The Great UK Scale-Up Gap: Why 60% of Late-Stage Funding Still Comes from Overseas
 
Every founder hopes their Series A will illuminate the path to scaleup success. But here's the uncomfortable truth: the moment UK startups need serious growth capital, they hit a wall that forces them to look across the Atlantic. Why does the UK excel at creating startups but fail at scaling them?
 
The numbers tell a stark story. Despite the UK venture market hitting £17.1bn in 2024, over 60% of late-stage funding still comes from overseas investors – mainly the US. This isn't a temporary market quirk - it's a structural flaw that's turning Britain into Silicon Valley's talent farm. While we celebrate our ability to launch unicorns, we're systematically unprepared to fuel their growth.
 
The implications run deeper than capital. When US investors control the majority of UK scale-up funding, they don't just bring money - they bring expectations, networks, and exit strategies that fundamentally reshape British companies. The result? UK founders are building businesses for an investor class they don't always understand, using playbooks written for a different game entirely.
 
 
The £20m cliff: where UK dreams go to die
 
The UK venture market hit £17.1bn in 2024 according to PitchBook data - a respectable showing that masks a devastating structural flaw. While the UK excels at Seed funding, the moment companies need serious growth capital at £20m+, they hit a wall. This isn't just a funding gap - it's a chasm that's forcing UK's most promising companies to make existential choices.
 
The distribution tells the real story: abundant capital at Seed (often from government-backed schemes like EIS/SEIS), increasingly scarce at Series A, and desperately thin at growth stage. UK ventures rely on foreign capital for over 60% of late-stage funding, creating a dependency that fundamentally weakens the UK's tech sovereignty.
 
We've watched countless founders discover this cliff edge too late. They've built solid businesses, achieved product-market fit, and proven their model - only to find that the UK investors who backed them early simply can't write the cheques they need to scale.
 
The harsh reality? Despite capturing significant venture investment, the UK remains a two-tier market - world-class at starting companies, second-rate at scaling them.
 
 
The capital concentration: how US money became UK's only option

The numbers reveal an uncomfortable truth: US investors participated in 42% of UK tech deals and led 58% of late stage rounds over $100 million in 2024. This isn't market preference - it's mathematical inevitability.
 
Consider the structural mismatch: the entire UK venture market deployed £17.1bn in 2024, while individual US growth funds routinely manage $5-10bn each. When UK companies need £20m+ rounds, domestic funds simply can't write the cheques. While a handful of UK-based funds like Highland Europe and Atomico have raised €1bn+ vehicles, most UK growth funds - including prominent names like Felix Capital ($600m) and Balderton (£230m) - remain significantly smaller than their US counterparts. A single US growth fund like Tiger Global or Coatue routinely manages $10bn+ and can deploy more in a quarter than most UK funds manage in total.
 
The concentration intensifies at each stage. While UK investors can confidently bring Seed rounds together, by Series B the maths breaks down. European venture remains stuck in a post-2021 slump - with deal values down 40% from peak and showing no signs of recovery according to PitchBook's Q2 2025 European Venture Report. This isn't cyclical; it's structural. European LPs remain conservative, European funds stay subscale, and European partners lack the networks to attract global LPs.
 
Geography compounds the problem. US funds clustering in Sand Hill Road or Manhattan create dense networks of capital, talent, and deal flow. UK funds scattered across London, Edinburgh, and Cambridge lack the critical mass to compete. When a UK startup needs growth capital, they're not choosing between UK and US investors - they're choosing between US capital or no capital at all.
 
The result is a one-way dependency that becomes self-reinforcing. As more UK companies take US money, more UK founders optimise for US investors, making it even harder for UK funds to compete. We haven't built a funding gap - we've built a funding cliff, and only US investors have the equipment to help companies climb it.
 
 
The awareness gap: UK founders don't know what they don't know
 
The 60% dependency on foreign capital masks a more fundamental problem: most UK founders don't realise until it's too late that "raising capital" means two completely different things on either side of the Atlantic. They spend years building what they think is an investment-ready company, only to discover at Series B (and increasingly at Series A) that they've been training for the wrong sport entirely.
 
The disconnect starts early. UK founders typically build for European investor expectations, optimizing for metrics that often compromise growth. Examples include prioritising capital efficiency, cautious burn rates, and the path to profitability, above all else. Smaller funds, government backed schemes, and angel groups, will often reinforce these lessons, praising founders who can stretch a £2m Seed round for 24 months. This prudence wins awards in London but reads as lack of ambition in Silicon Valley.

The problem? UK founders typically discover these differences only when they start Series A or B fundraising and face a wall of confusion from US investors. "Why haven't you expanded to the US yet?" "Where's your plan to be a category leader?" "This growth rate won't support a venture outcome for our size of fund." By then, it's often too late to pivot strategy, restructure the cap table, or reset expectations.
 
