VC Voice: Gresham House - The Changing VC Landscape

Sep 10
5 min read

Updated: Sep 12

A conversation with Francis Ireland from Gresham House Ventures on what founders need to know about today's funding environment - from the death of "growth at all costs" to the metrics that actually matter now.

Key Insights: The Rule of 40 has replaced pure growth metrics as the gold standard. Financial projections that can't be justified will kill your deal. Don't fundraise until you've moved beyond founder-led sales.

In this episode of VenturePath's VC Voice series, we sit down with Francis Ireland, Investor at Gresham House Ventures, to explore how the venture capital landscape has transformed over the past few years. From his unique vantage point within a £9 billion asset management firm, Francis shares candid insights about what's really changed in fundraising, what metrics investors care about now, and the critical mistakes that kill deals.

The fundraising environment has changed significantly since the high-valuation period of 2021-2022, with investors now prioritising sustainable growth over rapid expansion at any cost. Here are the essential insights every founder needs to understand about today's environment.

The Metrics Revolution: Rule of 40 Over Growth Rate

The most dramatic shift is in what investors actually measure. Francis is blunt about the change: "If you look back to 2021/2022, there was much more of a focus on how quickly that company was growing - the growth at all costs mentality. Over the last 18 months to 2 years, there's been a real reversion where investors are increasingly looking for sustainable long-term growth."

What this means for founders: Your 200% year-on-year growth rate won't impress if you're burning through cash with no path to profitability. The Rule of 40 - where your growth rate plus profit margin should exceed 40% - is now the benchmark. A company growing 30% annually with 15% profit margins will often beat one growing 50% but losing money.

This isn't just a UK trend. Francis notes it's happening "across the board in Europe and America." Why? Because sustainable growth broadens your exit options and prevents valuation traps that make future fundraising impossible.

The Fatal Flaw: Unrealistic Financial Projections

Francis identifies the most common deal-killer he encounters: "Sometimes you get financial plans from founders which don't make mathematical sense. You'll see plans where the metrics will double, and the founder won't give you an idea or justification of why those metrics will double."

This is particularly damaging because investors understand scaling dynamics. When you're a small team with founders driving sales, you're naturally more efficient than when you're twice the size with junior resources. Yet founders regularly project that efficiency gains will continue indefinitely.

The fix: Ground every projection in historical evidence. If your customer acquisition cost has been £500 for six months, don't assume it'll stay £500 when you're spending 10x more on marketing. If your NRR is 110%, explain specifically why it won't decrease as you expand to less ideal customers.

Francis emphasises: "We always like to see a financial plan which is rooted in historical evidence and makes sense from the perspective of what's gone before and what's likely to happen next."

Series A Readiness: Beyond Founder-Led Sales

Many founders approach Series A too early. Francis identifies the critical milestone: "A good Series A business has transitioned away from founder-led sales. You have a good go-to-market motion which isn't reliant on being executed by the founding team."

This serves two practical purposes:

Fundraising focus: "When you're going through Series A, there's always going to be some diligence and you're going to have to field questions. Your time as a founder is going to be devoted to the fundraising process rather than running your business."
Capital efficiency: "If I'm putting £5 million into a company, I want to make sure that capital is being put to work quickly and effectively. If you don't have a mature go-to-market motion backed up by unit economics, how do I know you'll get a good return on capital?"

The test: Can your business continue growing for three months without you personally selling? If not, you're not ready for Series A.

What Investors Actually Want to See

Francis breaks down what makes a Series A company compelling:

Founder-market fit first: "Companies are typically building solutions to problems they've experienced personally. If the founding team has been very proximate to that problem in past careers, they're designing solutions to deal with those problems."
Product differentiation with evidence: Don't just claim you're different - prove it through metrics. Francis looks for "product hustle" - rapid iteration based on customer feedback. This shows up in NRR: "We always talk about NRR of over 100% being suitable for a business. NRR is a great reflection of how your existing clients are using and implementing the product."
Market understanding with specifics: You need to clearly communicate your right to win against competitors, backed by evidence and data. Generic market size claims won't cut it.

The "Strategy Dictates Capital" Principle

Francis shares a crucial insight from a mentor: "Strategy dictates capital." This flips the typical fundraising mindset.

Instead of: "We want to raise £3 million - what should we do with it?" Think: "Our strategy requires £3 million to execute - here's exactly how we'll deploy it."

"The relationship doesn't work if the attitude is 'we're going to make a plan that fits the investor,'" Francis explains. "It must be: this is the business I want to grow and this is what I need in terms of financing to facilitate that."

How AI Changes the Game

AI is creating new opportunities for startups to compete against established players. Francis notes: "If you look at startups which have AI integrated into their workflows, it gives them a real competitive advantage in being able to compete against large enterprises and deliver a solution that's quicker, more efficient and better tailored to their end client market."

The opportunity: Large enterprises are "quite far behind" on AI transformation. Startups can build AI-native solutions that outperform traditional offerings from day one.

The implication: "You'll see a lot more funds invested at an earlier stage because if you can scale so quickly and efficiently, you don't necessarily need to follow traditional funding rounds."

The Partnership Reality Check

Gresham House's model differs from traditional VC approaches, and Francis is transparent about the implications: "A typical US VC makes 10 bets and nine fail while one lists. If you're in the eight or nine companies that are underperforming, they're going to forget your first name."

Their approach focuses on getting 8-9 companies out of 10 to deliver 2-3x returns rather than betting everything on one massive winner.

What this means for founders: Choose investors based on how they'll support you through challenges, not just the highest valuation. "Ultimately, it's candour and honesty. We're here to help founders and we want to make sure there's a relationship of trust."

The Honest Assessment: What You Don't Know

Francis makes a counterintuitive point: showing knowledge gaps can be a strength. "Sometimes founders think they need to know the answer to every question. Knowing what you don't know is actually a really great strength and helps optimise that business for the next stage of growth."

Whether it's needing a CFO, lacking technical expertise, or struggling with go-to-market strategy, acknowledging gaps allows investors to help solve them.

Cyclical or Permanent Change?

Is the focus on sustainable growth here to stay? Francis takes a balanced view: "Markets work cyclically. Post the dot-com bubble, VC was more focused on sustainable growth. Then as we led up to 2021/2022, the mentality shifted to explosive growth."

But AI may create lasting structural changes in how quickly companies can scale, potentially affecting future funding cycles.

The bottom line for founders: Don't wait for market cycles to change back. Build sustainable unit economics, demonstrate efficient growth, and prepare thoroughly before fundraising. The fundamentals-focused environment rewards companies that can prove their business model works - and that's unlikely to change anytime soon.

The rules have shifted, but opportunities remain abundant for founders who adapt their approach to match today's realities.

Ready to dive deeper? Watch the full interview to get Francis' complete playbook on navigating today's funding landscape.