James Murray
Business Developer
Industry & Trends
Business & Strategy
Author: James Murray, Business Developer
Reading time: 5–7 minutes
I was invited by ACT | The App Association to attend GAEC 2026 in London last week. What came through clearly across those conversations was something I'd been thinking about for a while: the UK isn't short of ideas, talent, or ambition. What it's short of is a system that actually lets those things turn into real, scalable businesses.
Funding is a major constraint. But the environment around it slow, fragmented, and out of sync with how startups actually operate, makes everything harder. The barriers are real. And they're the wrong kind.
Key Takeaways
- Public funding often rewards the people who are best at navigating the process, not the ones building the most valuable companies
- The gap between £350k and £1.5m is where promising companies stall, not because the business isn't working, but because the funding infrastructure doesn't serve that stage
- Eligibility rules built around recurring revenue exclude the companies that need support most, creating a circular dependency
- Bootstrapping is the normal starting point for most startups, current rules treat it as a liability
- Public procurement requirements consistently favour established players, limiting competition and innovation
- Uneven access to funding isn't just a fairness issue, it's a systemic inefficiency that weakens the entire ecosystem
Public funding rewards the wrong skill
On paper, public funding is meant to support the most promising companies. In reality, it often ends up rewarding the people who are best at navigating the process.
Applications are long, complicated, and inconsistent across schemes. If you don't already know how to work the system, or can't afford someone who does, you're at a disadvantage from day one. That shifts the focus away from building something valuable and towards learning how to tick the right boxes. It also explains why an entire ecosystem of grant writers and consultants has grown around it. Time and money that should be going into building products gets redirected into paperwork.
Even when founders do get through that process, the timelines don't make sense. Waiting months, sometimes over a year, for a decision just doesn't work in a startup environment. By the time funding comes through, the business has often moved on, changed direction, or run out of runway entirely.
The consistency problem
Decisions don't always feel consistent. Different evaluators, different interpretations, different outcomes. It's hard to plan around something that feels unpredictable, and even harder to trust it.
There's a gap where companies go to stall
The funding gap that keeps coming up sits between roughly £350k and £1.5m. Early-stage funding exists at smaller amounts, and venture capital tends to come in at larger rounds. In between, things get thin.
That's exactly the stage where companies need capital to scale, to hire, build, and grow beyond the initial idea. Instead, a lot of them get stuck. The business is working. The funding infrastructure just doesn't serve that stage.
The revenue loop
Eligibility rules compound the problem. Requiring recurring revenue sounds reasonable until you look at who it excludes. Startups with stable revenue are already in a stronger position. The ones that genuinely need support are earlier, still figuring things out, still building. Those are precisely the ones that don't qualify. You need revenue to get funding. You need funding to get revenue.
Private funding isn't a clean fallback
Private funding is often seen as the alternative, but that comes with its own friction. The cost of getting investment can be high even before any money is raised, due diligence alone can run into tens of thousands. Minimum cheque sizes don't always line up with what companies actually need, and the trade-off is usually equity, sometimes more than founders should be giving up that early.
It works for certain types of businesses, but not all of them. And a lot of that capital isn't even coming from within the UK, which says something about the strength of the domestic ecosystem.
Bootstrapping shouldn't be penalised
Bootstrapping is normal. It's often the first step, founders backing themselves, friends and family helping out. That's how most companies start. But under current rules, those investors can be excluded from schemes like SEIS. Instead of recognising that early commitment, the system penalises it. It's a disconnect between policy and how startups actually work.
The broader environment adds friction at every turn
Outside of funding, there's a lot of inconsistency in how different organisations operate, both in the public and private space. Processes change, criteria vary, and there's very little standardisation. Founders end up having to relearn the system every time they apply for something new. For small teams, that overhead adds up quickly.
Speed is a recurring issue as well. Startups are built to move fast, but they're constantly pulled into processes that don't. When timelines stretch and decisions vary depending on who's reviewing something, it creates drag, enough to slow things down in ways that matter.
Public procurement locks out the people it should be opening doors to
In theory, public procurement should be a big opportunity for smaller companies. In practice, the requirements, thresholds around turnover, insurance, previous contracts, consistently favour larger, established players. The same organisations keep winning the same contracts. Newer companies struggle to break in. That limits competition and, in most cases, limits innovation too.
Access isn't evenly distributed
There's also a broader question of fairness. Access to funding and opportunities isn't evenly distributed, and certain groups still face additional barriers. Even where support exists, it's not always applied consistently. Some founders have to work harder to reach the same starting line as others. That's a missed opportunity for the ecosystem as a whole.
The pattern is clear
The system isn't completely broken. But it's more complicated than it needs to be, slower than it should be, and consistently geared towards the wrong signals. Instead of making it easier for good companies to grow, it adds friction at the points where they need support the most.
Fixing this doesn't require reinventing everything. Simplify what's overly complex. Speed up what's too slow. Align the criteria with where companies actually are. The potential is there. The question is whether the system can get out of the way enough to let it become something real.