We've seen this shock play out countless times. Founders who've been celebrated by UK investors suddenly feel like they're speaking a different language. The metrics they've optimised for don't matter. The milestones they've hit aren't impressive enough. The conservative growth they've been praised for now looks like failure.
 
The 60% foreign dependency isn't just about capital scarcity - it's about UK founders building companies for an investor class that can't actually fund their growth, while remaining blind to the expectations of the investors who can.
 
 
The preparation playbook: how smart UK founders build for US capital
 
Awareness is only half the battle. UK founders who successfully attract US growth capital don't just understand the different expectations - they systematically prepare their companies to meet them from day one. The playbook is radically different from traditional UK funding wisdom.
 
Start with geography: successful founders establish a US presence early. At one extreme this could be hiring a US sales rep and at the other it could be full US incorporation. Over 70 U.K.-founded, venture-backed tech startups are now based in the U.S., with nearly a fifth of them being incorporated since 2020.
 
The most recent high-profile case is AI company ElevenLabs. Co-founder Mati Staniszewski, recently commented: “Recognizing that most venture funding comes from the U.S., we set up as a Delaware corporation — the preferred and familiar structure for U.S. investors.” The company was founded in 2022 and is now valued at $6.6 billion after completing a $100M secondary transaction in September led by US investors.
 
US presence isn't (just) about early revenues - it's about signalling that you understand where growth happens. US investors strongly prefer companies that already have US operations, viewing it as a proxy for ambition and market understanding.
 
Network building requires equal intention. Smart founders start cultivating US investor relationships at Seed stage, not when they need their Series A or B. They attend US conferences, get warm introductions through portfolio companies, and build advisory boards with Silicon Valley veterans. When fundraising time arrives, they're not cold-calling - they're activating existing relationships.
 
The operational choices matter too. US-focused founders often take more dilution early to bring on US investors who can make later introductions. They hire executives with US scale-up experience. They bring on (UK) advisors who've navigated the US market successfully – both operationally and in capital raising – to provide strategic guidance. They prioritize US market expansion even when closer markets might be easier. These might seem like minor decisions, but they signal fluency in the US venture ecosystem.
 
Most critically, they craft narratives that resonate with US ambitions. Not "we're the leading UK solution" but "we're building the global category leader." Not "we can reach profitability on £10m" but "here's how we'll deploy $100m to own this market."
 
The UK founders who successfully bridge the Atlantic don't just translate their pitch - they fundamentally reconceptualise their business as a global play that happens to have started in the UK. They understand that US investors aren't buying UK companies; they're buying global companies with UK origins.


The pension paradox: £6 trillion locked away while startups starve
 
We have to highlight that the UK growth capital problem is really about capital allocation not capital availability. UK pension funds hold more than £2.5tn in assets, yet only 0.5% of defined contribution pension assets are currently invested in unlisted UK equities. This compares to 11% of US public pension plans invested in private equity. The government's Mansion House Compact aims to change this, but implementation has been sluggish.
 
The cruel irony: UK pensioners' money is funding US venture funds that then buy UK companies at premium valuations. The proposed NOVA accreditation scheme aims to mirror France's successful Tibi initiative by creating a curated list of funds for institutional investment. France unlocked €6bn for tech through Tibi. The UK could do the same - if there's political will to prioritise domestic champions over foreign capital.
 
But will is exactly what's missing. While policymakers wring their hands about UK competitiveness, the solution sits in plain sight. Redirecting even 1% of pension assets to UK venture would transform the landscape overnight. The infrastructure exists. The returns justify it. Only inertia and outdated risk models stand in the way.
 
 
The bottom line
 
Forget the hand wringing about UK competitiveness - as a founder, you need to focus on what you can actually control. The 60% dependency on foreign capital isn't changing overnight, and waiting for pension reform is a luxury you can't afford. Your job is to build the best possible outcome for your team, your investors, and yourself.
 
Here's the reality: not every UK startup needs or wants US investment. If you're building a successful B2B SaaS platform for UK SMEs, a digital health solution for the NHS, or a fintech serving European markets, you can create tremendous value with UK and European investors. Many founders build profitable, sustainable businesses that deliver strong returns without ever needing to cross the Atlantic. That's a perfectly valid path.
 
But if your company has genuine global potential - if you're building technology that could dominate international markets - then ignoring US investors is leaving money and opportunity on the table. The founders who recognise this early give themselves options. Those who realise it too late find themselves scrambling to pivot when they hit the growth capital cliff.
 
For those ready to think bigger: look west. Not because it's better, but because it's where the growth capital lives.

If you're planning to raise in the next 6-12 months and want to understand how a US market strategy can strengthen your position, let's talk.