Happy new year! We’re kicking off 2025 with a look at what you, the readers of PreSeed Now (or some of you, at least), told us about the state of the UK pre-seed landscape over the past year.

There’s an interesting selection of comments from investors and founders alike, and plenty of contrasting opinions!

Coming up this month we’ve got plenty of new startup profiles to bring you, as well as the latest edition of our quarterly look at which startups have excited readers the most.

– Martin

You might remember that back in September we launched a survey to assess readers’ feelings about the pre-seed market. We wanted to hear from founders, investors, and people who work with startups.

It turns out that getting people to fill in a survey is very hard!

If you’re ever wondered why Atomico bangs on so much about getting people to contribute to its State of European Tech survey every year, it’s probably because filling in other people’s surveys is not top of many individudals’ priority list.

Usually, there’s no real ‘win’ for taking part in a survey. You can offer a reward for their submission, but then you’re potentially going to have to filter out useless data from people who just quickly click anything to get the reward.

And so, while the survey results we’re sharing today aren’t the most comprehensive overview of opinions about the UK pre-seed landscape right now, I can tell you that the 31 respondents (about 1% of PreSeed Now’s subscriber base) represent people truly motivated to share their views.

While I won’t name them here, respondents include investors and startups we’ve covered in the past, along with people I have never met or spoken to.

So thanks to all of you for taking part.

With that out of the way, let’s dive into what we found. The sample size is small but I’ve pulled out some of the most interesting results to help you frame the year ahead as we all get back to our desks for 2025 (if we ever left them!).

About the respondents:

Founders who were raising in 2024 provided the most submissions, with active tech investors the second most active. Hello to the sole tech journalist who took part!

Reflecting PreSeed Now’s broader readership pretty well, London and North West England were the most common locations of respondents, followed by South East England outside London.

Not listed in the key in this screenshot are Scotland and Northern Ireland, which we really want to hear more from in 2025!

How does raising pre-seed funding in 2024 compare to 2023?

There are plenty of ‘don’t knows’ here, reflecting the fact that many pre-seed startups are at the very beginning of their journey and don’t necessarily raise across two years.

‘Harder than 2023’ just edges it from those who do know. Below, you can read some of the insights and opinions respondents gave to accompany their answer.

Choice quotes from respondents:

• Marginally easier to raise from VC, flat (but still good) from high-net-worth individuals/angels/family offices. Valuations marginally higher. However, follow-on rounds still quite flat.

• There seems to be increasingly a lot more noise than signal in filtering and finding quality deal flow.

• There are more people seeking early-stage funding rather than bootstrapping, and on over reliance on funding especially at the start. Funders are more risk averse, therefore their terms are tighter.

• Still haven't raised anything... Seems a bad time for music tech.

• Early stage investors in fintech struggle to understand businesses that need a large-scale balance sheet

• It's a little difficult to say as there are so many nuances, but overall I would say fund raising is getting gradually more difficult since 2021/22

• We found it quite difficult to raise pre-seed money outside of SEIS/EIS funds and angels. Perhaps it was just specific to our business, but it was relatively easy to open conversations through introductions than to get investors over the line even after extensive due diligence, presenting to investment committees, etc.

If you invest in startups or work with investors, does it feel like dealflow in 2024 has been:

It doesn’t look like a tough pre-seed climate is reducing the flow of startups looking for funding…

MORE active than 2023: 78%

LESS active than 2023: 22%

Choice quote from a respondent, showing dealflow can be influenced by more than just the number of investable startups available:

• “More active, although possibly skewed for us as we have increased the size of our team of analysts.”

On a scale of 1 to 10, how optimistic are you about the pre-seed landscape in 2024?

‘Measured optimism’ seems to be the vibe as we go into 2025.

Choice quotes from respondents:

• It's still moving, but takes time to find the right sector-specific investor. There is less 'gambling' on cool tech and credible founders, pre-seed investors also seem keener to put their money where THEY can help reduce the risk and increase the chances of success... so more sector-specific than before.

• Pre-seed seems achievable for most effective tech companies at this time, seed is more difficult, particularly to avoid a flat round.

• I think there's a realignment towards being 'real' businesses -- with revenue and a business model from the beginning, rather than an SF-style grow-and-then-figure-it-out. It's probably a bad thing overall for the UK because we'll get fewer truly huge companies out of it. Unless interest rates come down a lot, I don't see how that's going to change though. And founders have never had more tools to validate/generate revenue from the beginning.

