UK funding transactions in freefall – what the best founders are doing differently

2025 investment in UK startups was essentially flat with 2024, according to Pitchbook’s annual report. But deal count was down markedly again for the fourth year running.
 
For most founders, deal count gives a much truer sense of how hard it is to raise capital.
 
From the high of 4,620 deals in 2021, UK startups will record around 3,140 transactions in 2025, a fall of 32%, making 2025 feel more like a regression to 2017 in terms of activity level.
 
When 1 in 3 transactions simply vanishes like this, pain is inevitable.
 
Tracxn's year-to-date figures for 2026 show this trend could even be accelerating. A 29% YoY drop in investment in January and a 59% collapse in the number of deals getting done. These are early figures, but signs of a continued slide are already there.
 
How are the best founders responding to these dramatically changing market conditions? Today we look at one of the most important factors that determines funding outcomes – founder behaviour.
 
From our ringside seat helping UK founders raise over $70M at Seed and Series A in 2025, we highlight 3 key behaviours that are playing an increasingly important role in driving successful funding outcomes.
 
 
1. The new rules of investor targeting

Where has all the money gone?
 
According to Pitchbook, European VCs raised just €12bn in 2025 – this is the lowest fundraising total in a decade and a decline of almost 50% on 2024.
 
When funds cannot raise new vehicles, they cannot invest. And when they cannot invest, founders are left pitching into a void.
 
The impact: an explosion in the number of zombie VC funds across Europe. These are firms that still have attractive websites, still take meetings, and still collect management fees - but have no deployable capital left to invest.
 
The practical consequence for UK founders is well-known if you have been raising capital recently. A meaningful proportion of the investors on your target list are, in effect, dead. They will take your call, attend your pitch, ask thoughtful questions - and never write a cheque.
 
Every hour a founder spends courting a zombie fund is an hour wasted. And as we said in our 29th January piece this misplaced effort doesn't just have a financial cost – it has an emotional one, feeding new cycles of self-doubt.
 
How successful founders react:
 
If zombie funds are the disease, then rigorous investor research is the treatment. This must go far beyond the classic tests for sector, stage, and geographic fit.
 
Founders that are developing real edge want to know much more about their target investor audience before any approach is made. For example:

• Who is still actively deploying out of current funds?
• Which funds have recently closed new vehicles?
• What is their latest investment thesis (that makes them relevant)?
• How are they assessing startups with a similar sector, stage, and geographic profile?
• Who is the partner best suited to an approach based on their portfolio and experience?

 
The founders who gather this intelligence - and are able to map it to set priorities before they begin their campaign - are the ones converting outreach into meetings and meetings into term sheets.
 
Founders have always researched investors before approaching them. But the depth required now is qualitatively different. This can be the difference between a highly productive process and a demoralising one.
 
 
2. The new rules of investment planning
 
FOMO is no longer the lever it once was.
 
The investment market highs of 2021 pushed FOMO – the fear of missing out – to a remarkable level. Some deals were done in just a few days. But, in the aftermath and ever since, investor psychology has seriously shifted. We are now in the era of FOLS - the fear of looking stupid.
 
Investors that lead rounds tend to focus on one primary stage – Seed, Series A, Series B. This is not just about round participation but actively leading those rounds as an incoming investor. Each major equity round needs a new lead, a fresh face that will revalidate the opportunity, as well as set the new valuation.  
 
For example, a lead investor at the Seed must now be convinced that the founder understands what evidence will be needed to eventually attract the right Series A investor. If they don’t profess this knowledge and have a plan to deliver it, then the incumbent investor(s) could be left holding the baby when the cash runs out. This is every investor’s nightmare and the biggest driver of FOLS.
 
How successful founders react:
 
Experienced founders are now thinking further ahead. Minimally, this means starting to plan the next fundraise almost as soon as the current one has closed. They are not waiting until runway gets short to think about what comes next. They are building towards it immediately, determined to hit the critical milestones required.
 
Some are going even further, planning two funding steps even before embarking on the first. Rather than simply asking "how do I close this round?", the sharpest are adding: "and where do I deploy these funds to ensure we are fundable at the next round?" If I raise a Seed round now, what evidence will the Series A investor in 18 months need to see? Or if I now raise a Series A, what does the Series B story look like?
 
These founders are essentially reverse-engineering milestones from what the next investor cohort will need to see - not what feels like progress internally, but what constitutes proof externally.
 
Some may think this is heresy. Surely the point is to design a company around customers, not investors. But the nuance is to ensure the funding plan, and the business plan are naturally interwoven, not a business plan with some fundraising stuck on the side. The two plans must share the same critical milestones. These milestones provide the evidence of progress investors must see. No progress, no milestones. No milestones, no funding.
 
Founders that see the world in this light do not view fundraising as some sort of horrible intervention that has to be endured. They see it almost as a natural consequence of their startup’s progress.
 
This kind of multi-step strategic thinking was ananthema at the market high. It’s now essential.
 
 
3. The new rules of building trust early
 
Fundraising is no longer an ‘event’.
 
There's a phrase that circulates among experienced VCs: they invest in lines, not dots. A single data point - one meeting, one deck, one set of metrics - tells them very little. And they're vetting dozens of companies every week, most of which blur together.
 
After the excesses of 2021/22 what they really want to see is a pattern. How does this founder think over time? How do they communicate when things are hard? Do they learn in public? Are they building something I want to be part of?
 
And above all (to reduce FOLS), can I trust them?
 
How successful founders react:
 
As we highlighted in our recent piece, ‘Why the founders who get funded in 2026 will be the ones you've already heard of’, the founders who break through and capture attention are those who have already built trust before the first meeting. They're not strangers asking for time. They're known quantities whose thinking investors have been following - sometimes for months or years.
 
How to achieve this? You don't need to become an influencer. You don't need to post daily or chase engagement metrics. But you do need to be findable - to have an online presence that tells investors WHO you are, WHAT you believe, and WHY your perspective on the world is worth paying attention to.
 
The founders who consistently share valuable, distinctive perspectives earn credibility before the pitch meeting ever happens. This is the 'soft' phase of the campaign. When they finally reach out (the 'hard' campaign), they're not explaining who they are from scratch. They're building on a foundation that already exists and making sure that early decision goes their way. 
 
When investors are already familiar with your thinking, your worldview, your track record of insight – this transforms your cold outreach into something much warmer. You're not interrupting their day. You're continuing a conversation they didn't realise they'd already started.
 
 
The takeaways
 
The UK funding market in 2025 was as tough as anything we've seen in years. The early 2026 numbers are alarming and the zombie fund problem means the effective supply of capital is even lower than the headline figures suggest. Capital is now concentrated in fewer places.
 
The founders who will win are the ones who treat fundraising itself as a strategic discipline: planning their milestones against what the next funding round demands, researching their investors with the same rigour they apply to their customers, and refusing to burn runway on meetings that will never convert.

But here is the counter-intuitive truth that should provide fresh incentive: founders who raise successfully in this environment will face less competition at scale, will have been forced to build more disciplined businesses, and will be backed by investors who genuinely believe in what they are doing - because nobody is writing speculative cheques anymore.
 
The money has not vanished entirely. It has just become far more selective about where it goes. Make sure it finds you.

 
Let's talk.