New research from HSBC Innovation Banking, as reported in The Times (April 2025), highlights a shift in the UK venture capital landscape: early-stage start-ups continue to attract funding on relatively fair terms, but later-stage deals are becoming increasingly investor-friendly, and potentially founder-unfriendly.
The study, based on 588 anonymised term sheets from 2024, reports that founders raising more than £10 million are more likely to encounter aggressive deal structures, including “double-dip” participating preference shares. This type of share gives investors their money back first, plus a disproportionately large share of exit proceeds, sometimes at the founder’s expense. In contrast, early-stage founders (raising up to £2 million) were more often able to negotiate standard preference shares and simpler terms.
This growing disparity, dubbed the “scale-up gap”, means founders must look beyond headline valuations. Founders need to, as Glen Waters of HSBC says: “Model out the proceeds, how much would I get in my pocket in various different scenarios?”
Control rights are also more common, allowing minority investors to influence key business decisions or even replace the founding team.
Waters also emphasised the importance of negotiation and legal advice: “Don’t go to a generalist, get a lawyer who does venture capital every day.”
At Birketts, our venture capital specialists help founders and growth companies navigate complex term sheets and funding rounds. If you’re seeking investment, we can help you protect your position and future outcomes.
Contact Nick Burt or Quentin Golder to find out how we can support your next stage of growth.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at April 2025.