The UK Builds Companies It Cannot Afford to Keep

Why that is a founder problem before it is a markets one

A declaration before we start. I am building in the space this article ends up in - a venture working on tokenised equity infrastructure for UK startups. So when I argue below that new market infrastructure could shift power back towards founders, I am arguing my own book. Read it knowing that. The data in the first half stands on its own either way.

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A founder in Britain in 2026 can do almost everything right and still end up in someone else's market. She can spin tech out of a UK university, raise a seed round from UK angels, hire her first team in Leeds or Bristol or Oxford, and prove that the thing works. She can scale the business to unprecedented heights - well almost - and then!

At the precise moment the company is ready to grow into something durable, she will find that the money to do that is not here. It is in San Francisco, in Boston, in New York.

To get it she may tilt her cap table, her leadership and eventually her listing across the Atlantic. The company stays British in sentiment but increasingly American in ownership.

This is not simply a feeling. It is now one of the best evidenced patterns in UK enterprise, and a run of reports published this month has put some hard numbers on it. The scale up gap is usually told as a story about capital markets and national competitiveness. The version that never gets told properly is the one about power: who ends up holding it in the companies that founders build, and how little of that process is in reality, decided by the founders themselves.

The numbers are worse than the slogans

Start with the spinouts, because they are the closest thing the UK has to a controlled experiment. Analysis by Bidwells, drawing on Beauhurst data covering 156 university spinout growth rounds above £15m since January 2022, found that just 8p in every pound of that growth capital came from rounds funded exclusively by UK investors.

Above £75m, not a single round in the period was UK only.

Dependence on foreign capital has exceeded 70% every year since 2022, and the figure for 2026 so far is 89%, the highest yet.

Barclays, looking at the whole UK equity market rather than just spinouts, found that 47% of all deals by count in 2025 involved a foreign investor, rising to 89% of all deal value. Put the two numbers together and the shape of the problem appears. Small rounds can still be done domestically. The big ones, the ones that decide whether a company scales as a UK owned business or as a subsidiary of someone else's ambition, almost always cannot.

The most acute version comes from Music Technology UK, whose Sound Investments 2026 report tracked a sector that attracted £809m between 2020 and 2025, a period in which seed investment more than doubled while growth stage funding collapsed by 90%, from £101m in 2020 to £10m in 2025.

The country got better at starting these companies and dramatically worse at scaling them. American buyers noticed. The report found US companies accounted for 32% of UK music tech acquisitions but only 14% of investment deals, recognising the value at the point of ownership transfer rather than at the point of growth.

The pattern is not uniquely British. Atomico's State of European Tech work has long argued that European tech needs roughly a trillion dollars over the next decade just to hold its growth rate, and more than two trillion to match the United States on funding as a share of GDP. The clearest illustration this year is Oura, the Finnish maker of the smart ring, which filed confidentially for a US listing at a valuation reported around $11bn. Atomico's data shows the drift began early. By 2026 a majority of Oura's people and the large majority of its senior leadership sat in the United States. As the firm put it, Europe does not lose companies at the IPO. It loses them at the first growth stage round.

Everything after that is just the paperwork catching up.

A founder story, not only a markets one

It would be easy to read all this as a problem for the Treasury, the pension system and the London Stock Exchange, and it is partly that. But the version that matters to founders is more personal.

Capital is never just money. It arrives with terms, board seats, biases, liquidation preferences and a say in who runs the company and how. Whatever the investor opening promises about being in it for the long term, we know the reality can be different. The dynamic brings pressure to change the business model: accelerate growth at any cost, push the valuation for the next mark, satisfy the fund's timeline rather than the company's. When the only investors willing to write the cheque that lets you scale are 5,000 miles away, the founder does not simply get funded. She gets a new set of people deciding what the company is for.

This is the quiet cost buried in the 89%, and the unfunded majority, the founders the system was not designed to find, feel it first. They are typically the least connected to the established London networks and, by proximity, have the least leverage to negotiate.

A founder with no warm introduction to a domestic growth fund, in a city the big UK cheques rarely reach, is not choosing between a UK term sheet and a US one. She is choosing between the US term sheet and no scale at all. Between existence and failure. The structural shortage of domestic growth capital quietly removes options from exactly the founders who already had the fewest.

By the way, none of this is an argument against foreign investment, which is welcome and often excellent. It is an argument that a country which can only fund the beginning of its companies' lives has handed the decisions about their adulthood to other people. For founders, the relevant question is not where the IPO happens. It is how much of the company, and how much of the say in it, they still hold by the time they get there.

What could change the architecture

The constructive part of this story, and you can probably tell it has touched a nerve, is that the mechanics of capital formation are genuinely in motion, and some of that motion points towards founders keeping more control.

