This week on the startup to scaleup journey:
- Term sheet paradox: why DeepTech founders aren't getting AI's leverage
DeepTech is now 45% of UK venture capital investment value, up from 14% in 2021. The 2026 HSBC Innovation Banking Term Sheet Guide reports 71% of UK VCs optimistic about the year ahead, with the same proportion expressing strong conviction in DeepTech specifically, a thirty point year-on-year jump. The headlines say it clearly enough: DeepTech is in favour.
So why are term sheets getting tougher?
That is the question buried inside HSBC's 2026 analysis, drawn from 711 UK term sheets and £11.2bn of investment value, and the question almost no public commentary on the report has surfaced.
The data describes a market that is simultaneously more optimistic in sentiment and tougher in the terms attached to that sentiment. Investor optimism is real. So is the cost of accepting it, paid in the small print of the term sheet.
For UK DeepTech founders raising in 2026, the most useful thing to understand is not the headline mood music but the three axes along which the market has quietly bifurcated underneath it. Stage. Sector. Geography. On each axis, most early-stage founders are sitting on the wrong side of the line...
This week on the startup to scaleup journey:
- What investors already know about your exit prospects - and you probably don't
Most founders, after closing their second institutional round, allow themselves a quiet moment of relief. Two rounds of validation. Two rounds of investor due diligence. Two rounds of someone with significant money on the line saying yes, this company is going somewhere. The instinct that follows is natural: we're on the path now. The hard part is behind us - the exit will come.
The latest data says otherwise. PitchBook's Q1 2026 European Venture Report reveals something most founders would find genuinely uncomfortable to read. A drill down on all European AI companies that have already raised at least two rounds of institutional finance, says 42% are predicted to have no exit at all.
Not failure in the dramatic sense. Just companies that drift sideways, become self-sustaining, get stuck, or quietly run out of momentum without ever reaching a clean ending. After two rounds. After all that effort.
And it’s not just in AI. Similar numbers repeat across other sectors. They should change how every founder thinks from Series A onwards.
This data reveals something else, too: that genuinely useful predictive analytics now exist for venture-backed businesses, but founders rarely see the predictions being made about their own companies...
This week on the startup to scaleup journey:
- The co-founder breakdown investors see before you do
What if the single biggest risk to your next funding round is not your traction, your valuation, your cap table, or even your technology - but the person sitting next to you on the call?
Most DeepTech founders, asked what could derail their Series A, would point almost anywhere else. They would talk about milestone slippage, about whether the science is ready, about the difficulty of finding investors who understand the technology. Almost none would name their co-founder. They would be looking in the wrong direction.
The relationship between founders is doing more underwriting work than most founders realise - quietly, in the background of every investor conversation, and increasingly explicitly inside the deal team's internal discussion. And the failure mode is rarely a dramatic blow-up. It is the slow, mostly invisible drift that surfaces, fully formed, in the room with an investor - by which point the deal is usually already lost.
This week's piece is uncomfortable on purpose. The DeepTech founders most exposed to this risk are the ones who would tell you, with complete sincerity, that they don't have it...
This week on the startup to scaleup journey:
- The negotiation you lose before the term sheet arrives
What if the most consequential negotiation in your next funding round takes place weeks before the term sheet arrives - and you're the only person in the room?
Most founders imagine the real negotiation begins when the offer lands. But by the time a formal term sheet is produced, the decisive moves have usually already been made.
Experienced investors do not write a term sheet and then negotiate it. They probe, weeks in advance, on valuation, on board composition, on the shape of the round - testing how the founder reacts, looking for the zone where agreement is likely.
Only when they believe they have found terms the founder will accept do they commit them to paper. By that stage, the document is not an opening position. It is a verdict.
The negotiation that matters most, then, is the one that happens in this soft phase - and much of it happens not across the table at all, but inside the founder's own head. It is shaped by the instincts that govern every investor interaction: the desire to be liked, to be fair, to keep momentum, to not seem difficult. These instincts feel like virtues. They are rewarded almost everywhere else in life. In early-stage fundraising, they are precisely what sophisticated investors are trained to recognise - and to use to their advantage.
This is the uncomfortable territory this week's piece enters. For founders who have done this before, or who are working with advisors who have, much of what follows will already be familiar. But for the majority undertaking an early-stage round for the first or second time, something worth understanding is in play. At every layer of the negotiation - mental framing, internal dialogue, the specific words spoken - the default founder instinct runs in the wrong direction. And the discipline of running the other way is what separates those who preserve leverage from those who quietly surrender it...
This week on the startup to scaleup journey:
- Why VCs now fund what they once rejected
What if the reasons VCs rejected your startup five years ago are precisely why they'll fund you today?
The venture capital playbook has been turned inside out. For a decade, mainstream investors chased frictionless markets, viral growth loops, and zero marginal cost distribution. Hardware was "too capital-intensive." Regulated industries were "too uncertain." Complex institutional sales were "too slow." These weren't just seen as messy challenges - they were disqualifying factors that sent founders to the reject pile.
But when AI agents can rebuild entire startup portfolios in 24 hours, software alone offers no protection. The characteristics that made businesses unfundable in 2021 may be exactly what makes them defensible in 2026. As we explored in February's newsletter, hardware and proprietary data have emerged as two of the deepest moats in the AI era. Today, we examine the third and perhaps most underrated for DeepTech founders: the mess itself...
This week on the startup to scaleup journey:
- A great investment proposition isn't enough to get you funded in 2026
Every successful fundraise depends on three things: targeting the right investors, developing a strong investment proposition, and executing an effective campaign. These pillars haven't changed in the sixteen years Duet has been advising early-stage companies. What has changed - dramatically - is their relative importance.
A decade ago, developing the proposition was the hardest part. Understanding what investors wanted (the specific investment criteria) was genuinely difficult. The information wasn't public. Founders who could articulate their opportunity through an investor's lens had a meaningful edge. A reasonable weighting of relative difficulty across our three factors might have therefore been: 30% investors; 40% proposition; 30% campaign.
Today, based on patterns observed across more than seventy client engagements and recent shifts in the market, our assessment shows these weightings have significantly changed:
Investors: 30% → 45%
Proposition: 40% → 10%
Campaign: 30% → 45%
The visible landscape of self-help support that has erupted in recent years - podcasts, newsletters, LinkedIn posts, pitch deck templates etc. - relates almost entirely to the proposition-building pillar, the factor that now matters least as the knowledge gap has reduced. The problem is that founders absorb this content, assume most of the hard work is done, and walk into a process they're unprepared for. The illusion is that fundraising has become easier – but of course we all know that it hasn't.
The key to increasing the probability of funding success now sits heavily within the other two pillars: targeting the right investors and executing an effective campaign. By sharing our understanding of how these have changed we hope founders will be better prepared to conquer the funding challenge of 2026...
