What UK tech founders need to know: a senior investment director’s perspective
In today’s environment, where fresh ideas can quickly become old news, the pressure to move fast increases the risk of missteps for founders.
Securing venture capital can accelerate growth, validate a business model and provide the strategic support needed to navigate the challenges of building a start-up.
Yet while capital remains available, investors have become more selective. Not every start-up makes the cut. Below, IW Capital’s senior investment director, David Fisher, shares what separates the companies that secure investment from those that do not in the tech industry.
David Fisher, Senior Investment Director
Understanding scalability. Building foundations that can grow
Technology and software companies share a defining characteristic that makes them attractive to venture capital investors. The ability to build once and sell many times. “Technology and software, you write it once, you sell it many times,” David explains. “Consulting or services, you’ve got to produce that every time you sell it.”
This scalability allows revenue to grow without a proportional increase in costs, forming the basis of venture-scale returns.
However, having this theoretical advantage and executing it successfully are very different things. Scaling is every founder’s ambition, but it is also the stage where many companies falter. “It’s not due to lack of effort. It’s because they scale the wrong things at the wrong time, often with a foundation that isn’t built to scale.”
“They confuse growth with scalability. Growth is getting more customers. Scalability is getting more customers without your costs, complexity, or chaos growing at the same rate. True scalability is when your systems, team and product all reinforce each other, not strain under success.”
The AI revolution. Opportunities and realities
Artificial intelligence dominates current technology discourse, but David cautions founders to look beyond the hype. “Every company’s got AI in its title now,” he observes, reflecting on the volume of pitches that rely more on buzzwords than substance.
The economics of foundational AI development have also shifted dramatically. Training large language models requires vast computational resources, often costing tens of billions of pounds. David explains, “There’s not going to be many examples of a British OpenAI or Anthropic.”
So where does the opportunity lie?
“For UK start-ups, the real potential is in building applications on top of existing AI infrastructure, using APIs from established providers to solve specific industry problems. Rather than training models from scratch, successful companies are leveraging tools like Claude, GPT, or open-source models to create specialised solutions in legal tech, healthcare diagnostics, financial analysis, or customer service.”
Rather than competing with big tech on foundational research, UK founders should focus on identifying inefficiencies in traditional industries and applying AI pragmatically to solve them.
Medtech
The convergence of technology and healthcare presents particularly compelling opportunities, driven by an unavoidable demographic reality. “My investment thesis is driven by the ageing population in many countries,” David notes.
Technologies that help people stay healthier for longer do more than improve quality of life. They address a growing economic challenge. This includes remote monitoring devices, AI-powered diagnostics, robotic assistance and preventative care technologies.
AI in healthcare
Machine learning and pattern recognition in diagnostics represent one of the most valuable applications of AI. “If it catches one cancer that would have been missed, it could save a life. If it prevents one unnecessary biopsy, it saves significant pain and cost,” David explains.
“We believe that this is one of the most significant uses of artificial intelligence. Rather than using this technology to generate cartoons or “memes”, this technology can revolutionise medical analysis, drug discovery and care in the future.”
Navigating regulatory complexity
Medtech founders face challenges that other software companies do not. “Long regulatory timelines, whilst proving early commercial traction, are big issues,” David notes
IW Capital typically requires companies to have regulatory approval in the UK and EU and to be ready for their FDA application before investment. The regulatory process represents significant risk, can take years and often limits a company’s ability to generate revenue while capital is being consumed.
Clinical trials and approval processes demand substantial resources that small firms frequently lack. A Class II medical device in the EU may take 12 to 18 months for approval, with FDA clearance adding a further 12 to 24 months. During this period, founders must demonstrate commercial readiness with limited revenue, a difficult balancing act.
IW Capital draws a clear line when it comes to pharmaceuticals. “We’re really investing in medical devices and technologies. We’re not investing in drug discovery because that’s a multi-decade cycle,” David states. Drug development can cost upwards of a billion pounds and often spans 10 to 15 years, with failure possible at any stage.
Instead, IW Capital focuses on medical devices, services and technologies where the path to revenue is clearer and timelines are shorter, typically three to five years to meaningful commercialisation.
What makes a start-up stand out
Every successful investment begins with the same foundation. “A strong, driven, capable management team. They’ve got to have a vision and a purpose that’s exciting,” David emphasises.
But vision alone is not enough. Founders must also show that they are solving a real problem for customers, supported by strong intellectual property.
IP varies by sector. In technology and Medtech, it may take the form of patents or proprietary algorithms. In consumer technology companies such as Magic AI, an IW Capital portfolio company building a differentiated home fitness brand, it is rooted in technical innovation. “It’s strong IP that’s defensible and provides real value,” David notes.
One of the clearest indicators of product-market fit remains simple. Someone has paid for it. But not just any customer. “Very often, in B2B sales, it’s big companies who buy from little companies they shouldn’t buy from,” David observes.
When a major organisation adopts a product from a small, unproven supplier, it sends a powerful signal. “If it were a big European bank that bought it in Munich or London, this would indicate that the company has something unique, as large corporates see every technology and vendor in their space, they know everything and yet they still bought from this small innovative business.”
Proving commercial traction
For investors, early revenue matters. “For us, it would be early revenue generation, so it’s earning money from what it does already,” David emphasises.
This does not mean start-ups must already be profitable. Some of the world’s largest companies scaled before monetisation. “If we saw something like that with the potential to turn on monetisation, then maybe,” David concedes. “But in reality, we want to see businesses delivering revenues and have a revenue and profitability model that we can look at and test today.”
What matters most is financial discipline and a clear path to sustainable growth, not repeated fundraising rounds used to cover costs while a business model remains unproven.
What founders must do to secure funding
David’s advice to founders is straightforward. Treat fundraising like a major sale. “You’re selling part of your business. It’s probably the biggest sale you’ll ever make if you’re trying to raise £millions,” he says.
This requires preparation. Founders should understand an investor’s typical cheque size, sector focus, decision-making process and timelines. “I’m talking to David, but who are the decision-makers? What’s the next step? Do I need to convince an investment committee? Who’s on that committee?” David explains. “It’s often on their website.”
Too many founders skip this work. Some approach funds that invest far more or far less than they are seeking. Others misunderstand sector or stage focus. “Why wouldn’t you be able to do that with the investors you’re targeting for funding?” David asks. “Do your homework. Be prepared.”
The strongest founders approach fundraising with the same discipline they apply to enterprise sales. They know who influences decisions, what needs to be demonstrated and how to close.
The current market reality
The fundraising environment remains challenging, though not necessarily due to a lack of capital. “Very significant amounts of funding are still available in venture funding today,” David observes. However, increased competition means standing out is harder.
Despite this, David remains optimistic. “We really want to do deals,” he says. “We’re at a really exciting time for making new investments. The changes in healthtech, circular economy, AI and consumer demand are offering real and significant investment opportunities to back founders with purpose who are going to make a difference to the world.”
The key distinction is between companies with genuine business models and those continually raising on promises that never materialise. For founders solving real problems with scalable solutions, disciplined execution and early customer traction, the opportunity to secure funding remains very much alive.
