From first cheque to first term sheet: what changes when you move from angels to VCs

I raised just over £3m for CROSSIP before I ever sat on the other side of the table. The round I remember most clearly isn’t the biggest one. It’s the first time I pitched a fund after a year of raising from angels, and worked out about ten minutes in that almost nothing which had got me that far was going to help me here.

Angels aren’t the easy version of this. A good one will take your numbers apart before they commit, and they’re risking their own money while they do it. But an angel only has to convince themselves. A fund has to make your deal work for its model, its partners and the people whose money it’s deploying. That’s the actual shift at the first term sheet. The decision stops sitting with one person and starts running through a system, and most founders feel that in the room before they can put a name to it.

I’ve since invested in more than 20 startups and spent a lot of time on the receiving end of deal flow. This is what I’d tell a founder about to make that jump.

What VCs look for in your angel round

The first thing a fund looks at isn’t a metric. It’s who already said yes.

If someone with a track record has put money in, that’s a filter the fund doesn’t have to apply from scratch. And cheque size matters far less than founders expect. Five thousand pounds from someone who has known you for a decade says more than £50k from someone who met you at a demo day, because the first one is a judgement and the second one is a bet.

There’s data behind this. 81% of funded UK VC deals come through warm introductions. Cold approaches make up around half the decks investors see, but only 11% of funded deals [1]. Read that again as a founder and the conclusion is uncomfortable but useful: who’s standing behind you often does more work than the deck itself.

Which makes who you let onto your cap table early a fundraising decision, not just a funding one.

Your cap table is the part you can’t rewrite

By the time you get to a fund, your cap table is a record of the choices you’ve made under pressure. It gets read that way.

What funds want to see is angels who are additive. A cluster of people who understand your domain, who’ve done this before in your space, and who can open a door to a real customer when you start commercialising. The money is the least interesting thing a good angel brings.

What makes funds walk away is more specific than founders assume:

• One dominant shareholder who put in a modest amount early and holds 25% of the company
• Too much equity gone to friends and family before the institutional round starts
• A founder already diluted below the level a fund needs them at to stay motivated for another five years
• A valuation pushed so high that the round no longer fits the stage it’s at

That last one bites harder than it did two years ago.

Median seed pre-money valuations fell to £2.04m in 2025, down 17% year on year [2]. A number set in a hotter market can leave an otherwise strong round looking out of step with where the market actually is.

None of these kill a business. But some of them can’t be undone, and all of them make the next raise slower. My own view, having been on both sides of it: give away slightly more equity to someone who opens the right door than slightly less to someone who only wires money.

VC isn’t the right money for every business

This gets said less often than it should, usually because the people saying it have an interest in you raising.

Venture money works when a business can build real scale quickly and the founders want to. That’s a narrower set of companies than the noise suggests. If yours can grow steadily and profitably without it, that’s a genuine strength, and there are far better options for you than a fund.

The problem isn’t founders who raise VC. It’s founders who raise it because it looked like the assumed next step, then find themselves on a growth curve that doesn’t suit the company they actually wanted to build. Moving to institutional money should be something the business needs, not a box you tick because your peers did.

Moving from a position of strength

More founders are making this jump than the market mood suggests. 2,489 UK companies raised their first-ever equity round in 2025, up 23.6% on the year, with a record £6.27bn going into first-time rounds [2].

Four things separate the ones who do it well.

Start before you need the money. Runway is leverage. The moment your milestones aren’t quite there and your cash is running down, every conversation gets harder and every term gets worse. The best time to start talking to funds is while you can still walk away from one.

Treat it like a sales process. Build a pipeline, work it in a sequence rather than all at once, and keep the funds who said “not yet” on a short quarterly update. Warm beats cold on the second attempt too.

Find out what good looks like before you start. Founders regularly misjudge the bar for their stage, and not by a little. I’ve seen the gap be an order of magnitude on user numbers. Working that out in advance saves months of pitching into a target you can’t hit yet.

Be careful what you claim. The UK early-stage market is small and investors talk to each other constantly. If you tell one fund that another is leading your round, expect that to be checked, often the same day. It’s rarely malicious and it’s almost always fatal.

One more thing, and it isn’t a tactic.

Take two businesses with identical numbers, give one to a founder who can tell the story and one to a founder who can’t, and they’ll get different outcomes. That isn’t spin. It’s the work of helping the right investor see what you can already see.

Finding investor fit, not more investors

Moving from angels to VCs looks like a step up in scale. It’s really a step up in relevance.

The early backers who help most are the ones who understand your space. The first fund that says yes is almost always the one your round was genuinely built for. Everything in between is time you don’t get back.

That’s the thing we built ThatRound around. Fewer, better conversations with people who actually invest in what you’re building. Whether you’re lining up your angels or your first institutional round, the work doesn’t change. Find the right people, not just the available ones.

References

1. The Diversity Deficit | Startup Coalition (Extend Ventures data) | https://startupcoalition.io/news/the-diversity-deficit/
2. The Deal 2026 | Beauhurst | https://www.beauhurst.com/research/the-deal/