-ups has found that around a quarter of the start-ups succumbed within
the first two years of the establishment and half shuts down in the first four years (Yang et al.
2014). This finding depicts that only around twenty percent of the firms survive that started
as start-up. The main causes that lead to the failure of the start-ups are owner’s death,
bankruptcy and improper access to various options of finance. However, owner’s death
cannot be regarded as a structural, conceptual and financial failure. Then again, bankruptcy
and insufficient access to finance exhibits that there are financing issues that really influences
the sustainability of start-ups. Therefore, a proper inflow of capital is necessary for start-ups
to launch or remain operational even during the periods of economic distress.
The seed finance of a start-up comes from the owners or from the relatives or family
of the owner. It is the most important type of finance for a start-up because on it the
fundamentals of a start-up is dependent and it decides the path of the start-up through which
it enters the second stage, in which it will get finance from the outside source. This phase is
the start-up financing stage. In the start-up financing stage, the main flow of finance comes
from the Venture Capitalists and Business Angels (Mason and Harrison 2017). The first two
stages of start-up financing come before the stage of production and sales. It helps in
establishment of the firm and prepares it for operation. After the first two kinds of financing,
there comes the third type of financing which is termed as first round financing and is
applicable for established and operational start-ups. The first round of finance plays a crucial

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role in determining the path and future of start-ups. The shortage in monetary requirements is
supported by the first round of finance and makes the operation smooth and successful. The
primary sources providing this kind of financing are commercial banks, customer, suppliers
and government grants (Porter and Kramer 2019). However, lending money from commercial
banks requires guarantees or collaterals. Furthermore, if the star-up firm wants to expand its
operational activities, it requires more monetary investments. Here comes the role of the
second round of financing, the start-ups require finance at this stage because increase in
expenses due to expansion plans would hurt the earning of the firm, which is not good during
the start-up stage (Maier, Sandner and Geibel 2016). This is why second round of financing is
required for every start-up for its growth. Lastly, comes the Mezzanine finance, this is the
type of finance that is required by start-ups to expand their plant or business primary,
however, it is also used for promotional and improvement activities such as marketing
activities, expenses required for improvement in product quality and working capital
(Sazonov et al. 2016). The main sources of Mezzanine finance are commercial banks and
investments banks and are available as hybrid form of financial securities that means it is
featured with both debt and equity. Therefore, it is clear that at each stage of start-ups there is
a requirement of finance and that need to be fulfilled in order to keep the start-up operational
such that it can achieve a long-term growth and bring itself up from start-up stage to company
status.
It is thus transparent from the above discussion that the outside sources of start-up
finance are very important for start-up growth, especially, commercial banks, investment
banks and government. Therefore, it is important to discuss the effect on banks that Brexit
will have or already exerting since its announcement after the referendum (Jeffs et al. 2016).
Therefore, in the following paragraphs literature reviews on banks are given along with the

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cases of start-ups in United Kingdom to gather a clearer view of the effect of the Brexit
scenario on the financial world.
The post announcement period of Brexit decision created a confusion among the
banks operation in the European Union and the United Kingdom. It is because of the
unpredictable future changes that bank might face after the completion of Brexit that means
the United Kingdom makes the exit from the European Union. There ought to be some
structural changes in United Kingdom and would have impact on the financial sector of the
country and it includes banks and financing firms. There would be structural changes in the
United Kingdom but the concern of EU is no less because banks of both EU and the United
Kingdom operates across the lands of EU and the clients of these banks are spread all over
the countries that are member of the Union (Ashcroft and Bevir 2016). Hence, any change in
United Kingdom definitely has impact on the EU. The financial sector players are thus
worried about the outcomes. These scepticisms generated reluctance in the attitude of the
banks and resulted into safe play, which in turn reduces the amount of loans disbursed to the
business sector and thereby decreased the total investment. Therefore, until and unless the
terms and conditions of British exit from the EU is finalized and brought in front of all this
situation of uncertainty will keep on existing and the economy thus have to keep suffering.
After the referendum in 2016 regarding the Brexit, the forecast for economic growth
of United Kingdom has been reduced by many organizations such as Ernst & Young and
International Monetary Fund. Ernst & Young has reduced the economic growth forecast for
2017 from 2.4 per cent to 0.4 per cent and International Monetary Fund reduced the
economic growth forecast for 2017 from 2.2 per cent to 1.3 per cent. However, Bank of
England has not furnished any figure but said that the Brexit would have negative impact on
the economy of United Kingdom. The time has spoken for itself, and the spur in investment
in European Union countries, by the companies in United Kingdom depicted that the forecast

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of lower economic growth was not made on vague assumptions. The outcome of the
referendum boosted the foreign direct investment in the European Union, and the investment
came from the United Kingdom. The rise in investment in the EU from the United Kingdom
recorded to be 12 per cent. The companies were of the thought that the Brexit would be
harmful for the Briatin, there will be negative impacts on the economy that would further
affect the business sector, and thereby the companies would face loss or lesser growth than
expected. Thus to avoid this they increased investment in the EU, which felt safer to them for
investment. It was estimated that from 3rd quarter of 2016 to September 2018 there was 8.3
billion pounds increase in investment in EU from the United Kingdom whereas investment
from the EU to the United Kingdom has decreased by 11 per cent, which was then equivalent
to 3.5 billion pounds. Hence, it is evident that the effect of the Brexit on the economy of the
United Kingdom was not at all pleasant. The firms also believed that there would be trade
barriers due to the Brexit and thus after the referendum regarding the Brexit there was an
economic slowdown in the economy. The impact of this slowdown was also experienced by
the start-ups and the investment in this sector fell drastically. Apart from this, the new or
potential entrepreneurs who were planning to establish new firms became sceptical and were
afraid of launching new start-ups due to the Brexit because the new firms might not get
enough financial support from the investors and financial institutions and fail to emerge as a
company in future. The owner would possibly face loss and might get bankrupt.
According to a news article published in website of BBC in February 2017, the start-
ups in the United Kingdom faced drop in financial support after the Brexit referendum. The
investment in United Kingdom fell significantly. For example, the investment in the star-ups
related to the financial technology has fell by one-third. Innovate Finance, the representative
of 300 Fintech companies in the United Kingdom, provided the information that in 2015 the
amount of investment in the fintech companies was $ 1.2 billion, whereas, by the end of 2016

