Why the UK must reframe the startup journey

It’s a common assumption that fast-growing startups follow a predictable hockey-stick growth curve. Founders project a seamless transition from seed capital to Series A, scaling up in incremental stages. However, the myth of the smooth startup journey does not reflect the realities of building a company in the UK. If we want to safeguard British innovation and foster the next generation of entrepreneurs, we must begin by normalising the ups and downs.

Building a world-class business is defined by critical inflexion points where companies either break through or fracture. Even the most successful scaleups – including household names like Gymshark or Octopus Energy – will have had to navigate near-death experiences. When faced with these situations, the difference between survival and collapse often boils down to day-to-day or even hourly operational decisions.

The precariousness of startup life is reflected in the data. ERC research estimates that of the 325,811 startups registered in 2020, only 47% survived to 2023, and of these, only 2% achieved £1 million turnover after three years.

When founders do hit these pressure points, it is easy to feel that they are failing rather than recognising it as a normal and often necessary phase of scaling. This misinterpretation can lead to premature pivots, poorly timed fundraising or a loss of confidence at the moment when resilience is required.

The role of venture capital

Yet these highly damaging missteps can be avoided if the right funding structures are in place. It is during periods of peril that the limitations of traditional financing become clear. When a startup business needs rapid access to cash, traditional bank debt can be too slow to deploy and is often too risk-averse. Similarly, many government grants are bogged down by bureaucratic processes and can take months to obtain, making them ill-suited for high-volatility scenarios.

This is where venture capital (VC) comes into its own. VCs are structured specifically to absorb risk in exchange for the potential of high returns. These funds provide the capital required to sustain pre-revenue or capital-intensive innovation. VC offers speed, flexibility and a signal of confidence. Whether it’s through follow-on rounds or strategic board intervention, VCs can move at the pace the market demands. Beyond capital, VCs can help founders navigate crises by drawing on previous portfolio experiences or their extensive networks.

Incentivising early-stage investment

However, the capital engine that is fuelling the early-stage ecosystem is showing worrying signs of strain. Years of high interest rates, political turmoil, and an overly negative economic narrative have created a pervasive risk aversion across the UK early-stage funding landscape. This matters because high-potential companies are more likely to experience fluctuations and, therefore, more likely to be overlooked in low-risk environments.

There has been a clear cultural shift over the past decade, which reveals itself in the latest statistics from HMRC: investment through the Enterprise Investment Scheme has stagnated for the tax year 2024 to 2025. Starving the top of the funnel means fewer venture-backable startups ever get the chance to step onto the scaling ladder.

A new generation of entrepreneurs

If we wish to reverse this trend and inspire a new generation of entrepreneurs, we need a fundamental shift in both policy and perspective.

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A revision of our regulatory and tax landscapes will help the UK maintain a competitive edge. The government should raise investment limits under the EIS framework (SEIS is already well served), whilst expanding the qualifying criteria to encourage experienced, high-net-worth angel syndicates to deploy their capital and expertise into early-stage companies. The removal of the Entrepreneurs’ Relief tax break in favour of the far less generous Business Asset Disposal Relief should also be revised, as the reward for putting it all on the line has been significantly reduced and the enhanced tax take is minimal.

But policy alone is not enough; we have to change how we talk about building businesses. It’s imperative that we reframe the messy, often chaotic process of company building not as a systemic failure but as a necessary, normal phase of scaling something of global importance. True innovation is often born in the trenches of operational crises and pivots. When we stigmatise the turbulent periods, we force founders to suffer in isolation rather than seek critical interventions. Only by celebrating resilience can we support entrepreneurs to take the massive risks required to build world-leading UK-based companies.

The UK remains one of the best places in the world to start a business. We have three of the world’s top 10 universities, world-leading talent, ambition, and willing entrepreneurs. But unless we align our expectations, capital, and culture with the realities of how companies actually grow, we risk undermining that potential.