• I think the VC market is broken. Only funds with government backing are willing to take true venture risks, with others focussed on sure bets (who therefore shouldn't be seeking VC funding). The government needs to do more to encourage investment in smaller businesses by increasing the SEIS limit and/or making EIS more generous.

• More competition than ever. More entrepreneurs than ever.

• I think there is money out there, the conviction needs to be higher and I would argue that the reliance on having a technical team or cofounder is even more key than in the past.

• AI hype means investors have stopped thinking altogether. Very little effort is put into understanding opportunities, outside slogans about AI or deep tech. Investors are not about building ventures, it's all about virtue signalling and free lunches.

• Fintech should focus first on the "Fin," ie, the financial services that people need and are willing to pay for. Tech investors struggle with the core product and are easily distracted by "shiny" tech that few customers are willing to pay for.

• I’m optimistic by nature, optimistic about the value of what we're doing, but women only get 2% so…

How do you feel about the state of pre-seed startup funding support (from organisations and initiatives set up to provide this) in the UK in 2024?

A lot of contradictory responses here suggest the good support can be hard to find, but some of it is very good.

Choice quotes from respondents:

• Nowhere near enough resources to properly support businesses.

• Innovate UK investor partnerships were a great initiative, but funding ran out too quickly.

• Support organisations on the increase, more novel business models such as venture building providing effective operational support to bridge the capital/support gap between research group and pre-seed.

• The UK has a lot of support for under-represented founders and a big community.

• Little government support or support from anywhere else.

• Angel networks have become more corporate than VC funds. The almost complete lack of founders among VC investors means experienced investors are dealing with an audience which is completely unqualified to add any value.

• I try to stay well away from any state funded organisations in the UK, any grants, etc. Easy to optimise for being a grant darling rather than a real business. Everyone else is good. Lots of helpful people in London!

• We live in a big country with large endemic problems. Early stage investors need to think big otherwise we risk tinkering at the edges. Some startups can bootstrap, others need single-digit million so create huge value for investors. The phrase "pre-revenue" means very little when you're building a regulated financial service platform. Seed, pre-seed, series A are not particularly meaningful concepts.

What types of new startups does it feel like you're seeing more of this year?

Is there anything else you'd like to share about the state of the pre-seed startup landscape in the UK in 2024?

• VCs seem to be very careful about investing in B2C. B2B is clearly preferred due to stable MRR.

• I think I still see a big difference in the Northern fund raising environment. European investors and some of the London-based ones are coming across with more of a US-style approach to risk (those that stand out anyhow), I guess because there are more US funds starting to operate in UK and European deals.

• When speaking to Northern funds, the terms seem much more in favour of them, with cheque sizes being much smaller and the deals being a lot longer in terms of time to close (in many cases).

• Think big. The journey from pre-seed to profitability can take a decade… Investors are herd-like and impatient so they miss the forest and trip over the trees, particularly AI-enhanced trees with almost no revenue model.

• I think the pre-seed landscape is showing a positive outcome, but noting that it's less affected by the difficulties in VC (slow LP returns in previous years) and growth funding than the later stages, somewhat bolstered by the availability of family office/high-net-worth individual/angel group financing.

• The VC capital market remains broken in the UK compared to the US. Broken cap tables are a common occurrence.

• There should be more corporate VC activity in the UK.

• The opening of pension funds ability to invest in startups will be a big deal once it arrives.

• Pre-seed no longer exists in the UK. Investors want to capture future unicorns by investing at post-product and post-revenue stage. You hear about the different checks and milestone ls for Seed, Series A, etc... UK pre-seed investors ask for product-market fit from bootstrapped companies. Conversations with US investors are more aligned to expectations. I can't see how the current landscape has a future outside university spinoffs.

Here’s to 2025 🥂

Well wasn’t that a real range of opinions!

At the very least I hope it’s given you a feel for how people are feeling as we enter another year of pre-seed raises.

How the return of Donald Trump to the White House, complete with his suggestions of invading countries and the like, will affect startup investment remains to be seen.

I spoke to BBC News about Mark Zuckerberg’s reaction to ‘Trump II’ yesterday, but while big media might be less interested in the early-stage investor reaction, I’m very interested! Hit me up with your thoughts and predictions - just drop me a line.

We’ll plough on regardless here at PreSeed Now. And I’m already thinking about how we can make this year’s edition of this survey a bigger and better deal once we get to the autumn.

Back next week

We’ll be back in your inbox on Tuesday with a startup that is hopefully new to you…