Unveiling UK's Entrepreneurial Landscape: How AI Buzz and Life Sciences Fuel Seed Investments and Tackle the Scaleup Gap

Artificial Intelligence (AI) and life sciences are drawing venture capital (VC) magnet back to the UK shores, contributing to a significant surge in seed investments. A recent report on UK VC term sheets from HSBC Innovation Banking UK echoes with this commanding rise, highlighting a spike in the deals at the nascent seed, robust Series A+, and mature Series C+ stages. The findings are grounded on an extensive analysis of 588 anonymised VC term sheets from 2024, issued by a wide array of 27 law firms. The data reveals that the seed deals have more than a twofold increase since 2021, accounting for a lion’s share of 32% of term sheets in 2024. This leap is mirrored in later-stage VC deals, rising from 7% in 2023 to 11% in 2024.

The report is rich with data, drawing from the largest sample of term sheets to date, which represent 33% of the UK VC market by deal volume and an impressive 40% by investment value for deals exceeding £500k. It underlines the importance of founders understanding VC investors’ priorities to establish a harmonious rapport from the outset.

A few sharp insights from the report include a cautious optimism about the return of growth capital after a tumultuous 2022-2023 period. Despite the rise in deal volumes at Series C+, confidence is muted as valuations are lower and terms are investor-friendly. The report also spotlights the growing ‘scaleup gap’ in the UK venture ecosystem, with many homegrown funds capping out at Series B (£20m-£30m investment size). European investors, accounting for 43% of UK’s later-stage deals, are seen as a hopeful bridge to this gap. Lastly, the report points out that start-ups in ‘pure AI’, GenAI, and large language models are showing a promising trajectory, accounting for 14% of term sheets last year, up from 9% in 2023.