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the amount of investment dropped to $783 million. Contrarily, the fall in investment in
fintech companies was not a global financial activity because there was a 10.9 per cent rise in
global fintech investments. There were 1439 fintech start-up companies in 2017 globally and
together all the companies attracted a corpus of $17.4 billion in investment. Moreover, China
and United States also invested $7.7 billion and $6.2 billion respectively in the fintech start-
ups, both countries invested several times of the amount the United Kingdom invested.
Therefore, it is evident that decision of the Brexit hampers the operation of start-ups in the
United Kingdom significantly. The key reason behind such happenings was the existence of
uncertainty about the structural changes and the new polices that would be included under the
rules and regulations due to the Brexit. The Venture Capitalists, who generally invest in the
risky opportunities and firms, had also stepped down from taking risks. The investors were
not willing to invest in the risk projects in the United Kingdom due its uncertain social,
political and economic scenario. More than 30 per cent bosses of the fintech start-up
companies were from abroad and the investors fear is that if the tech talents are force to move
out from the Britain due to new immigration laws then the fintech companies might shut their
operation in the country and thereby the investors would face loss. Unlike the venture
capitalists, the private equity firms raised significant amount of fund for investments in less
risky businesses. Thus, it can be said that for the start-ups that are in early stage will have to
face financial issues, but the start-ups that are operating smoothly and making considerable
profit will have the support of the private equity firms for financial needs.
According to Welfens (2016), the decision Brexit have affected the economy of the
United Kingdom quite adversely. The evidence of the adverse effects can be found from the
cost benefit analysis given in the paper of Welfens. Although the process of Brexit is still
under process the cost benefit analysis provides a clear vision of the losses that the United
Kingdom might suffer after the exit from the European. After exiting from the EU, the United

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Kingdom will lose its market share in the single market of the EU. There will be loss in
exports and the terms of trade will be hampered as many countries other than the EU
members would not be sure of the political, social and economic rules and regulations of the
country and will be slightly reluctant to act positively towards making prospective trade
relations. Apart from effect on the trade, The United Kingdom will also suffer reduction in
total output of the country and as a result of all these losses the national income of the
country fell by -15.8 per cent. Therefore, the result of the cost benefit analysis depicts that it
is quite uneasy for the starts-ups to grow in such an economy in which existing firms are
suffering adversely.
According to Khayrattee (2018), London has been the heaven for venture capitalists
and start-ups; it was successfully able to attract the talent and many turned out to be
successful after establishing start-up in London. As per the Genome Ecosystem for the start-
ups, for London the talent score and start-up experience score was quite high, thus it can be
said that for start-ups the United Kingdom is a good option to start new ventures. However,
after the referendum that ensured the decision of Brexit, the venture capitalists and start-ups
suffered badly. Exiting from the European Union would give rise to various challenges for
the venture capitalists and start-ups as acquisition of talents would become much difficult for
them. Thus innovation would suffer, which might lead to exit of the start-ups from the
country. It is known that venture capitalists and start-ups are complementary to each other,
venture capitalist like to invest in risky but innovative business and star-ups require
continuous flow of fund that would help them to run smoothly. For growth of start-ups
encouraging investors is a necessary and this role is quite well played by the venture
capitalist, they boost the start-ups to take risky and innovative steps pus them towards
success. Unfortunately, the Brexit would push the venture capitalist into such uncertainties
that they would fear to make any risky investment in businesses in the United Kingdom. As

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the exiting from the European Union would close the doors to internal single market for the
United Kingdom, it will result in adversities that the country will face in the trade sector and
there might arise trade barriers ceasing smooth operation of export and import sectors. It will
further cause the domestic business firms to suffer along with the newly established firms and
start-ups. Then again, poor trade will affect the exchange rate and thus people would be less
attracted to work in the United Kingdom and thus overall investment in the businesses along
with the start-ups suffer. Hence, start-up financing is suffering just after the Brexit decision.
In the above literature reviews, it is found that how start-ups might get affectd by the
Brexit in the United Kingdom, but is should also be mentioned that London a city in United
Kingdom is regarded as heaven for the start-up business. It is regarded as the third fastest
growing start-up hub. In 2017, the amount of fund accumulated for the start-ups recorded as
7.1 billion euros. Many successful start-ups in London are operating successfully and it
attracted most number of venture capitalists among all the major start-up encouraging cities.
Thus, the effect of Brexit seemed to have affected the start-ups in the United Kingdom just
after referendum on the Brexit. However, with passage of time, the adversities have
diminished and the start-up businesses along with venture capitalist are rising again in the
country.
The time has healed the injury of the economy of the United Kingdom it got from the
shock of the Brexit. It is now in reviving condition and the country is hoping to progress
further in the future, especially in the area of start-up business. It is being argued that the
Brexit has acted as a positive catalyst and the effects are gradually becoming visible. The
Fintech are actually adding boost to this start-up sector in the United Kingdom. The event of
Brexit has gave rise to the concept of cross border payments and thus enabling investors to
invest in new avenues and thereby promoting the start-up business. Apart from this, other

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successful fintech start-up areas are digital banking, mobile banking, digital foreign exchange
providers and digital small business lending systems. In 2017, the start-ups in the United
Kingdom has seen very impressive growth in the investment as there was 78.2 percent
growth in the start-up business compared to 2016. In the total investment, the share of fintech
investment was also remarkable and recorded as $2.9 billion. Therefore, it is evident from the
data that the Brexit is not as bad as it seemed after the conduction of the referendum in June
2016. The sudden decision of Brexit and the undecided terms and conditions of making the
exit from the European Union had put the business sector into dilemma and as a result, the
slowdown in the economic growth occurred. Mainly, the policies of migration, immigration,
trade and business investment were not clear and the politically the country was a bit
unstable. All these together created a cloudy atmosphere in the economy and the investors
and potential entrepreneurs feared to do anything in the United Kingdom. Although it seems
it has now been much eased up, the investments are again entering the country, and new start-
ups are emerging and making good prospect.
The Brexit would have direct impact on the foreign direct investment, as exiting from
the European Union would make various changes because the United Kingdom could not
participate in the Single Market. The operability of the United Kingdom in the Single Market
of the European Union acted as the tool for attracting FDI (Dhingra et al. 2018). It is because
that as a member of the EU, there was no huge cost for the exports of the United Kingdom to
the rest of the countries of the EU. Thus, investing in the United Kingdom while it is in the
EU is beneficial for the foreign investors. However, due to the Brexit, the United Kingdom
could no more enjoy the benefits of barrier free exporting to the EU member countries. Thus,
it would be costlier for the multinationals with headquarters in the EU countries to operate in
the United Kingdom because after Brexit they would face different regulations for co-
ordinating between their local branches and headquarters since they have complicated supply

