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Venture capitalists jamming on the brakes in 2017: UK fintech chief

UK must remain magnet for global talent, despite Brexit: Innovate Finance CEO
UK must remain magnet for global talent, despite Brexit: Innovate Finance CEO

The tidal wave of venture capital (VC) money that flowed into global financial technology (fintech) investments during 2016 has already shown signs of receding, according to the U.K.'s fintech chief.

"Things in venture capital have slowed into 2017. We're seeing globally more extensions of A-rounds and I think the prognosis is that it might be difficult to top the global numbers of around $16 billion that was done globally last year," Lawrence Wintermeyer, chief executive officer (CEO) of Innovate Finance, told CNBC from FundForum International in Berlin on Monday.

Wintermeyer heads up the non-profit association that represents fintech in the U.K. and has been keeping a close watch on investment appetite since the U.K. voted to leave the European Union (EU) last June.

The period immediately following the Brexit vote featured a "bumper" round of VC investments which indicated that most deals that had been planned in advance still went ahead, according to Wintermeyer.

Continuation of such momentum is critical given than once the U.K. has left the EU - with the clock already ticking down to a March 2019 deadline - the domestic fintech industry will lose access to the European Investment Fund. This EU body provides financing to small and medium sized enterprises and contributed around EUR 2.3 billion ($2.6 billion) to U.K. VC funds between 2011 and 2015.

The Innovate Finance CEO says that there has been some slowdown but not enough yet to cause panic.

"People have been sitting on the fence but broadly we have been doing ok," he observed.

Robert Churchill | Getty Images

Aside from the potential loss of capital, many U.K. fintech industry participants are concerned that the capital will find it harder going forward to entice the best talent due to both tighter immigration policies and concerns that uncertainty and a sense of feeling being unwelcome in a post-Brexit London will persuade promising developers and potential tech stars to look to other cities.

"The most important thing is U.K. remains a magnet for talent…That and attracting capital. Talent and capital are the two most important things in FinTech," emphasized Wintermeyer.
"30 percent of our own fintech founders or CXOs (corporate officers) are non-British and it's a really important part of making up the community," he added.

Beyond hosting a burgeoning fintech community, London is also one of the global epicenters of traditional finance, with many banks and asset managers conducting vast operations from the capital.

The industry's incumbents and newcomers share space and an overlapping consumer base, yet are enjoying a more constructive phase of cooperation of late according to Wintermeyer.

"Institutions need to innovate - they really need to get down the costs and change the technology in their legacy stacks and get the compliance cost down. Innovators want to innovate and institutions are a good source of capital for them," he explained.

"So we are in an unprecedented period of collaboration."

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