Most weeks, Silicon Scotland reports on companies that have raised or closed a round of investment. Behind each of those announcements is a process that can take months. By the end of it, the company and its investors have agreed a price for the business, and the investors, whether new or existing, have committed to buying shares. Funding stories attract a lot of reader interest, and they often raise questions. This article is an introductory overview of how rounds work, intended to help readers make sense of that coverage.
Three announcements this week show the range. SolarSub, founded by two University of Edinburgh engineering graduates, completed a £1.34 million round to develop passive cooling technology for solar panels. UK-headquartered StandardX raised £10 million in seed funding to build an accelerator-based isotope refinery. MAGIC AI, the company behind an AI fitness mirror, closed an $11 million Series B to expand in the United States.
What is being sold
In an equity round, a company raises money by selling new shares. The British Business Bank describes the investors as becoming joint owners, entitled to a share of profits and assets. Taking investment does not necessarily mean that the original shareholders give up control; new investors may acquire only a minority stake.
The stages
Rounds are usually named by stage. The British Business Bank‘s guidance for businesses sets out the sequence, starting with pre-seed. This is money raised before a business has a minimum viable product, often from the founders’ own savings, friends, family, or angel investors. Seed funding is intended to turn a concept into a going concern and can pay for product development, prototypes, and early hires.
According to the same guidance, Series A typically follows once a company has a product and market traction. Series B supports businesses with strong growth potential, for example as they enter new markets or add product lines. Series C backs companies aiming to become large enterprises, sometimes ahead of acquisitions or a stock market listing.
The labels describe a company’s stage more than the size of the cheque involved. The British Business Bank’s Small Business Equity Tracker 2026, published in July and based on Beauhurst data on announced deals, found that the median UK seed-stage deal in 2025 was £0.6 million. The average was much higher, at £3.2 million, and was the highest the tracker has recorded. A few very large deals pull the average up, which is why it sits so far above the median. The largest was Fidra Energy’s £445 million fundraising, which the report describes as the biggest seed-stage deal since 2020. Without it, the report says, the average seed deal would have risen by 11% in 2025 rather than 41%.
Who invests?
Angel investors are often entrepreneurs or successful businesspeople investing their own money. The British Business Bank says they typically take a stake of 10% to 25%. Venture capital firms invest money from large institutions, such as pension funds, generally ask for a larger stake and often take a board seat. Corporate venture capital comes from large companies, which tend to invest in businesses in the same or a similar industry.
Two of this week’s examples show how a round can bring several investors together. SolarSub says its round was led by Sustainable Ventures, with participation from Zinc VC, Scottish Enterprise, Old College Capital (the University of Edinburgh’s venture investment fund), SFC Capital and the British Business Bank, and with support from Innovate UK’s Investor Partnership programme. According to Beringea, MAGIC AI’s Series B was co-led by Beringea and existing backer IW Capital, and took the company’s total funding to $20 million.
Public funders also invest alongside private money. The tracker says British Business Bank programmes supported 15% of UK smaller-business equity deals between 2023 and 2025. Scottish Enterprise runs two equity funds, the Scottish Co-investment Fund and the Scottish Venture Fund, and says it invests alongside experienced private-sector investors where there is an identified lead investor. It typically invests between £100,000 and £2 million, in deals that are typically up to £10 million, and can provide up to 50% of the total funding package on a fully commercial basis. Its investment is usually limited to a cumulative £2 million per company, over up to five years and no more than three funding rounds.
Tax relief can help at the earliest stages. The government’s venture capital schemes are designed to help young companies raise money by offering tax reliefs to the individuals who invest in them. The two main schemes for investing directly in companies are aimed at different stages. A company cannot use the Seed Enterprise Investment Scheme (SEIS) once it has taken investment through the Enterprise Investment Scheme (EIS), so where a company uses both, SEIS comes first.
SEIS is for the youngest companies. Qualifying companies under three years old can raise up to £250,000 through the scheme. According to GOV.UK, their investors can claim income tax relief of 50% on up to £200,000 invested each year. HMRC figures show that 2,430 companies raised £276 million through SEIS in 2024-25.
EIS covers a wider range of companies. It is the successor to the Business Expansion Scheme, which was introduced in 1983 and replaced by EIS in 1994. HMRC describes EIS as a revision and fine tuning of the earlier scheme; it added capital gains tax deferral relief to the existing reliefs. EIS investors can claim income tax relief of 30% on up to £1 million a year, or £2 million where at least £1 million goes into knowledge-intensive companies. From 6 April 2026, most companies can raise up to £24 million over their lifetime through EIS and venture capital trusts, rising to £40 million for knowledge-intensive companies. The British Business Bank’s tracker puts EIS investment at £1.6 billion in 2024-25.
Under both schemes, if investors receive income tax relief and hold the shares for at least three years, gains on selling them are exempt from capital gains tax, and losses can be set against income.
Terms, price and dilution
Once an investor is interested, the main terms are usually set out in a term sheet. This is typically a non-binding document covering the valuation, the amount being invested, and what the investor receives in return. Some clauses, such as confidentiality and a “no shop” period preventing the company from seeking other offers, can be binding. The British Business Bank says a term sheet is typically valid for 30 to 90 days, and a binding legal agreement must be signed within that period or it lapses. Any serious investor will also carry out due diligence before the deal proceeds.
The valuation determines how much of the company the investor receives. The pre-money valuation is the company’s value before the investment; the post-money valuation includes the new cash. New shares mean existing holders own a smaller percentage, a process known as dilution.
In a British Business Bank example, founders own 1 million shares. An investor puts in £1 million at a £5 million post-money valuation, receiving 250,000 new shares and 20% of the company. The founders still own 1 million shares, but now hold 80%. The bank notes that dilution is not necessarily bad: if the company grows in value, a smaller share can be worth more than the larger one held before.
The bank’s guidance adds that term sheets can also include liquidation preferences, which give investors priority when proceeds are distributed on a sale, and pro-rata rights, which allow investors to buy into future rounds to maintain their percentage stake.
The picture in Scotland
Smaller businesses in Scotland raised £986 million of equity investment across 197 announced deals in 2025, according to the tracker. Investment value rose by 74%, while deal numbers fell by 7%. The report attributes the rise above all to Fidra Energy’s round, alongside three further deals of £50 million or more, by Trogenix, Orbex and BLK.
Scotland completed more deals than any other UK nation or English region except London, and its share of UK equity investment doubled from 4% to 8%. It also completed more spinout deals than London, by 45 to 28.
Across the UK, smaller businesses raised £12.3 billion through 2,002 announced deals. Companies are also waiting longer between rounds at the earliest stage. The report found that the median gap between funding rounds for seed-stage companies increased from 12.4 months in 2024 to 14.4 months in 2025, while at growth stage it shortened from 18.5 months to 15.1 months.
A note for readers
This article is a general introduction to the main elements of equity fundraising. It is not financial, investment, tax or legal advice. Figures and scheme rules are as published by the sources named at the time of writing and may change.
Raising equity investment is complex, and the right approach depends on each company’s circumstances. Any business considering this route should take independent professional advice before proceeding, for example from a corporate finance adviser, a solicitor experienced in investment transactions and a tax adviser or accountant. Scottish businesses can also contact Scottish Enterprise, whose Financial Readiness team supports companies preparing to raise investment.Investing in early-stage companies carries a high level of risk, and investors can lose all of the money they invest. Anyone considering such an investment, including through SEIS or EIS, should also seek independent advice.