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chains. With this, the intra-firm transfer of staff, machineries and means of production would
be difficult as the different rules increases. The changes in rules and regulations therefore
would increase the cost of production of the multinationals and thus production is not
attractive anymore, hence, there is fall in FDI in the United Kingdom after the Brexit. The
fall in FDI is also harmful for the United Kingdom as from FDI the country earns enough
benefit. Along with capital inflow, the FDI brings improved technologies and better
management practices. Eventually, all these factors contribute in improved productivity of
the business and industrial sector and pose better competition for the domestic firms, as a
result the product manufactured and services available in the country improves over time and
gains trade advantage over other countries and thus export sector improves and the country
experiences economic growth. Hence, fall in FDI due to Brexit is not desirable for the growth
of the United Kingdom. The negative impact of fall in FDI would also affect the start-ups in
the United Kingdom.
According to Forbes (2018), the start-ups in the Europe are not worried about the
Brexit because the single market concept of the European Union does not affect the start-ups
as most of the start-ups are engaged in technology-based works. On the other hand, the exit of
the United Kingdom from European Union affects the companies that are involved in
business of tangible goods, railways, airlines and energy. However, there are start-ups, which
suffer from cross-border gaps from the initial times irrespective of exercise of Brexit. It is
also evident that start-ups thrive during the periods of distress. In the period of recession,
Airbnb and Uber solved the problem of joblessness and many were able to pay their bills due
to the rise of these companies. Thus, problems that arise from the chaotic situation of the
socio-economic circumstances are solved by the start-ups as objective of most of the start-ups
to identify the problems that are not yet been identified or solved but those require serious
attention and solving those can make real changes in the economy.

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After the Brexit, it has been argued by many that it would hamper the start-up
business in whole of United Kingdom and it did so just after the referendum. Although from
2017 sluggish start-up business again started to pick up its growth pace as the investment
began to rise and enough money has been funnelling to the start-up business and giving it a
boost. Investment has been increasing since then and in 2018 the 6.5 billion euros has been
invested in the start-up sector and by this it does not seem that the Brexit in anyway is
hampering the growth of start-up in the United Kingdom. However, it is not that investment
has been easier after the Brexit referendum, but it is also not that the exit decision of the
United Kingdom has made it worse for the start-ups to grow. The main issue that start-ups
face is that most of the employees that they hire are from abroad. The reason behind this has
not been known yet, but the speculation is that the start-ups mainly cater to the abroad client
or customers and thus it is better for the start-ups to hire talents from the abroad because it
would be harder for the locals to understand the requirements of the clients from abroad.
Therefore, after the Brexit due to distress in the United Kingdom, many talents were in
dilemma to start job in the country and opted out of it, which created a temporary flux in the
start-up business but with more clarity on the Brexit, this problem has melted down.
However, it should not be forgotten that the emergence of start-ups has been occurred with
the easing up of cross-border relations, globalization and improvement in trade relations
among the country, which has increased the ease of doing business index of many countries
and opened up opportunities for new ventures.
The discussions that have been made so far are about the direct difficulties that
the start-up has faced after the Brexit referendum or would face after the Brexit, but there are
other factors that might not seem to have directly affect the start-ups but would influence the
sector in other ways. One of such factors is the relation between the European Union member
countries with the United Kingdom. The countries that are still in the European Union would

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have to abide by the rules and regulations of the Union and thus cannot take any different
step to improve relationship with the United Kingdom if required. Hence, companies and
employees from such countries would be facing issues working in the United Kingdom.
Thus, the pool of talents would shrink for the United Kingdom business. The Scandinavian
countries are also the member of the European Union and thus if the United Kingdom could
not maintain good relationship terms with the EU then it would be difficult for the United
Kingdom to share technology and talents of the Scandinavian countries which would be a
downside for the start-ups in the United Kingdom.
For the start-ups one of the primary source of financing is crowd funding. The
concept of crowd funding has emerged not much before, but has gained enough popularity
among the start-ups and small firms. The crowd funding is the fund that the start-ups and
small firms raise from the mass that means via the general people of the country.
Various websites act as the fundraiser for the start-ups and it is not like the bank financing
and hence there is no collateral and is one of the safest form of financing. Hence, it is
necessary to look at the condition of the crowd funding in the United Kingdom since it is the
only source that do not require any risk assessment by the investors. It is because the
investors do not do it for profit, it is actually donations made by the people to promote and
support the new firms or star-ups that are doing something for the society and solving the
problems that not yet been addressed yet by the government or any other organization.
Examples of such start-ups are tech news channels, educational channels and many more.
However, crowd funding is not popular among start-ups that are into manufacturing sector or
service sector. Therefore, these areas are required to be explored to find that if it can be used
for supporting the other start-ups as well. Thus, to extend the finance support to the potential
start-ups that are not into social sector the introduction of the equity crowd funding has been
made. However, the way it is successful for the news related starts-ups, it could not do the

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same for the other sectors and has failed the cause. In the United Kingdom the crowd funding
existed since 2011, but since its advent many companies has come into existence but most of
them gone out of business by 2016. It is seen that in the United Kingdom, the people like to
invest money in casinos or activity centres rather than investing in companies to support them
and earn dividends. Thus, if any financial crisis occurred after the exercise of the Brexit then
the start-ups in the United Kingdom would not have any option like the start-ups in the
United States. Thus, financing state of the start-ups should be improved in the United
Kingdom. Therefore, financing of the start-up sector in the United Kingdom is solely
dependent on the venture capitalists and commercial banks. The scepticism among the
venture capitalists and the commercial banks, especially in the case of foreign banks and
foreign venture capitalists would be the main issues regarding the growth of start-ups in the
United Kingdom. Therefore, still it is not clear what the condition of the start-ups financing
in the United Kingdom is going through since the fluctuations in the industry has given rise to
various scepticism in the economy.
2.4 Summary
The United Kingdom has always been the heaven for the start-ups. It is among the top
three countries that encourages the start-ups. The start-ups that are operational in the United
Kingdom are mostly involved in fintechs and technological innovations. The main sources of
finance for the start-ups in the United Kingdom are from the venture capitalists and
commercial banks. Both the types of the start-ups are existent in the United Kingdom.
Therefore, there is requirement for all the types of start-up investment in the country. The
business of the start-ups in the United Kingdom was going well until the announcement of
the Brexit decision was made after the referendum that happened in June 2016. The sudden
shock of the announcement affected all the political, social and economic structures of the
country and a situation of distrust emerged in the country. As a result, the business sector also

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got affected and the start-ups of the country too faced investment issues. The venture
capitalists the main source for the start-up financing felt that investing fund in the start-ups of
United Kingdom might bring excess risk and thus they remained inactive after the
announcement of the Brexit. It has reduced the investment in the start-up sector significantly
and thus the start-up business during that time suffered badly in the United Kingdom. The
experts is of the opinion that due to the Brexit the inflow of foreign direct investment will
decrease as the structural changes in the United Kingdom might make it difficult for the
foreign companies and investors to operate in the United Kingdom. As a result, the export
sector will suffer and employment falls. Therefore, with the induced effect, the gross
domestic product of the economy decreases and thus the economic growth of the United
Kingdom suffered. However, with the passage of time, the situation eased up and the
economic condition of the country revived. In 2017, the investment in the start-up sector
again rose up, and in 2018, the fund raised by the start-ups was considerably high. Along
with the other start-ups the fintechs too brought themselves out from the sluggishness. In
2019, 1423 start-ups registered in the United Kingdom and it depicts that even after the
announcement of the Brexit and during the process of the negotiation of the Brexit. Foreign
direct investments that drooped after the announcement of the Brexit have now gained pace.
The volume of foreign direct investments has increased significantly and the new investments
occurred in the start-ups sector. However, the crowd funding was not successful in the United
Kingdom and thus the start-ups has to depend on venture capitalists and the commercial
banking system. Therefore, the evidence regarding the start-ups in the United Kingdom
showed that after result of the referendum of the Brexit start-ups in the United Kingdom was
in fluctuating condition and it is difficult to assess the start-ups correctly. There are other
crunches in the start-up sector globally and thus the fluctuations that are occurring in the
United Kingdom might be due to the factors other than the Brexit.

