Index Ventures’ Martin Mignot talks stock options, Deliveroo’s IPO and London Tech Week

·3 min read
Index Ventures partner Martin Mignot (Index Ventures)
Index Ventures partner Martin Mignot (Index Ventures)

One of Britain’s leading tech investors has warned that London is at risk of falling behind rival tech hubs in Europe unless the Government moves to overhaul stock option and visa rules to keep the UK competitive.

Martin Mignot, a partner at venture capital firm Index Ventures, told the Standard: “Clearly, over the last decade London was the obvious place to start a business. The gap between London and the rest of Europe was huge. Fast forward to today, the gap has narrowed.”

Brexit has made the UK a less attractive location for founders and visa rules make it difficult for talent to come here even if they want to, Mignot said. The high-profile flop of Deliveroo’s stock market listing in London has also hurt the City’s reputation when it comes to tech.

City of London investors shunned the gig economy company publicly and the stock tanked on its first day of trading in March. (Mignot was one of the first investors in Deliveroo.)

“That’s not the best look,” he said. “People even went so far as to say we don’t need high-growth tech companies in the UK, which I think is a crazy thing to say.”

Mignot said London needed better analysts to cover the tech sector and help public market investors understand businesses like Deliveroo.

“Just looking at the P&L in some of these fast-growing businesses is a basic mistake,” he said.

The “single biggest” issue for tech companies is laws around the taxation of stock options, Mignot said.

The UK’s Enterprise Management Incentives (EMI) scheme gives startups a tax-efficient way to award stock options to staff. These options are a crucial tool used by startups to convince the best talent to join early stage businesses. Current rules cap the amount individual staff can be awarded at £250,000 and can only be used by companies with assets below £30 million.

The tech industry wants the Government to overhaul the 20-year-old rules, arguing that they are now out of step with the reality of modern fast-growth businesses. The industry now regularly produces “unicorn” companies — private businesses worth more than $1 billion. Mignot said reforms in other markets in Europe had left the UK in the “middle of the pack” when it came to stock options.

The Treasury announced a consultation on EMI reforms in March’s budget and Chancellor Rishi Sunak has promised “ambitious visa reforms” to attract top talent post-Brexit. Mignot said he was “very hopeful” but stressed that action was needed.

“There’s what people say and what people do — congratulating companies and funding schemes, yeah it’s great but we need visa reform,” he said. “It’s all about talent, right?”

Mignot is one of Britain’s most successful and prominent technology investors. As well as Deliveroo, he has backed startups like $33 billion (£23.9 billion) digital bank Revolut and Trainline.

His comments about London’s competitiveness came ahead of London Tech Week, which begins next Monday.

Despite concerns about London falling behind in the competitive stakes, Mignot said the city’s tech scene was still vibrant.

“We’re super excited about this week and London in general,” he said.

Index Ventures has invested £1 billion into London startups since it was founded in 1996, backing the likes of Farfetch, Just Eat, and Wise. This year it has banked gains from floats of businesses including Deliveroo, Trustpilot, and Wise. Index announced a new $3.1 billion fund to back new businesses in July.

“In general it’s a very good time,” Mignot said.

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