How academic founders raise capital in the UK

A practical guide from the people who fund spinouts, and one founder who deliberately didn't become one

UK universities are world-class at producing research. The country is less good at turning that research into venture-backed companies that scale. This piece is for academic founders thinking about that journey, whether through a formal spinout or by leaving the IP behind and building something new.

We spoke to three people who see the path from both sides: Sara Palmer, Head of Investments at Innovate UK; James Baker, Principal at Amadeus Capital Partners; and Josh Silverstone, founder and CEO of Hartley Ultrafast and a former academic at the University of Bristol.

The UK's deep tech paradox

The headline numbers look strong. The UK is Europe's #1 for venture capital, raising more than France, Germany and Switzerland combined in 2025¹. £6.27bn went into first-time equity rounds last year, up 74.3% on the prior year and a record high². University spinouts alone took 17% of total UK equity deployed in 2024, with £1.86bn across 243 deals³. By the standard "is the UK good at deep tech" question, the answer is yes.

The harder question is what happens after the first round. Average time from launch to Series C has nearly doubled since 2019, to 9.6 years⁴. 66% of H1 2025 UK venture capital came from international sources, 43% of it from US funds⁴. Median seed pre-money valuations fell 17% in 2025². The capital that scales UK deep tech increasingly isn't UK capital, and the path between first cheque and exit is getting longer.

Josh Silverstone has lived this directly. He helped architect what became Psiquantum, the photonic quantum computing company that started in 2016 — and that, Josh told us, was incorporated in Palo Alto rather than Bristol because "in 2016, it was inconceivable that you could build a unicorn off of European capital markets." He calls it "a tragedy in the evolution of UK deep tech companies, especially computing ones."

The implication for academic founders is sharper than it looks. The first cheque is the easier part. The story has to survive a long, capital-intensive path to scale, with US investors entering the conversation earlier than most tech transfer offices anticipate. And it has to break through a market that's still hard to see into. As Sara Palmer puts it: "The landscape is fragmented and not as visible as it needs to be." 65% of UK equity deals in H1 2025 went unannounced, the highest share since 2020⁵. Founders can't see the full investor market. Investors can't see the full pipeline.

Two paths out of the lab

Most academic founders assume they're heading for a formal spinout. IP licensing from a tech transfer office, the university taking equity, the structure baked in from day one. That's one route. It isn't the only one.

Josh Silverstone took the other. He spent over a decade at Bristol working on photonic quantum computing and trained 17 PhDs as a UKRI Future Leaders Fellow. When he founded Hartley Ultrafast, he made a deliberate choice: "We are not strictly a spinout. The university isn't on our cap table. We haven't taken any IP out of the university. We've just taken a bunch of big brains."

The two paths have different fundraising consequences. Formal spinouts inherit a clean technology moat — IP that's defensible by construction. They also inherit a more complicated cap table that some VCs find hard to underwrite, particularly when university equity stakes look high or terms aren't transparent. Sara is direct about what universities need to fix: equity stakes need to be fair, terms transparent, and the process needs to move at pace. Some universities are getting there. Others aren't. With the path to scale-up getting longer, every percentage point of cap table friction at the start matters more.

The funding stack before VC

Most academic founders don't start with venture capital, and most shouldn't. The journey from research to investability runs through grant funding, university proof-of-concept funds, technical angels, and pre-seed deep tech funds long before a Series A conversation makes sense. The early stack is also the healthiest part of the UK system right now — 2,489 companies raised their first-ever equity round in 2025, up 23.6% year on year². SEIS expanded sharply after the 2023 rule changes, with £242m raised across 2,290 companies in 2023–24, up 51%⁶.

Josh credits this stack with the runway to figure out what his company actually was. A UKRI fellowship paid his salary into the company's early days. A legacy business he'd been running alongside academia kept the lights on. "That public support through taxpayer funding effectively allowed me to take these personal risks," he said — including the freedom to test a positioning that ultimately failed and pivot before it sank a venture-funded round.

Sara's advice mirrors this sequencing: build the relationships before you need the cheque. "Many [investors] will know a company for many years before landing that first investment, and investors tell us regularly that they want to see pipeline as early as possible." A first conversation today might not result in investment now but buys credibility for a round 18 months out. Don't think of it as networking but as part of 'investment readiness'.

What investors actually look for

When the round eventually opens, what do funders care about?

