In the game of startup funding: Is VC the trump card, or are you really playing the Joker..?

Venture Capital (VC) is often treated as the “trump card” in the startup funding game - a silver-bullet signifier of success. For many founders, landing VC backing feels like winning the jackpot. But that perception can be misleading. VC is just one tool, and not always the right one. For many early-stage UK startups, opting for alternatives may offer a more sustainable, founder-centric path.

This isn’t an argument against VC. Plenty of businesses, especially those in capital-intensive spaces like deeptech, biotech, or AI infrastructure, genuinely need VC to reach their potential. But for most early-stage UK startups - particularly those raising a first or second round - VC often isn’t the most realistic or beneficial option.

Why VC isn’t usually the first move for early-stage founders

Even with the recent rebound in UK venture investment, VCs continue to be highly selective. In 2024, UK VC deployments climbed to around £9 billion, and early-stage term sheets accounted for roughly three-quarters of completed deals. But “early-stage” rarely means “idea-only.” Increasingly, it implies meaningful traction, early revenue, or strong technical validation.

At the same time, round sizes have grown. The median seed round in 2024 reached £4.1 million, Series A rounds averaged £17.9 million, and pre-seed valuations jumped to roughly £3.2 million. These rising numbers bring rising expectations - faster progress, faster hiring, faster market capture. Many founders simply aren’t ready to operate at that speed, or don’t want to.

The picture is similar on the angel side. While SEIS/EIS-backed investments remain a cornerstone of UK early-stage funding, and many angels became more cautious. Early-stage capital hasn’t disappeared, but founders face a higher bar for credibility and proof.

Why VC incentives may not match your own

Part of the mismatch comes from the power-law dynamic guiding VC portfolios. Venture funds place many bets knowing only one or two will deliver the 100× (or more) outcome required to make the fund successful.

For the VC, that model works.

For the founder, who only gets one shot, it can be misaligned.

A founder may be thrilled to build a profitable business and exit for £20-£50 million - genuinely life-changing. A VC, however, may see that outcome as a failure, because it doesn’t materially impact fund returns. This difference in incentives creates a tension that many first-time founders don’t fully appreciate until they’re already on the venture treadmill.

There’s also the matter of control. VC rounds frequently come with terms such as liquidation preferences, anti-dilution protections, board seats, veto rights, and other investor-friendly mechanisms. These terms aren’t inherently bad - they’re normal for venture-scale businesses - but they do shift power away from founders.

So, what’s the alternative?

For a large portion of early-stage UK founders, two pathways tend to create the most favourable outcomes: bootstrapping or modest angel investment under SEIS/EIS.

These pathways allow founders to maintain control, grow sustainably, and aim for a meaningful exit without the pressure of chasing unicorn status.

Bootstrapping vs Angel Investment

Bootstrapping

Bootstrapping means building your company using your own resources, early customer revenue, or whatever cash flow you can generate. While it can be slower and sometimes harder, it gives founders full control and the freedom to focus on building a product that truly works - rather than chasing artificial milestones to satisfy investors.

For many founders, especially those creating service-based businesses, software tools, marketplaces, or niche B2B products, this approach leads to strong foundations and, often, far more flexibility at exit.

Angel Investors (SEIS/EIS)

Angel investors can be transformative - not just because they provide capital, but because they bring experience, objectivity, and networks. SEIS and EIS make the UK an unusually founder-friendly ecosystem: investors get meaningful tax relief, which encourages them to take early risks without demanding onerous terms.

Angel capital today comes in many forms: individual angels, angel syndicates, private investor clubs, equity crowdfunding platforms, and SEIS/EIS funds.

Most of these are straightforward and founder-friendly - but SEIS/EIS funds require particular attention. Some behave more like small VCs and attempt to include terms that don’t align with the spirit of early-stage investing. We have some great information on SEIS/EIS funds here:

What should I be aware of if I’m using a SEIS / EIS Fund?

SEIS Funds: What they are and how to raise money

By understanding the differences between these models, founders can access the advantages of early equity financing without giving away excessive control.

When VC does make sense

VC is absolutely the correct path when your business:

• requires large amounts of upfront capital to get to market,

• must scale quickly to capture network effects,

• is in a winner-takes-all or winner-takes-most category, or

• has a team prepared to operate at venture pace and accept venture expectations.

In those scenarios, VC isn’t just helpful - it’s essential. But those scenarios are not “every startup,” and they are not “most startups.”

Conclusion: Know the game - and choose your hand wisely

VC can be a powerful trump card - but only when you’re playing the same game as the investors.

For many first-time founders in the UK, particularly in the shifting fundraising landscape, VC may feel more like drawing the Joker: unpredictable, high-stakes, and not always aligned with your goals.

Before chasing the prestige of VC... Ask yourself what game you’re playing, and what outcome you actually want.

Sometimes the smartest, most rewarding play isn’t the flashy card everyone talks about - it’s the ace up your sleeve: bootstrapping, angels, SEIS/EIS, and the freedom to build on your terms.

Choose the hand that matches your ambitions - not someone else’s.

Sam Simpson, Founder of FounderCatalyst

"My key piece of advice is this. Work out what game everyone is playing. Because chasing VC could mean you’re falling into the trap of a game you didn’t realise you were playing.

Instead, consider a different path. VC is just one tool in the startup’s toolkit. Explore alternative funding options that align with your vision, long-term goals, and risk tolerance.

Success in the startup world can take many forms, and sometimes, playing the right game, with the right hand, could lead to the most rewarding outcome."

At FounderCatalyst, we help founders make their UK startups investor-ready, close funding rounds, and motivate their teams. We handle SEIS and EIS advance assurance, fundraising legal paperwork, data rooms, cap table management, and set up EMI and unapproved share option schemes. Book a call with an expert to learn more.