Introduction
I've been lucky to contribute to the last few editions of this guide. One of the most comprehensive datasets on UK VC term sheets in existence, now covering 711 completed term sheets, £11.2bn in aggregate investment value, and 42% of UK VC deal volume.
Here are my key takeaways from an EIS and VCT perspective of what has changed in the past year:
1. The EIS/VCT slice of the market is growing but becoming more segmented
The share of EIS and VCT term sheets in Seed (raising up to £2m) and Series A (raising £2m to £10m) is rising, from 19% in 2024 to 29% in 2025. Alongside this growth the detail around them has changed considerably.
In 2024, the headline story was caution. Later-stage deals at lower valuations with more structure. The 2025 data (reflected in the 2026 guide) tells a more interesting story. The market is segmenting, and that segmentation has a material impact on both founders and investors looking to raise or deploy up to £10m into EIS and VCT qualifying companies.
2. In the £2m to £10m rounds things are getting more founder-friendly at the top end, and more structured at the early stage
Larger Series A rounds, those with strong metrics, genuine competitive moats, and real investor competition, are seeing participating preference shares fall (down to 9% in 2025 from 12% in 2024 at Series A), simpler structures overall, and rising valuations in some sectors. The flight to quality of the past 4 years remains strong, and for the best companies, the terms reflect it.
For smaller rounds and earlier stage companies, the picture is different. Seed rounds (raising up to £2m) are becoming more investor friendly and more structured than they were just a year ago. Participating preferences at Seed doubled from 7% to 14%. Syndication is rising. Investors are demanding more performance before writing cheques. The easy Seed rounds of 2021 era are long gone for the vast majority of companies outside a small number of sectors, primarily parts of the AI and defence ecosystems.
For Guinness Ventures, this reinforces the importance of selectivity at Series A. We continue to focus on companies that demonstrate not just growth, but quality of growth, clear evidence of defensibility, and a credible path to the next institutional round. The dispersion in outcomes is widening, making discipline on entry even more important.
3. The Series A valuation story is more complex than the headline suggests
The median Series A post money valuation came in at £17.1m in 2025, down 5% from £17.9m in 2024. At face value, that suggests compression. Digging deeper, a more nuanced picture emerges.
The volume of Series A deals above £50m pre money valuation fell (from 12% of deals in 2024 to 10% in 2025), yet the average valuation for those companies that did clear the £50m bar rose sharply to £160m, up from £130m. Fewer but bigger winners. The market is concentrating on quality at the top while the median reflects a reduction in the middle.
For EIS and VCT funds like Guinness Ventures, this reinforces something we have felt for some time: the definition of a "good Series A" is narrowing. Alongside an excellent team, the bar for defensible advantage, strong unit economics, and a clear path to the next milestone continues to rise.
Learn how we evaluate Series A opportunities at Guinness Ventures.
4. The "UK scale-up gap" is getting more apparent, reinforcing the value of EIS and VCT funds
One of the most striking data points in the 2026 guide is the composition of capital by stage. UK investors lead at Seed (c.70% of term sheets) and continue to anchor Series A (c.54%). From Series B onwards, the dynamic flips decisively. US investors now represent 37% of Series C+ capital, up from 27% in 2024 and 23% in 2023.
This is the UK scale up gap made visible in data. We build companies well at the early stage, but struggle to fund them through the growth stage domestically. US capital is now stepping in at scale, £3.1bn of the £5.9bn in inbound capital in 2025 was US sourced.
There is a bullish interpretation: international capital validates UK innovation. There is also a harder question: if the best UK companies are financed and eventually listed overseas, who captures the long-term value? This is something the UK policy environment needs to address.
Against this backdrop, the growing share of EIS and VCT term sheets in the earlier stages of investment should be seen positively. As domestic capital pools, EIS and VCT are playing an increasingly important role in the earlier stages of the UK venture ecosystem.
What the data tells me about 2026
The investor pulse survey in the 2026 guide makes for encouraging reading. 71% of VCs are optimistic about 2026. Deployment intent is rising, with 41% prioritising new investments, up from 20% in 2025. Conviction is concentrated in AI (78%) and DeepTech (71%).
But, and this is likely to be a theme of 2026, 53% of investors expect founders to push for more aggressive valuations, while 71% expect term structures to remain broadly unchanged. That is a growing disconnect between pricing expectations and structural discipline. The result is likely to be polarised negotiations. Competitive deals will be competed hard. Others will face more friction.
The average may not change materially, but the dispersion between the very best, oversubscribed rounds and other quality deals is likely to widen further.
For EIS and VCT investors, this means process quality and conviction at the point of initial commitment will matter more than ever. We cannot rely on a rising tide; we need genuine conviction to invest.
One thing that doesn't change
As I comment in the guide on preference shares and valuation, my core observation holds just as true in 2026 as it did in 2025: valuation and preferred shares are a sliding scale, and they need to be read together. A high valuation with an aggressive preference structure is rarely a founder win. A lower valuation with clean, non-participating terms often is.
The data in this guide gives founders the information they need to understand that trade off clearly, and to push back intelligently when terms do not reflect market standard. That is why I have championed this guide for several years, and why I would encourage every founder to read it before they sit across the table from an investor.
The full 2026 HSBC Innovation Banking VC Term Sheet Guide is available at www.hsbcinnovationbanking.com, it is a genuinely excellent resource for anyone in the ecosystem, founder or investor.
Thinking about your next round?
If you're a founder raising your Series A, or an EIS/VCT eligible company thinking about your next round, feel free to reach out. This is exactly the market we navigate every day at Guinness Ventures.
At Guinness Ventures, we focus on scaling companies with clear product market fit, strong unit economics, and a credible path to scale. In the current environment, we place particular emphasis on capital efficiency, defensibility, and management teams that can execute through more challenging market conditions.
FAQs
What is the HSBC Innovation Banking VC Term Sheet Guide?
It is one of the most comprehensive datasets on UK VC term sheets, covering hundreds of completed deals and providing insight into valuation, structure, and investor behaviour across stages.
What do the 2026 findings mean for Series A founders?
The data shows a more polarised market. Strong companies are achieving better terms and higher valuations, while others are facing more structured and investor-friendly conditions.
How are EIS and VCT markets changing?
EIS and VCT participation in Seed and Series A rounds is increasing, but outcomes are becoming more segmented depending on company quality and investor competition.
Why is the UK scale-up gap important?
The data highlights that while UK investors dominate early-stage funding, later-stage capital is increasingly coming from the US, raising questions about where long-term value is captured.
How should founders think about valuation vs terms?
Valuation and preference structures must be considered together. A higher valuation does not necessarily mean a better outcome if the terms are more aggressive.