Key findings from HSBC Innovation Banking’s Venture Capital Term Sheet Guide 2026
- Later-stage deals over £10m continue to rise, with increased competition for high-quality companies driving more founder-friendly terms
- Early-stage investment accounts for 69% of term sheets but remains more structured and investor-protective
- Regional ecosystems continue to gain traction, with sector clusters in energy (56%), CleanTech (61%) and Life Sciences (60%) driving deal activity outside London
- Seed and AI rounds are largely funded by UK investors while US investors dominate late-stage deals
23rd April, 2026 – HSBC Innovation Banking has today published its latest Venture Capital Term Sheet Guide 2026, providing insight into the evolving dynamics shaping UK startup investment. The report empowers founders to make informed decisions when seeking investment, while enabling VCs to benchmark against the wider industry.
Based on analysis of 711 (643 UK HQ) completed term sheets and 50,000 data points, representing 42% of UK equity deals over £500k by volume and 46% by value in 2025, the independent report is the most comprehensive of its kind. It highlights an increasingly nuanced funding environment, with clear differences emerging between early- and late-stage investment dynamics.
Later-stage rounds show more founder-friendly dynamics
At the later stages, larger deal sizes and increased competition for high-quality companies are contributing to more favourable term sheet outcomes for founders. The proportion of term sheets for investments over £10m (Series B and C+) has continued to rise, now representing 31% of all term sheets.
This reflects growing competition for scaled businesses, larger capital requirements, and the rising importance of the UK’s innovation economy.
Notably, breakout AI and DeepTech businesses continue to attract a significant share of investment. In some cases, Series A rounds are reaching sizes more typically associated with later-stage deals, giving founders greater negotiating power.
Early-stage investment remains structured and selective
In contrast, early-stage investment continues to reflect a more cautious and structured approach. Seed and early-stage deals account for around three-quarters of all term sheets (69%), highlighting the scale of activity at the earliest stages.
Increasingly, however, Seed rounds are becoming more structured and investor-friendly. Participating preference shares have doubled (7% to 14%), while syndication has increased (26% to 31%), reflecting tighter capital markets and longer gaps between funding rounds.
At the same time, investors are placing greater emphasis on tangible performance – particularly revenue and profitability – resulting in a more disciplined approach to deal terms.
Regional ecosystems continue to gain traction
The report highlights the growing importance of regional ecosystems across the UK, with investment increasingly flowing beyond London into sector-driven clusters.
Over 50% of deals across all life stages are now funded outside London while 51% of Seed rounds take place beyond the capital. Regional concentration is particularly strong in Life Sciences (60%), CleanTech (61%) and Energy (56%) – reflecting both the strength and diversity of innovation across the country, and the continued development of specialist hubs like Cambridge, Oxford and Manchester.
However, London continues to offer the most founder-friendly terms, with 93% of term sheets including non-participating preference shares. Founders raising outside London should therefore expect a wider mix of capital sources and greater negotiation on downside protection and structures.
University spinouts remain a key source of innovation
University spinouts are a key part of the UK’s ecosystem, representing 9% of UK term sheets. They play a particularly important role in Life Sciences and DeepTech, which account for 46% and 38% of spinout terms respectively.
These companies are central to translating research into commercial outcomes and strengthening the UK’s innovation pipeline.
As the ecosystem matures, spinouts are increasingly aligning with broader market norms in how term sheets are structured and negotiated.
International capital remains active in UK deals
UK investors continue to anchor funding at Seed and early-stage levels, accounting for 70% of Seed and 55% of Series A investment.
However, cross-border capital – particularly from US investors – plays a critical role at later stages. Nearly two thirds (65%) of Series B and C+ rounds were led by foreign investors, representing £5.9bn of investment.
This reflects the increasingly international nature of later-stage funding, reinforcing competition for high-quality companies and the global appeal of UK innovation.
See also:
HSBC Announces Successful Tokenised Deposit Pilot on the Canton Network
UK VC investment gathers pace in Q1 2026 as AI and megarounds drive late-stage surge
