This week on the startup to scaleup journey:
- Why the financial model goes quiet once the funding round closes
Ask a founder in the month after a Series A closes where the financial model lives, and the honest answer is usually the data room. It did its job. It carried investors through the plan, survived diligence and helped set the price. Now there is a company to build, and the model goes quiet.
That is the moment the risk changes shape. The danger is no longer raising the money, but losing sight of it.
Max Hodak co-founded Neuralink before founding Science, which is developing technology to restore vision to people who have lost it. Speaking at Y Combinator's Startup School this year, he was blunt: "It's uncommon that these deep tech companies fail because the technology doesn't work." In his view, they fail because the systems that run the company never catch up with the science.
The financial system is where that gap opens first. Many founders treat the model as the document that wins the round. The founders who reach the next round run the company on it.
In DeepTech, where revenue is thin or absent for years, the model's assumptions are the main early-warning system a company has. But they warn only if the model is kept up to date, and if the company can see what its decisions cost...
This week on the startup to scaleup journey:
- Will your investors keep their conviction when the market mood changes?
Ask a DeepTech founder who is raising this autumn how the market feels, and you will probably hear relief. After years of being told their companies were too hard, too slow and too hungry for capital, they are suddenly in demand. European DeepTech raised $37.6 billion in the first nine months of this year, according to Dealroom, which puts 2026 on course for a 145% rise on 2025. Rob Toews of Radical Ventures caught the mood in June: "breathtakingly quickly, deep tech has gone from contrarian to consensus."
Then October showed how quickly positive investor sentiment can change, even in the hottest market of all, AI. As AI-related shares in public markets weakened, Reuters reported that several data-centre listings were being pulled or paused. Closer to home, Microsoft pulled out of Nscale's planned AI data centre at Loughton in Essex.
Nobody yet knows whether this is a cooling or a passing wobble for AI, and whether venture markets will be next. For a founder, that uncertainty is the point.
So, which of the investors backing DeepTech today will still be there if sentiment turns?
In a boom, every DeepTech cheque looks the same. The investor who suddenly started investing in DeepTech last month and the one who has backed your field for a decade send similar term sheets, at similar speed, with similar warm words. What separates them stays invisible until the mood changes.
The difference lies in where each investor's conviction comes from, and thus how far a change of sentiment moves it. In this context, venture investors fall broadly into three classes: the generalist, the thematic investor and the thesis-driven investor.
Sentiment can turn in weeks, while a DeepTech company needs years, and several more rounds, to reach an exit. Most founders find out which kind of conviction they took on only when they come to raise their next round. If it all came from one place, and sentiment has since turned, the round gets much harder...
This week on the startup to scaleup journey:
- The grant that keeps your startup alive could be the one that sinks it
Ask a UK DeepTech founder how the company was first financed, and the answer will often begin with a grant. Long before the first institutional investment, there is an application to Innovate UK or the European Innovation Council. Winning one has become close to a rite of passage, and founders give it the time, care and hope they might otherwise reserve for a funding round. On the surface, it is the easiest money a startup will ever raise.
But most founders read the grant the wrong way. They treat it as cheap equity with a stamp of approval attached: money that dilutes no one, and the backing of a respected public body that should make the next investor easier to persuade. On both counts the evidence says otherwise. Investors pay for neither the cash nor the logo. They pay for the specific uncertainty the grant removes.
That uncertainty is the proof point: the one technical question the next round will be priced on. A grant aimed squarely at it is worth far more than its face value. A grant aimed anywhere else may buy time, but time is not what investors are waiting for.
This matters more for UK founders now than at any point in a decade. Innovate UK's Smart grants, the open door for any ambitious R&D project, are closed to new applications. The largest European alternative, the European Innovation Council's Accelerator, offers UK companies grants of up to €2.5m, but each company can receive only one under the current programme. Fewer shots means each one must land on the proof point...
This week on the startup to scaleup journey:
- The investor you pitched to isn't the one on your term sheet
The term sheet arrives after weeks of conversation. By now you know the partner well. You have met the platform team, heard how the firm supports its founders, and called two of its portfolio CEOs. Then, in the opening lines of the written offer, a name appears that nobody has mentioned. The investor is not the firm at all. It is something called Fund III LP.
Most founders read straight past it. They should not.
Investors talk about their firm because the firm is what lasts: the brand, the people, the network, the way it backs founders. That is not unreasonable. But the money in your round comes from one specific fund, and that fund has its own size, its own clock, its own cash held in reserve, and its own investors to answer to. Those facts are rarely discussed before the term sheet, and they shape how your investor behaves for years after it.
The firm is the investor you meet. The fund is the investor you get.
In June we described the investor-director's second loyalty, to the money behind them. In July we asked whether a firm could raise again at all. This week we go one step earlier, to the moment when you can still choose. Before you sign, read the fund, and the people it answers to...
This week on the startup to scaleup journey:
- Atoms are back. Are hardware startups suddenly more fundable?
Few reports this year have travelled as fast through founder conversations as Andreessen Horowitz's State of Markets, published at the end of September. Its verdict on hardware fits in four words: atoms are so back. After a decade in which software took the money and the multiples, chips, power, robots and rockets are suddenly where the returns are.
Many UK founders have quoted those four words back to us, usually with the same hopeful conclusion. If hardware is back in fashion, surely the investors who once winced at capital intensity will now take the meeting, and the deck that struggled last year will land this year.
Some will, and we made our own case for hardware as a moat in February. But that reading misses what the report actually measured, and it misses what is happening on this side of the Atlantic.
So, is hardware back in Europe? Not quite. In Europe, the money is not following hardware per se. It is following the buyers who have decided certain hardware is strategic: governments rebuilding defence and industry worried about resilience. Where such a buyer stands behind the demand, cheques are larger than ever. Where none does, the renaissance is much harder to find.
That makes the useful question for a hardware founder a different one. Not whether atoms are back, but whose demand underwrites the cheque.
This week on the startup to scaleup journey:
- The AI services land grab: why your business model decides who will back your startup
Lawhive set out to sell software to law firms. The firms, mostly small high-street practices, were reluctant to buy. So Lawhive stopped selling to law firms and became one itself. Today, about 500 lawyers work through its platform and annual revenue has passed $35m, up sevenfold in a year. In February it raised a $60m Series B to take the model across the United States.
Read that as a simple pivot story and you will miss the point. Lawhive changed its customer, its business model and, without quite announcing it, the kind of investment capital it needed. The same choice is now arriving for every founder building with AI in a services market, from accounting and IT support to lettings and law.
There are only three ways to reach a customer an incumbent firm already serves. Sell the incumbent software. Compete with it for the client. Or buy it, client list and all.
Most founders treat this as a technology choice. It is not. It is a choice about how you acquire customers, and each route is paid for with a different kind of capital. Pick the route and you have picked your investors, whether you meant to or not.
What makes this urgent is timing. In February, PitchBook's analysts declared SaaS dead. Yet in the same quarter, global venture deal value in enterprise SaaS reached a record $173 billion. The money has not left software. But the conviction is already moving, and the investors leading that move do not agree on which road wins.
For founders, that is the trap. You have to commit to a business model before anyone knows which one will win. Then you have to pitch it to investors who are already sure they know...