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2.5 Gap in Literature
The literatures that are discussed above in the review part of the chapter mostly
discussed about the types of financing required for supporting a start-up. The start-ups in the
United Kingdom has performed well until June 2016. This is because the announcement of
Brexit created dilemma among the entrepreneurs and the financial sector of the economy and
thus the investment fall in the sector following the announcement of the Brexit and thus the
start-ups suffered due to lack of fund during that period. Therefore, the view regarding the
start-ups situation after the announcement of the Brexit is available but what will be the effect
after the exercise of the Brexit is not yet been known from the information available. The
studies have been made on the after effect of the announcement of the Brexit. The finance in
the start-up sector declined in the second half of the 2016 but it increases since 2017 and the
investment has been rising after that. However, from the literatures the idea of rise or fall in
investment is not clear as the information or data was given in generalized form. The impact
would have been clearer if the data was available for different start-up sectors. The impact of
Brexit would then be understood sector wise and the investment problems could be identified.
It is known from the articles that crowd funding is also present in the United Kingdom but it
did not work crowd funding is generally for the web start-ups that work as news media.
Similarly, for every type of start-up there is specific kind of financing mediums like venture
capitalists, commercial banks, government grants and crowd funding. Moreover, the effect of
the Brexit on the start-up financing is bit unclear as the start-up has seen both fall and rise in
investment after announcement of the Brexit. Investment in any business are made after
perceiving the future prospects of a business and no investment is done for short term
especially in the case of start-ups since this sector requires continuous and steady financial
support. Therefore, the investment that has been made in the year 2018 and 2019 in the start-
up sector would possibly get return or see result after the start-ups reach a stable position.

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Thus, this would not happen suddenly. Thus, different literatures provide different aspect and
thus the confusion regarding the future of the start-ups after the completion of the Brexit
remains. Therefore, the major gap in the literatures is that the articles and studies did not
cover the views of the entrepreneurs and thus it is not known from the articles that what will
be the stand of the entrepreneurs after the conduction of the Brexit. Furthermore, the Brexit
has not yet been completed thus officially the United Kingdom still a member of the
European Union and it has to abide by the rules and regulation of the Union, hence analysing
the investment status in the start-up industry in this period cannot provide the insight of the
future condition of the start-up financing after the Brexit. Thus, to predict the future status of
the start-up financing in the context of the Brexit more research is required.
Chapter 3: Research Methodology
3.1 Introduction
In order to conduct the research with feasible and credible procedure the research
methodology provides a solid base, which is to be pursued while performing the research.
One of the main aspect of this research is to understand the gap in the existing research
relating to this abovementioned topic. This research also explains in which specific spot the
main focus need to be made in order to create a successful outcome. The research
methodology is conducted to reduce the gap or totally obsolete the gap which was present in
the previous research. Research methodology also helps the researcher to understand whether
the research is on track or not. The research methodology which is mentioned in this case
should not be diverge from the main research rather it should help the research to provide the
authenticity of the research regarding the issue which are to be taken into consideration. The
third part of the research focused on increasing the strengths of the research so that the
research is able to meet the objective of the research. It will also solidify the reasons to be
needed for accomplishing the study and hence the study can reach its desired conclusion.

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Thus, research methodology is one of the integral part of the dissertation and it is supported
by the efficient analysis which is to be made on the for collecting the information and
eventually reaching the goal. The research also offers the processed data and the findings
which are being interpreted with utmost accuracy so that the research should reach the
desired feasible solution.
3.2 Research Method Outline
The approach of the research which is adopted here for the sake of the research is the
deductive method. The research is done with total optimism in case of the preference. This
researcher helps to focus on the studies and the models related to studies. Analytical design
and descriptive design need are to be used in the case of research design concerned. The
research of the study is to be organized by econometrically modeling and also through
forecasting. Both quantative approach and also the qualitative approach are to be adopted.
The SWOT and PESTLE analysis are being conducted. This will help to provide aclear
picture regarding the internal and external environment of BREXIT.
3.3 Research Onion

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Research onion is one of the layer oriented design which can be framed for the
purpose of conducting the research in the form of layers. The data which are processed and
provides information are individually represented through the research onion. Many tools are
used for the developing the knowledge for the research. In research onion there are six types
of research layers. This includes research philosophy, research strategy, techniques,
procedures, choices and also the time horizon. This help to understand the research in much
better way because it represented through diagram.
Research onion
(Source: Johnston, 2014)
3.4 Research Philosophy
The research philosophy is said to be set of belefs which can be categorized into three
basic aspects which can be termed as the realism, positivism and interpretivism. The study
developed in accordance with the philosophical purview. In this research positivism is used to

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ti find out the problem associated with it. Realism on the other hand is the combination of
both positivism and interpretivism. Interpretivism alone used to depicts the business
activities. This way helps to use the market scenario which is also one of the parts of the
research.
3.5 Justification for the Chosen Research Philosophy
The justification needed to apply for the purpose of the research about investigation
and diversification related to the state of startup financing after BREXIT. To ensure the
authencity of the research and also to identify the problems related with the company startup
financing during BREXIT is mainly done by using the positivism.
3.6 Research Approach
There are two types of research approach namely deductive approach and the
inductive research, which deals with the theories and models of the research. In case of
inductive approach, analysis states the research is made on the totally new approach and new
sets of models for theoretical information. To conduct this research paper deductive approach
has been followed. Deductive approach has been adopted because the research needs to be
reached after analyzing the research and then move forward.
3.7 Justification for Chosen Research
The deductive research has been adopted because researcher has went for the help
from the existing theories and models, which are to undertaken. To conduct this research
inductive approach has not adopted. It is done because for this research, no new theories are
to be developed or no new models to be created and hence it is not taken into consideration.
3.8 Research Design
The research designs, which are to be implemented in the research, are analytical,
expletory, and explanatory and the descriptive research design respectively. The descriptive

