America's hottest startups are sounding the alarm about Brexit as they prepare to go public

Dara Khosrowshahi

Buzzy American startups are raising red flags about the risks of Brexit.
Multiple billion-dollar companies, from Uber to Slack, are currently gearing up to go public in the US
In the process, they are publishing warnings about the threats that Britain leaving the EU could pose to their businesses.
The risks range from uncertainty around employment law to decreased investment and issues around employee compensation.
You can read their warnings in full below.
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Some of America's buzziest billion-dollar startups are quietly setting off warnings about the risks that Brexit could pose to their businesses and to the broader technology industry.

After years of staying private and growing to ever-inflated valuations thanks to rivers of venture capital funding, startups like transportation firm Uber and work messaging app Slack are finally gearing up to go public. In the process, they are required to release detailed financial information and documentation about their businesses — and nestled among dozens of pages of legalese are warnings about the risks being created by Britain leaving the European Union.

"Exposure to political developments in the United Kingdom, including the outcome of the U.K. referendum on membership in the European Union, could harm us," Slack warns potential investors in its S-1 documents filed on Friday.

The companies call out a laundry list of potential hazards that Brexit could pose — from uncertainty around employment law and issues around financial regulation, to the risk of decreased investment in the UK, that could have knock-on effects for the entire British technology industry.

The red flags raised by these startups illustrate the trepidation with which many international companies are viewing the United Kingdom due to ongoing Brexit uncertainty — and the breadth of the hurdles it is creating for them.

After voting to leave the European Union in a referendum in 2016, the UK was originally scheduled to formally exit on March 29. But after being bogged down in protracted negotiations with the European Union about the terms of its exit, while also facing fierce domestic disagreement about the best path forward, Britain has now delayed Brexit until the end of October 2019.

The final form Brexit will take (or even if it will ultimately take place) remains unclear, clouding the British business and political landscape with paralyzing uncertainty.

The concerns are myriad

The different companies raise different concerns about potential implications of Brexit. A key concern raised by Slack is how Britain's final potential deal with the EU will affect its laws on handling user data — a subject of obvious concern to a platform for enterprise messaging.

"Depending on the terms reached regarding any exit from the European Union, or if no such terms are reached, it is possible that there may be adverse practical or operational implications on our business," it warns. "For example, the UK Data Protection Act that substantially implements the GDPR became effective in May 2018. It remains unclear, however, how United Kingdom data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the United Kingdom will be regulated."

File storage service Drobpox, which went public in 2018, also brought up concerns around data protection regulation: "In particular, it is unclear whether the United Kingdom will enact data protection laws or regulations designed to be consistent with the pending EU General Data Protection Regulation and how data transfers to and from the United Kingdom will be regulated." In the year-plus since then, this issue has still not been resolved.

Uber, meanwhile, has an entire shopping list of worries: "Financial laws and regulations (including relating to payment processing), tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws," and so on.

The companies' warnings, in full

You can read the full relevant sections from the companies' risk factors in their S-1's below. (Emphasis added by Business Insider.)

Here's Slack:

Exposure to political developments in the United Kingdom, including the outcome of the U.K. referendum on membership in the European Union, could harm us.

On June 23, 2016, a referendum was held on the United Kingdom's membership in the European Union, the outcome of which was a vote in favor of leaving the European Union. The United Kingdom's vote to leave the European Union has created an uncertain political and economic environment in the United Kingdom and across other European Union member states. The result of the referendum means that the long-term nature of the United Kingdom's relationship with the European Union is unclear and that there is considerable uncertainty as to whether and when any such relationship will be agreed and implemented. The political and economic instability created by the United Kingdom's vote to leave the European Union has caused and may continue to cause significant volatility in global financial markets and the value of the British Pound or other currencies, including the Euro. Depending on the terms reached regarding any exit from the European Union, or if no such terms are reached, it is possible that there may be adverse practical or operational implications on our business. For example, the UK Data Protection Act that substantially implements the GDPR became effective in May 2018. It remains unclear, however, how United Kingdom data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the United Kingdom will be regulated and how those regulations may differ from those in the European Union. Further, the United Kingdom's exit from the European Union may create increased compliance costs and an uncertain regulatory landscape for offering equity-based incentives to our employees in the United Kingdom. If we are unable to maintain equity-based incentive programs for our employees in the United Kingdom due to the departure of the United Kingdom from the European Union, our business in the United Kingdom may suffer and we may face legal claims from employees in the United Kingdom to whom we previously offered equity-based incentive programs.

Here's Uber:

Additionally, the United Kingdom held a referendum on June 23, 2016, to determine whether the United Kingdom should leave the European Union ("EU") or remain as a member state, the outcome of which was in favor of leaving the EU, which is commonly referred to as Brexit. Lack of clarity about future U.K. laws and regulations as the United Kingdom determines which EU rules and regulations to replace or replicate in the event of a withdrawal, including financial laws and regulations (including relating to payment processing), tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws, and employment laws, could decrease foreign direct investment in the United Kingdom, increase costs, depress economic activity, and restrict access to capital.

Here's Dropbox:

We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, European legislators have adopted a General Data Protection Regulation, or GDPR, that will, when effective in May 2018, supersede current European Union, or EU, data protection legislation, impose more stringent EU data protection requirements, and provide for greater penalties for noncompliance. Further, following a referendum in June 2016 in which voters in the United Kingdom approved an exit from the EU, the United Kingdom government has initiated a process to leave the EU, or Brexit. Brexit has created uncertainty with regard to the regulation of data protection in the United Kingdom. In particular, it is unclear whether the United Kingdom will enact data protection laws or regulations designed to be consistent with the pending EU General Data Protection Regulation and how data transfers to and from the United Kingdom will be regulated. Additionally, although we have self-certified under the U.S.-EU and U.S.-Swiss Privacy Shield Frameworks with regard to our transfer of certain personal data from the EU and Switzerland to the United States, some regulatory uncertainty remains surrounding the future of data transfers from the EU and Switzerland to the United States, and we are closely monitoring regulatory developments in this area.

Here's Zoom:

We also expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions. For example, in May 2018, the General Data Protection Regulation (GDPR) went into effect in the European Union (EU). The GDPR imposed more stringent data protection requirements and provides greater penalties for noncompliance than previous data protection laws, including potential penalties of up to €20 million or 4% of annual global revenues. Further, following a referendum in June 2016 in which voters in the United Kingdom approved an exit from the EU, the United Kingdom government has initiated a process to leave the EU, known as Brexit. Brexit has created uncertainty with regard to the regulation of data protection in the United Kingdom. In particular, although the United Kingdom enacted a Data Protection Act in May 2018 that is designed to be consistent with the GDPR, uncertainty remains regarding how data transfers to and from the United Kingdom will be regulated. Additionally, although we have self-certified under the U.S.-EU and U.S.-Swiss Privacy Shield Frameworks with regard to our transfer of certain personal data from the EU and Switzerland to the United States, some regulatory uncertainty remains surrounding the future of data transfers from the EU and Switzerland to the United States, and we are monitoring regulatory developments in this area.

(Lyft, which doesn't operate outside of North America, has no mention of Brexit or the EU of any kind. There's also nothing in social network Pinterest's S-1, or for music streaming app Spotify, which went public in 2018 and is headquartered in Sweden but has a large US presence.)

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