The AI test is just the start. What a seasoned investor wants answered in 2026

Graham McDonald has invested in early-stage companies for 15 years from Scotland. He sits on PAR Equity's investment committee, is a member of Gabriel Investment Syndicate, and holds a senior independent director role at Baronsmead Venture Capital Trust. Few people have watched the UK fundraising process from as many angles. He's unambiguous about what separates founders who close their first round from the ones who don't.

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Three years after helping a team raise £500,000 and stepping in as chair, Graham McDonald had to turn the key in the door for the last time.

He'd mentored the founders through a Scottish Government initiative during COVID, believed in what they were building, and stayed close as they grew. Then, quietly, the business ran out of money. "It's quite a salutary lesson," he says. "It does make you think about how you assess opportunities and how you assess management teams."

He kept investing. Today Graham is a member of Gabriel Investment Syndicate in Glasgow, sits on the investment committee at PAR Equity, and holds a senior independent director role at Baronsmead Venture Capital Trust, a £230m vehicle with more than 70 active investments. His earlier career ran through Bank of Scotland, Scottish Widows Investment Partnership, and Aberdeen Asset Management, where he led a global private equity and venture capital business employing 50 investment professionals.

After 15 years and a vantage point across three of the most active investment vehicles in Scotland, the questions he brings to an early-stage pitch are sharper than most founders are ready for. And the first one is about AI.

Run the AI disruption test on yourself before an investor does

Graham is currently reviewing a company that makes construction panels from recycled glass. Physical product, not software. He's still running the AI disruption test on it.

"Even when you're looking at something that doesn't profess to be AI-oriented, your mind is immediately working," he says. "Is there an AI application here, or is there an AI threat to this?"

The data backs the shift. In 2024, AI accounted for 30.3% of UK equity deal value, up from 14.7% a year earlier¹. AI now pulls close to half of all UK SaaS venture capital². The question of how defensible your market is once AI reshapes it is no longer reserved for deep-tech pitches. Every founder is being asked it now, whether they know it or not.

It isn't a London phenomenon either. Scottish AI investment has grown from £2m in 2016 to £113m in 2025³. The test Graham runs in Glasgow is the same one we see in other investment groups across the country.

Get specific about what AI does to your market in both directions

The founders who land well aren't the ones promising AI transformation. They're the ones who've already mapped where AI lifts them and where it exposes them.

"Any founder who doesn't think AI is a threat to their business probably hasn't looked at it closely enough." — Graham McDonald, Gabriel Syndicate

"The pace of change has been quite dramatic," Graham says. "There's been talk of a 'SaaSastrophe' — the idea that SaaS models are going to get absolutely ripped up and destroyed. I do think a lot of SaaS models are under some form of threat. But the level of that threat, and how it actually plays out… I'm not sure everyone knows the answer yet."

His point isn't that SaaS is finished. It's that the level of threat isn't yet clear to anyone, and the founders who can speak to it directly, where AI helps them, where it hurts them, and what they're doing about both, land differently in a meeting than those who shrug it off.

Know whether the problem is the market or you

One question most investors won't ask a founder directly, but are quietly answering for themselves: is your difficulty raising a market problem, or a you problem?

"You have to know when to quit."

Graham is unusually direct about this. "There's a harsh reality to asking the question; is the failure to raise a symptom of the market, or is it down to your own failings? As an angel, we owe it to founders to give honest feedback. It's in everyone's interest."

Most founders don't get that feedback. They get silence, a polite pass, or a vague "not the right fit for us." What that costs them is the ability to course-correct while there's still opportunity to do so.

AI has made this harder to ignore. The cost of getting an MVP to market has dropped dramatically. What once needed £200k can now be done for a fraction of that. Investors know it. If you haven't pushed your product as far as the tools available allow, you're leaving questions unanswered that you could have answered yourself. The barriers to entry being lower for you means they're lower for everyone. The moat matters more now, not less.

If you're not closing, treat it as data. Map the pattern. Is the same objection recurring? That's signal worth acting on. And if you're not getting honest feedback, go back and ask for it directly. The investors worth knowing will give it.

Treat your first investor as distribution, not just capital

Scotland is, by most measures, unusually well-networked. Scottish Enterprise works with 17 co-investment and matching partners, most of which are syndicates. PAR Equity's investor network runs to around 200 people. Gabriel itself has 26 active investments and a process built for rigour, with typically two angels carrying a deal through diligence before presenting it to the wider group.

Graham's read on the state of it is still blunt. "I don't think there's enough cohesion," he says. "There's an awful lot of organisations almost trying to work by themselves."

If a region as densely networked as Scotland still feels fragmented to someone with Graham's visibility, founders raising outside that infrastructure have to work even harder. And the capital concentration behind it is only getting more severe. Across the UK in 2025, follow-on rounds outnumbered first-time fundraisings for the second year running, 3,398 versus 2,489⁴. First cheques are rarer than the headline numbers suggest, and they're going to founders whose investors already know other investors.

Every backer on your cap table is a route to the next one. Founders who treat their first investor as distribution, not just capital, compound that route. The ones who don't are back to cold outreach in six months.

What still gives him optimism

Asked what makes him optimistic, Graham doesn't hesitate. He judged Scottish Edge last year and came away genuinely encouraged. "The quality of opportunities in front of us was truly first class. The energy levels, the barriers people have overcome. Truly impressive."

The founders who close their first round, in his experience, are rarely the ones with the loudest ambitions. They're the ones who've already run the AI test on themselves, already thought about whether they're the right person to lead what they're building, and already understand that their first backer is their most valuable distribution channel. Everything else flows from there.

Key Takeaways for Founders

• Run the AI disruption test on yourself before an investor does, whatever sector you're in
• Get specific about where AI helps you and where it exposes you. Internal risk is part of the assessment, not just competitive risk
• Investors are asking whether you can still lead the business as it scales. Be ready to answer honestly
• Regional momentum like Scotland's doesn't override the fact that capital is concentrating behind companies investors already know
• Every investor on your cap table is a route to the next one. Use them that way

References

1. Small Business Equity Tracker 2025 | British Business Bank – https://www.british-business-bank.co.uk/about/research-and-publications/small-business-equity-tracker-2025
2. UK Innovation Update Q3 2025 | Dealroom.co / HSBC Innovation Banking – https://www.hsbcinnovationbanking.com/en/resources/uk-innovation-update-q3-2025
3. Techscaler Annual Report 2025 | Beauhurst – https://www.beauhurst.com/wp-content/uploads/2026/04/Techscaler-Annual-Report-2025.pdf
4. The Deal 2026 | Beauhurst – https://www.beauhurst.com/reports/the-deal-2026/