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design approach through the research in most pin point manner. The explanatory method has
been adopted into the beginning stage of the study, which is made on the hypothesis of the
researcher. This explanatory research design helps in the development of the two existing
variables, which are related to the study.
3.9 Justification of the Chosen Research Design
The data gathered in this research through quantitative and qualitative approaches, the
interpretation and analysis of the data has been done by using suitable forecasting and
modelling methods. Hence, based on the research philosophy and incorporation of the
deductive approach the adaptation of the research modelling is justified. The formulation of
appropriate model is required to analyse and understand the data gathered from quantitative
data collection methods and the model should be so formulated that it ensures the detection of
the variation in the data and analysis. In order to reach reliable results according to the
objective of the research and make up for the gap in the literature by incorporation of suitable
and effective measures.
3.10 Selection of Sample Size and Sampling Methods
The data that has been used in this research is collected by using survey
questionnaires that means primary data have been collected regarding effect on the start-up
financing after exercise of the Brexit. The data collected in this research are collected from
the general respondents related to the start-up sector hence the sampling method used for the
research is random sampling. With the help of the random sampling method, the data
collected ensures transparency in the reflected outcome and will reveal possible scenario of
the start-up industry after the completion of the Brexit. Therefore, the data will help to predict
the financing status of the start-up industry in the United Kingdom after the Brexit.

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3.11 Data Collection Method
The data used in the research has been collected by forming questionnaires and
interviewing individuals involved in the start-up industry. Considering the data collected by
interviewing the individuals a suitable model will be developed that can be appropriately
used to analyse and predict the future of the start-ups in the United Kingdom considering the
current scenario of the start-ups in the country. It will help to fill the gap that recent literature
could not address properly.
3.12 Primary Research
In the following research, the data is collected from primary resources; the data is
collected from the start-up entrepreneur of United Kingdom. The data is in the form of
questionnaire and supported by five-point Liker scale from strongly agree to strongly
disagree and by taking personally interview. In order to support the research secondary data
has been analyzed. The analysis is done by referring articles, journals and books in order to
ensure that the obtained result is credible enough and to broaden up the quality of the
research.
3.13 Data Analysis
The data analysis is an important part of a research study especially if it deals in
primary research methodology. In this research study, the primary data will be collected via
use of the structured questionnaire survey. Thus, to analyse the data SPSS software has been
used and the statistical method that has been used to make the analysis is regression analysis
and correlation between the Brexit and the financing factors of the start-ups in the United
Kingdom has been found. The discussion of the result of the data analysis is given in the
chapter 4.

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3.14 Research ethical consideration
The following research has been carried out without affecting the ethical boundaries
of the research. In order to ensure transparency in the research strict ethical guidance is
maintained in the following study. There is no unethical means of research is carried out
which can reduce the quality of paper and thus making sure that the analysis is a
consequential approach of creating a reliable research analysis. In order to maintain the
ethical concerns the research maintains its authenticity and is conducted under the legal
aspects of the study to obtain reliable result. It is also kept in mind that the particular research
is put forward only for academic purpose and not for any promotional act, which would
violate the research ethics of the paper.
3.15 Research Limitation
For this research, the following factors can be the limitation of the following paper.
The inability to acquire secondary resource as the company is a start-up there is less evidence
of data of the and there is no annual report of the company for reference. The secondary data
is the raw input of the paper and hence there may be a slight chance of biasness in the
present6ed research. Time has always been a constraint for the research therefore, there is
less time to wholly examine and complete the research. The data has been collected only
from a specific region due to insufficient fund for the research.
3.16 Time horizon
The allocation of the work is made with reference to the research needs and according
to the ability to obtain the research data and initiate the research in a reliable manner. The
maximum priority is given to the collection of data with legitimacy and also focusing on the
quality of analysis and finally using the analysis in the research paper. The time horizon in
the research provides the segregation of time period that is to be implemented for conducting
the research.

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Chapter 4: Result and Discussion
This section analyzes results obtained from the survey carried out and performs
necessary statistical tests to evaluate the research objectives. Firstly, an overall descriptive
statistics of the data set is given. The correlation and regression analysis then have been done
to analyze the relation between the state of start up financing and the eco-political event
Brexit in United Kingdom.
4.1 Descriptive statistics
Table 1: Descriptive statistics of Gender
Gender
Frequency Percent Valid Percent Cumulative
Percent
Valid
Male 67 67.0 67.0 67.0
Female 33 33.0 33.0 100.0
Total 100 100.0 100.0
Figure 1: Summary measure of Gender
Among the 100 sample surveyed, 67 percent are males and 33 percent are females

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Table 2: Descriptive statistics of age
Age
Frequency Percent Valid Percent Cumulative
Percent
Valid
18-25 years 38 38.0 38.0 38.0
26-35 years 44 44.0 44.0 82.0
36-45 years 10 10.0 10.0 92.0
46-55 years 5 5.0 5.0 97.0
56 years and above 3 3.0 3.0 100.0
Total 100 100.0 100.0
Figure 2: Summary measure of age
In the sample surveyed most people belong to the age group of 26-35 years. This is
followed by group of people in the age group 18-25 years, 36-45 years, 46-55 years and 55
years and above.

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Table 3: Descriptive statistics of Educational qualification
Educational_Qualification
Frequency Percent Valid Percent Cumulative
Percent
Valid
Higher Secondary 7 7.0 7.0 7.0
Graduate 28 28.0 28.0 35.0
Post Graduate 48 48.0 48.0 83.0
Doctorate 12 12.0 12.0 95.0
Others 5 5.0 5.0 100.0
Total 100 100.0 100.0
Figure 3: Summary measure of Educational qualification
The descriptive measures on educational qualification suggests that most of people
are post graduate followed by graduate, doctorate, higher secondary and others.
Table 4: Descriptive statistics of duration of working in start ups
Duration_of_Working_in_Start-ups
Frequency Percent Valid Percent Cumulative
Percent
Valid 1-2 years 39 39.0 39.0 39.0
3-5 years 47 47.0 47.0 86.0
6 years and above 14 14.0 14.0 100.0

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Total 100 100.0 100.0
Figure 4: Summary measure of duration of working in start ups
Most people have a work experience of 3-5 years in start-ups followed by a work
experience of 1-2 years and 6 years and above.
Table 5: Descriptive statistics of interest of people to open start-ups
Interest_in_opening_start-ups
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 27 27.0 27.0 27.0
Agree 39 39.0 39.0 66.0
Neutral 28 28.0 28.0 94.0
Disagree 5 5.0 5.0 99.0
Strongly Disagree 1 1.0 1.0 100.0
Total 100 100.0 100.0

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Figure 5: Summary measure of interest of people to open start-ups
Most of the people agreed to open start-ups after Brexit giving a support to the state of
start-ups after Brexit.
Table 6: Descriptive statistics of growth of start-ups
Brexit_helps_in_Start-ups_growth
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 23 23.0 23.0 23.0
Agree 54 54.0 54.0 77.0
Neutral 16 16.0 16.0 93.0
Disagree 7 7.0 7.0 100.0
Total 100 100.0 100.0

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Figure 6: Summary measure of growth of start-ups
As obtained from the sample, almost 77 percent people agree on the fact that Brexit
will help in growth of start-ups.
Table 7: Descriptive statistics of FDI flow after Brexit
Increase_FDI_after_Brexit
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 26 26.0 26.0 26.0
Agree 43 43.0 43.0 69.0
Neutral 21 21.0 21.0 90.0
Disagree 9 9.0 9.0 99.0
Strongly Disagree 1 1.0 1.0 100.0
Total 100 100.0 100.0
Figure 7: Summary measure of FDI flow after Brexit
More than 70 percent people believe that Brexit will be favorable for FDI inflow in
United Kingdom.