James Baker's framing at Amadeus is clear: spinouts win on technology depth. "Spin-outs have a depth of technology and research behind them that in theory will make their business resilient via a strong technology moat that is sustainable over a number of years." That's the upside. A SaaS competitor can be cloned by a good developer in days. A spinout can't.

Depth alone isn't enough, especially in a tightening market. Two specific tests separate fundable spinouts from unfundable ones. First, the technology has to be a step-change, not an incremental improvement. Second, the team has to know how to productise it: turn the research into something a customer can actually buy and use.

Sara adds a third test: commercial credibility on the team itself. "The team needs to demonstrate that they have commercial skills as well as their deep technical skills, even if just as advisors on the board or fractional director." Commercial validation, route to market, fit to market, a financial model. Not a beautifully refined deck. Real evidence that someone on this team has thought about customers as carefully as they've thought about physics.

The bar keeps rising. 1 in 3 UK VCs cite "lack of deal quality" as their biggest challenge⁴, and seed valuations dropped 17% across 2025². Investors are slower, more selective, and writing into a slimmer cap table. A misconception worth flagging in that context: not every academic team is right for VC. Baker is blunt: "Not every spin-out has a multi-$B outcome potential and so is VC actually the right capital tool for their business? I see a lot of spin-outs assume they deserve VC funding and not considering whether it is actually the right fit." If your trajectory doesn't support a 10x return at the fund level, alternative capital may serve you better, and you'll waste fewer months chasing the wrong meetings.

The science-project trap

The biggest single thing academic founders need to overcome isn't technical. It's a perception problem.

Josh: "We are constantly fighting the pattern match that founders with PhDs actually want to run science projects." Investors meet a lot of academic founders. They've seen plenty who treat a company as a way to keep doing research with better lab equipment. The bar to prove you're different is high.

The cleanest signal you've cleared it is productisation. Baker calls this the single biggest reason deep tech startups fail outside founder fallouts: "The startup graveyard is littered with great technology that never got its productisation right and so people didn't buy it." Spinout founders who treat customer feedback as a constraint on technical purity tend to lose. The ones who treat it as the whole point tend to win.

The other tell is narrative. Josh's first positioning of Hartley sat one rung lower in the value chain than where he ended up — supplying components into a photonic computing market that didn't exist yet. The story was technically sound and almost no one got it. He moved up the value chain, simplified the pitch, and the round started moving. "Having something simple, or boiling what you've got down to something you can explain in one sentence, is essential." Treat your story as part of the product. Road-test it. Refine it. Be willing to throw a draft away.

The practical playbook

Six things matter most for academic founders raising for the first time, given where the market actually is:

• Find a commercial co-founder or advisor early. Investors will look for one, and a fractional commercial director on the board counts
• Build the funding stack in order. Grants, fellowships and SEIS-eligible angels first, VC only when the trajectory genuinely supports it
• Start investor relationships years before the round, not weeks before. Pipeline visibility is what moves an investor from cold to warm in an opaque market
• Plan for an international cap table. With two thirds of UK venture funding now coming from overseas, conversations with US funds at Series A — or earlier — are the rule, not the exception
• Test whether VC is even the right tool. If your business doesn't have a multi-billion outcome shape, alternative capital will get you further
• Sharpen the story until anyone can repeat it back. If you can't explain the company in a sentence, the round won't move

Every item on that list falls out of the same structural picture: a UK ecosystem that backs deep tech earlier and harder than ever, but that still struggles to carry it through to scale. The academic founders who do best in that system are the ones who plan for the long path, not just the first round, and who choose the first investor with the second and third in mind.

The research is world-class. The first capital is here. Bridging from there to scale starts with picking the right first investor.

References

1. UK Innovation Update Q3 2025 | Dealroom / HSBC
2. The Deal 2026 | Beauhurst
3. Small Business Equity Tracker 2025 | British Business Bank
4. Tech Nation Report 2025 | Tech Nation
5. State of UK Investment H1 2025 | Beauhurst
6. EIS/SEIS Statistics 2025 | HMRC

Quotes from Sara Palmer, Head of Investments, Innovate UK and James Baker, Principal — Early-Stage Funds, Amadeus Capital Partners are taken from written Q&A correspondence. Quotes from Josh Silverstone, Founder and CEO of Hartley Ultrafast, are taken from a recorded interview transcript.