For me, the most interesting development is not a new fund, and not the latest allocation from the British Business Bank, welcome as the money is. More capital poured into the same architecture produces more of the same outcomes. The development that matters is a relatively simple but quietly radical piece of market infrastructure that I believe could do more for the UK's investing and innovation landscape than any single initiative in recent years. PISCES. The football style transfer window for private company shares.

PISCES, the Private Intermittent Securities and Capital Exchange System, is a regulated framework that lets shareholders in private companies sell existing shares to qualifying investors in scheduled windows, without the company being forced into a full public listing or a traditional priced round. It is running through an FCA sandbox to 2030, with four operators approved so far: the London Stock Exchange, JP Jenkins, Asset Match and Vestd.

Its permissioned format lets a company decide who is allowed in, which means founders can offer early employees and backers liquidity while keeping a hand on the shareholder base. Nothing quite like it exists anywhere in the world, and everyone is watching.

The restrictions are features, not limitations. Continuous open trading in early stage private shares would be actively harmful, exposing founders and long term investors to price manipulation, gamification and value distortion driven by short term activity rather than company performance. Intermittent, founder controlled windows allow shares to trade without those harms or the apparatus of a public market.

Today, PISCES activity runs on conventional rails: paper era share administration and secondaries. Now imagine combining it with the transparency, speed and accessibility of tokenised equity, and the outline of a legitimately different model appears.

If shares can be issued and administered as tokens, with the legal share register remaining the source of truth throughout, and if a regulated secondary venue exists where they can change hands in controlled windows, a company can in principle raise incrementally and let early supporters realise value, without running the classic Series A, B and C sequence that hands institutional investors a board seat and a preference stack each time.

The power dynamic changes. This matters even for founders who do not need outside capital to start. A founder who builds on these foundations can bring in money as she scales while retaining far more of the upside and the decisions than the traditional round by round path allows.

This is still emerging, and the honest position is that the evidence will accumulate over the next two years rather than a few quarters. PISCES is being tested in a sandbox. Tokenised equity is early.

The regulatory perimeter around both is still being drawn. The point is not that tokenisation solves the scale up gap. It's that the scale up gap is, at it's core, a question about who holds power in a capitalised company, and for the first time the infrastructure that decides that question is being rebuilt rather than merely funded.

Earlier attempts to ask the same question, from evergreen funds to DAO's and community owned vehicles, mostly did not survive in their original form. But the question they were asking, whether capital formation can be fairer and less founder hostile, was the right one. It is now being advanced in more durable, regulated ways.

The UK does not have a shortage of good companies. The data this month says it has a shortage of domestic capital at exactly the stage where ownership and control are settled.

Closing that gap is a markets problem and a policy problem. But for the founder watching her cap table drift abroad, it is something more immediate. It is the difference between building a company and merely starting one.

Key takeaways

• Just 8p in every pound of UK university spinout growth capital since 2022 came from UK only rounds, and no round above £75m was domestic, per Bidwells analysis of Beauhurst data.

• Barclays found foreign investors were involved in 89% of UK equity deal value in 2025. UK music tech growth funding fell 90% between 2020 and 2025, from £101m to £10m, per Music Technology UK.

• Atomico's Oura case shows companies are lost at the first growth round, not the IPO, as ownership and leadership drift to the US.

• The deeper cost is control. Foreign growth capital arrives with terms and board power, and founders outside the London networks have the least leverage to resist.

• PISCES, now live in the FCA sandbox with four approved operators, combined with tokenised equity, hints at a model for incremental, founder controlled scaling. The evidence is still emerging.

Sources

• Beauhurst Insights newsletter, Inside the scale-up gap, Henry Whorwood, 4 June 2026, citing Bidwells, Capital, clusters and the scale-up gap, and Barclays, Attracting Global Capital in the UK. [Public link to be added when the analysis is published online.]

• Music Technology UK, Sound Investments 2026: Back the Sector, with Beauhurst and KPMG UK. Coverage: Music Ally, 1 June 2026

• Atomico, State of European Tech: stateofeuropeantech.com

• Oura files confidentially for IPO: CNBC, 21 May 2026

• BVCA, UK scale-ups increasingly relying on overseas investors to grow: bvca.co.uk

• FCA, PISCES: platforms for trading private company shares: fca.org.uk

• FCA, First PISCES operator gets greenlight in drive for growth: fca.org.uk

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This article is provided for general information only and does not constitute legal, financial, or investment advice. The regulatory treatment of tokenised assets and digital securities varies by jurisdiction and continues to evolve. Readers should seek independent professional advice before making any financial, legal, or regulatory decisions.