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Table 8: Descriptive statistics of flow of venture capital after Brexit
Increase_in_Venturecapitalist_after_Brexit
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 25 25.0 25.0 25.0
Agree 45 45.0 45.0 70.0
Neutral 16 16.0 16.0 86.0
Disagree 13 13.0 13.0 99.0
Strongly Disagree 1 1.0 1.0 100.0
Total 100 100.0 100.0
Figure 8: Summary measure of flow of venture capital after Brexit
Most people in the sample support the claim that there will be an increase in venture
capital after Brexit.
Table 9: Descriptive statistics of investment flow after Brexit
Fall_in_investment_after_Brexit_Announcement
Frequency Percent Valid Percent Cumulative
Percent
Valid Strongly Agree 21 21.0 21.0 21.0
Agree 49 49.0 49.0 70.0

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Neutral 19 19.0 19.0 89.0
Disagree 8 8.0 8.0 97.0
Strongly Disagree 3 3.0 3.0 100.0
Total 100 100.0 100.0
Figure 9: Summary measure of investment flow after Brexit
Most people agree on the claim that there is a significant fall in investment after
Brexit.
Table 10: Descriptive statistics of startup sector after Brexit
Fall_in_startup_sector_unclear_Brexit_objective
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 35 35.0 35.0 35.0
Agree 43 43.0 43.0 78.0
Neutral 16 16.0 16.0 94.0
Disagree 5 5.0 5.0 99.0
Strongly Disagree 1 1.0 1.0 100.0
Total 100 100.0 100.0

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Figure 10: Summary measure of startup sector after Brexit
More than 78 percent people believe that there is a decline in startup sector because of
unclear objectives of Brexit.
Table 11: Descriptive statistics of solution to migration and immigration problem
Solution_to_immigration_migration_issues
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 27 27.0 27.0 27.0
Agree 47 47.0 47.0 74.0
Neutral 18 18.0 18.0 92.0
Disagree 6 6.0 6.0 98.0
Strongly Disagree 2 2.0 2.0 100.0
Total 100 100.0 100.0

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Figure 11: Summary measure of solution to migration and immigration problem
Most people support the claim that Brexit will provide a solution to migration and
immigration problem.
Table 12: Descriptive statistics of Fintech start-ups after Brexit
Increase_in_fintech_start-ups_after_brexit
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 19 19.0 19.0 19.0
Agree 53 53.0 53.0 72.0
Neutral 20 20.0 20.0 92.0
Disagree 7 7.0 7.0 99.0
Strongly Disagree 1 1.0 1.0 100.0
Total 100 100.0 100.0

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Figure 12: Summary measure of Fintech start-ups after Brexit
More than 70 percent people believe that there will be an increase in Fintech start-ups
after Brexit.
Table 13: Descriptive statistics of complexity in EU and UK relation
Nocomplexity_in_EU_UK_relation
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 22 22.0 22.0 22.0
Agree 48 48.0 48.0 70.0
Neutral 16 16.0 16.0 86.0
Disagree 10 10.0 10.0 96.0
Strongly Disagree 4 4.0 4.0 100.0
Total 100 100.0 100.0

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Figure 13: Summary measure of complexity in EU and UK relation
Most people agree the fact that there will be no complexity in EU and UK relation
after Brexit.
Table 14: Descriptive statistics of solution to crowdfunding problem
Solution_to_Crowdfunding_Problem
Frequency Percent Valid Percent Cumulative
Percent
Valid
Strongly Agree 20 20.0 20.0 20.0
Agree 51 51.0 51.0 71.0
Neutral 21 21.0 21.0 92.0
Disagree 7 7.0 7.0 99.0
Strongly Disagree 1 1.0 1.0 100.0
Total 100 100.0 100.0

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Figure 14: Summary measure of solution to crowdfunding problem
Most people support the claim that Brexit will provide a solution to crowdfunding
problem.
4.2 Analysis of correlation
The correlation analysis has been done to measure the degree of association between
decision of investors to open a start up after Brexit and other related variables (Chatterjee and
Hadi 2015). The table below gives the result of correlation coefficient between decision to
open start up after Brexit and associated variables.

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Table 15: Correlation matrix
From the above correlation matrix, the obtained correlation coefficient between
interest of investors to open a startup after Brexit and that of duration of working in start-ups
is 0.040. The positive correlation indicates a positive association between duration of
working in start-ups and interest in opening start-ups. The more years an investor works in a
start-up, the more experienced the investor is and therefore is more confident in opening start
up even after Brexit.
The correlation coefficient between interest to open stat up and the fact that Brexit
helps in growth of start-ups is 0.623. The correlation is positive and closer to 1. This implies
growth of start-ups after Brexit has a strong positive correlation with interest of investors to
open a startup (Fox 2015). Moreover, the correlation coefficient is significant at 1% level of
significance.
For increase in FDI after Brexit, the correlation coefficient between interest in
opening start-ups and FDI is estimated to be 0.429. The correlation coefficient suggests a

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positive and moderate correlation between FDI and interest of investors to open start-ups
after Brexit. The increase in FDI after Brexit will help to boost confidence of investors which
in turn help in startup decision (Mullineux 2019). The correlation coefficient is statistically
significant at 1% level of significance meaning there exists a significant positive association
between FDI flow after Brexit and the decision to open start up.
The correlation coefficient between venture capitalist after Brexit and investors’
interest to open start-ups is 0.259. The value of correlation coefficient is small but statistically
significant meaning there is a weak positive relation between interest of investors to open
start up and increase in venture capitalist after Brexit. The increase in venture capital thus
positively affects decision to open start-ups.
The estimated correlation coefficient between solution to issues related to
immigration and migration and decision to open start up after Brexit is 0.163. The positive
correlation coefficient indicates a positive association between investors’ decision to open
start-ups after Brexit and solution to migration and immigration problem. The relation
however is weak and statistically insignificant.
Finally, the correlation coefficient between interest of investors to open start-ups and
solution to crowd funding problem is 0.198. The value of correlation coefficient is small but
statistically significant meaning there is a weak positive relation between interest of investors
to open start up and solution to the crowd funding problem after Brexit (Schroeder, Sjoquist
and Stephan 2016). That is proper policy formulation to solve the problem of crowd funding
after Brexit is positively associated with the decision to open start-ups after Brexit.

