Why Confidence Isn’t Enough to Bridge the Equity Gap

In the UK, we have become experts at the ‘start’. With four of the world’s top ten universities and the third-largest venture capital market globally, our ability to mint new companies is undisputed. However, the recently published UK ScaleUp Investment Report - which combines venture data from Sifted with extensive founder and VC surveys - highlights a sobering reality: we are still struggling with the ‘scale’.

The data shows that the bottleneck at the Series A stage is tightening. Only 7% of seed-funded startups are successfully making the jump to a subsequent VC round. While our early-stage ecosystem is thriving, we are at risk of becoming an ‘incubator economy’ - brilliant at starting, but failing to provide the domestic fuel required to finish.

A Tale of Two Confidences

The report reveals a striking disconnect between founder ambition and market reality. 63% of founders report high confidence in their internal ability to scale operations, yet 83% admit they are not confident about securing the venture capital needed to do it.

This ‘Confidence Gap’ suggests that founders believe in their product-market fit, but they no longer trust the traditional funding ladder to be there when they need it. This scepticism is well-founded: in 2025, fewer than 500 UK companies successfully raised a Series A round, and a mere 110 reached Series B.

The European Context: A Competitive Shift

Perhaps most concerning is how the UK is performing relative to its neighbours. In the £2–20m funding bracket - the critical ‘Death Valley’ for scaleups - the UK’s investment growth in 2025 was just +2.6%.

By comparison, France saw a +9.5% surge, followed by the Nordics (+6.7%) and Germany (+5.2%). Other European ecosystems are simply fixing their bottlenecks faster, creating a more robust pipeline that could see the UK lose its crown as Europe’s default tech hub. In fact, for the first time in recent memory, French VC fundraising actually overtook the UK in 2025.

The New Rules: EIS, VCT, and the 2026 Landscape

To combat this, the Government has introduced the most significant changes to investment thresholds in a decade, set to take full effect this year. These aren’t just minor tweaks; they are a fundamental expansion of who can raise tax-efficient capital:

• Doubling the Caps: The annual fundraising limit for EIS and VCT is doubling from £5m to £10m (and up to £20m for knowledge-intensive companies).

• Wider Net for Scaleups: The gross asset test is doubling to £30m, meaning larger, more mature companies can now stay within the protective tax-efficient ecosystem for longer.

• The EMI Talent War: Expansion of the EMI scheme (now allowing companies with up to 500 employees and £120m in assets) allows scaleups to compete for senior talent that would previously have been poached by US giants.

The ‘Precision Task’ of Scaling

While these policy shifts are welcome, capital alone is not the solution. Raising scaleup investment has become a ‘precision task’. The margin for error at Series A has vanished.

The successful 7% are no longer just those with good ideas. They are the founders who treat the investment process as a distinct operational arm of their business. This is why we at VenturePath focus on the Scaleup Investment Platform as the immediate lever for change. The platform itself provides investor-readiness resources, allowing founders to prepare for the more selective VC market and engage with the £13bn+ of Series A-B capital that is available.

Looking Ahead

We should look at the remainder of 2026 with cautious optimism. The ingredients are there - new capital from the British Business Bank, improved tax incentives, and a founder base that is more resilient than ever. The challenge now is making sure companies are properly prepared to raise VC funding, ensuring they raise on the best terms from the right investors to thrive.