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4.3 Analysis of regression
The regression analysis has been performed to evaluate the proposed relation between
decision of investors to open start up after Brexit and the variables related to start-up
decision. The table below shows result of the obtained regression.
Table 16: Summary of Regression Model
Model Summary
Model R R Square Adjusted R
Square
Std. Error of the
Estimate
1 .644a .415 .384 .715
a. Predictors: (Constant), Solution_to_Crowdfunding_Problem,
Brexit_helps_in_Start-ups_growth,
Increase_in_Venturecapitalist_after_Brexit,
Solution_to_immigration_migration_issues, Increase_FDI_after_Brexit
From the regression result the value of adjusted R square is obtained as 0.384. The
adjusted R square value indicates that the explanatory variables together explain 38 percent
variation in the decision to open start-ups after Brexit (Hayes 2017). The independent
variables do not account much variation in the dependent variable meaning the model does
not fit well.
Table 17: ANOVA result of regression
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 34.018 5 6.804 13.317 .000b
Residual 48.022 94 .511
Total 82.040 99
a. Dependent Variable: Interest_in_opening_start-ups
b. Predictors: (Constant), Solution_to_Crowdfunding_Problem, Brexit_helps_in_Start-
ups_growth, Increase_in_Venturecapitalist_after_Brexit,
Solution_to_immigration_migration_issues, Increase_FDI_after_Brexit

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The ANOVA table gives the significant F value as 0.000. The significant P value is
less than the 5% significance level. This implies rejection of null hypothesis no overall
significance of the model. The developed model therefore is statistically significant.
Table 18: Estimates of Regression estimates
Coefficientsa
Model Unstandardized Coefficients Standardized
Coefficients
t Sig.
B Std. Error Beta
1
(Constant) .522 .258 2.021 .046
Brexit_helps_in_Start-
ups_growth .608 .102 .548 5.942 .000
Increase_FDI_after_Brexit .167 .093 .174 1.800 .075
Increase_in_Venturecapitalis
t_after_Brexit -.017 .084 -.018 -.201 .841
Solution_to_immigration_mig
ration_issues -.030 .091 -.031 -.335 .738
Solution_to_Crowdfunding_
Problem .045 .099 .043 .458 .648
a. Dependent Variable: Interest_in_opening_start-ups
The regression coefficient for the variable that Brexit helps in growth of start-ups is
0.608. The positive regression coefficient implies growth of start-ups after Brexit has a
positive influence on the decision to open start-ups after Brexit. As start-ups grow after
Brexit, investors will gain confidence, which will positively affect the decision to open start
up. The p value associated with the coefficient is 0.000. The p value is less than the
significance level meaning rejection of null hypothesis of no significant relation between

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decision to open start-ups and growth of start-ups after Brexit (Darlington and Hayes 2016).
The expect growth of start-ups after Brexit thus likely to have a positive significant impact on
decision to open start-ups after Brexit. This is in support of most of the past literatures
claiming that growth of start-ups is helpful in further expansion on start-ups in the post-Brexit
period.
The associated regression coefficient for FDI is 0.167. The positive coefficient of FDI
implies that FDI flow has a positive influence on the interest to open up start-ups after the
Brexit. That is if FDI flow increase in the post-Brexit period, investors are more tend to open
start-ups after Brexit in United Kingdom. The reason behind this is simple. The inflow of FDI
helps to increase capital base in the country. This encourages investors to open new start-ups
after Brexit (Dhingra et al. 2016). The associated p value for the coefficient is 0.075. The P
value exceeds the significance value of 0.05 meaning acceptance of null hypothesis of no
significant relation between FDI and decision to open start-ups. FDI therefore though has a
positive influence on investors’ interest to open start-ups in post-Brexit period, the variable
however is not statistically significant.
The regression coefficient for the variable that venture capitalist is -0.017. The
negative regression coefficient implies increase in venture capitalist after Brexit has an
inverse influence on the decision to open start-ups after Brexit. The growth of venture capital
is likely to help small and medium firms to open new start-ups. This should contribute to the
growth of new start-ups. The result of obtained regression thus contradicts the expected result
(Brown, Linares-Zegarra and Wilson 2019). The p value associated with the coefficient is
0.841. The p value is greater than the significance level meaning acceptance of null
hypothesis of no significant relation between decision to open start-ups and increase in
venture capital after Brexit. The expected increase in venture capital after Brexit thus likely

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to have a negative impact on decision to open start-ups after Brexit. However, no clear policy
conclusion can be made here as the variable is not statistically significant.
For the variable solution to migration and immigration problem the obtained
regression coefficient is -0.030. The negative coefficient implies the variable has an adverse
effect on investors’ interest to open startup in the post Brexit period. One possible
explanation might be an expected decline in migrants’ flow after the Brexit will reduce the
availability of surplus labor in United Kingdom. The start-ups therefore will no longer be
able to take advantage of surplus labor at a relatively cheaper rate. The increased labor cost
may discourage investors to open up new start-ups after Brexit (Wright 2016). The p value
associated with the coefficient is 0.738. The p value is greater than the significance level
meaning acceptance of null hypothesis of no significant relation between decision to open
start-ups and solution to immigration and migration issues. The variable therefore is
statistically insignificant and hence, no clear policy recommendation can be derived from this
result.
The associated regression coefficient for the solution to crowd funding problem is
0.045. The positive coefficient of solution to crowd funding problem implies that solution to
crowd funding problem has a positive influence on the interest to open up start-ups after the
Brexit. That is as the problems related to crowdfunding are solved, investors are more tend to
open start-ups after Brexit in United Kingdom. The solution to crowdfunding problem
increases confidence among investors (Cumming. and Zahra 2016). This encourages
investors to open new start-ups after Brexit. The associated p value for the coefficient is
0.648. The P value exceeds the significance value of 0.05 meaning acceptance of null
hypothesis of no significant relation between solution to crowd funding problem and decision
to open start-ups. Solution to crowd funding problem therefore though has a positive

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influence on investors’ interest to open start-ups in post-Brexit period, the variable however
is not statistically significant.
Chapter 5: Conclusion, Recommendation and Future Work
5.1 Conclusion
The study in the research paper has been made to find the effect of the Brexit on the
financing state of the start-ups in the United Kingdom. In 1973, the United Kingdom joined
the European Union, it was then known as the European Economic Community. From then
the United Kingdom has been in the European Union. Thus, for so many years, the country is
abiding by the rules and regulations of the European Union and sudden decision of exit from
the Union ought to impact the population of the country. Thus, the referendum on the Brexit
given a shock to the entire country and as the date of the Brexit had not been decided then the
business sector including the start-up sector reacted negatively and the sector got affected.
However, with the time the objective of the Brexit is been clear to the entrepreneurs and has
idea about the changes it can bring. Thus, it is expected that after the Brexit the entrepreneur
might not react the way they reacted after its announcement. Thus, by conducting the
research and collecting data based on the structured questionnaire the analysis would be done
to find the status of start-up financing will be after the Brexit. Therefore, the concerned
research adapts the method of primary research to study the probable effect of the Brexit on

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the financing of the start-ups in the United Kingdom. No secondary research has been
conducted by collecting data from the secondary sources like government websites, articles
and other reliable sources because enough data on start-up financing was not available using
which the research can be conducted. Therefore, the analysis is based on the primary research
in which data has been collected by doing survey interviews of the start-up entrepreneurs
using structured questionnaires. However, before moving into the results of the surveys, it is
necessary to discuss the research questions that can be answered through the literature review
part. The reasons for which the United Kingdom decided to make exit from the European
Union were that the country has to abide by the laws of the Union regarding trade, migration
and business regulations. The United Kingdom wanted to regulate its economy as per its own
policies and regulations to provide benefits to its citizens with priority. Thus, the referendum
took place and the decision on the Brexit was made. Apart from this the United Kingdom was
not feeling comfortable with the terms and conditions of the European Union, was reluctant
to pay the huge amount of money to the Union to remain a member country of the Union.
Moreover, the condition of the start-up financing in the United Kingdom before the
referendum of the Brexit was worth mentioning as the start-ups in the country were doing
well and one of the primary reasons of their good performance was the availability of ample
amount of finance. The main source of finance for the start-ups then was venture capitalists.
The United Kingdom before the Brexit was the third largest country as per the number of
operational start-ups. The country has always encouraged growth of start-ups, and thus is the
heaven for the entrepreneurs that are planning to establish new firms. Therefore, it can be
said that before referendum of the Brexit the start-up financing was going well in the United
Kingdom. However, after the referendum the investment in the start-ups in the country falls
significantly for a period of more than six months. The slowdown in the start-up financing
however did not lasted for long and from 2017, the financing condition of the start-ups started

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to improve and in 2019, it recorded huge amount of improvement over the last value of total
start-up investment. Thus, it can be summarized that before the completion of the Brexit the
condition of start-ups are good except a six-month period of post-referendum of the Brexit.
The period before the completion of the Brexit has been thus discussed and now moving to
the result of the primary research. The primary research data outcome shows that there will
be improvement in the condition of the start-ups in the United Kingdom after the completion
of the Brexit. The correlation data show that the Brexit is beneficial for the start-ups and they
will grow even after the completion of the Brexit. The main concern of the report was to find
the start-up financing status in the United Kingdom following the Brexit. Pertaining to the
topic it has been found from the correlation analysis of the primary data that foreign direct
investment will increase after the conduction of the Brexit. However, the correlation found
with the venture capitalist with the Brexit is negative, but from the statistics, it is also found
that the result is insignificant. The crowd-funding problem will also be solved after the
conduction of the Brexit (Ridge-Newman León-Solís and O’Donnell 2018). Alike the
correlation data of the venture capitalist, migration also found to be negative but
insignificant. Hence, the statistical analysis shows a proper way to the future of the start-up
financing of the United Kingdom after the conduction of the Brexit. Although the result
found from the data analysis is majorly in favour of the start-ups, the respondent could have
been positive with the decision of the Brexit , the entrepreneurs might be thinking that the
government will formulate new rules and regulations regarding business completely by itself
and those policies will support the growth of the start-ups in the United Kingdom, the
entrepreneurs.
5.2 Recommendation
The data analysis of the primary research data predicts that the future of the start-up
financing after the completion of the Brexit to be good. However, the entrepreneurs or the

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respondents of the survey is of the opinion that the condition of the start-ups will improve
after the Brexit due to the increase in the investment volume in the United Kingdom. Thus,
improvement in the funding must be due to the revamped and newly formulated policies
regarding business sector in the economy. Thus, it is required to recommend suitable policies
after the Brexit that keeps the start-ups at the desired level of growth. It is thus recommended
that the government should clearly negotiate the terms and conditions of the Brexit with the
European Union such that no confusion regarding the Brexit arise and again the start-ups
sector along with all other businesses suffered as they did after the referendum of the Brexit.
The government should revise their policies regarding venture capitalists such that the start-
ups keep on improving in the United Kingdom. Not only venture capitalists should be
addressed, but also other source of financing should be encouraged by policy formulation.
Thus, it is necessary for the government of the United Kingdom to formulate more productive
policies through which the problem if any, arise due to the Brexit might be solved soon.
Apart from this the migration and immigration policies of the country should be more robust
because a large number of workers of the European start-ups come from abroad. Thus,
migration of the workers should be improved such that the growths of the start-up firm in the
United Kingdom remain regular and uninterrupted.
5.3 Future Work
The concerned research study found that he condition of the start-ups will be good
after the conduction of the Brexit in the United Kingdom. However, the growth and stability
of the start-ups depend on the other rules and regulation factors. Furthermore, the research
does not cover many other aspects of the start-ups in the United Kingdom such as the share of
different types of start-up in the total start-up sector, the most growing start-up type, type of
start-up attracting the maximum amount of fund. Thus, these aspects can be further studied

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and more detailed insight of the start-up sector can be achieved. Hence this research study
provides many aspects that can be studied in the future.

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Appendix
Age
18-25 years
26-35 years
36-45 years
46-55 years
56 years and above
Gender
Male
Female
Educational qualification
Higher Secondary
Graduate
Post Graduate
Doctorate
Others
Duration of working in the Start-up industry
1-2 years
3-5 years
6 years and above

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Are you interested in opening a new start-up in the United Kingdom after the
completion of Brexit?
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
Brexit will help in the growth of the start-up industry in the United Kingdom
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
After the completion of Brexit, there will be a rise in the foreign direct investment in the
United Kingdom
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Following Brexit, the number of venture capitalists will increase in the United
Kingdom, and they will increase their investment
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
It is believed that the fall in investment in the start-up in 2016 that occurred due to the
announcement of the Brexit will not happen again after completion of Brexit
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
The fall in investment in the start-up sector in 2016 was due to unclear objectives of the
Brexit
Strongly Agree
Agree
Neutral
Disagree

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Strongly Disagree
The government of the United Kingdom will solve all the issues regarding immigration
and migration with proper implementation of policies
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
There will be an increase in the number of fintech start-ups in the United Kingdom
after the Brexit
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
There will be no complexity in the relationship between the European Union and the
United Kingdom after the Brexit, thus trade, and the business transaction will be good
Strongly Agree
Agree
Neutral

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Disagree
Strongly Disagree
After the Brexit, the crowd-funding problem in the United Kingdom will be solved with
proper policy formulation
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree