Bridging the Atlantic Divide: A new model for raising capital that fits a different culture.

Guest article by Simon Tutton, Steampunk Ventures

Steampunk Ventures is a Funding & Finance Partner, learn more about the programme here.

The Cambridge Paradox: A Tale of Two Innovation Hubs

The Economist recently ran an article comparing Cambridge and Cambridge — the medieval British city and its American namesake – illustrating a broader truth about the venture capital (VC) ecosystems in the UK and US. These two global innovation powerhouses, though separated by an ocean, share a name, a legacy of academic excellence, and a mirror-image set of challenges.

• UK Cambridge excels in research depth and early-stage innovation, producing more patents and scientific publications per capita than almost anywhere else. Yet, it struggles with scaling up: constrained by infrastructure, limited late-stage capital, and a domestic market that often forces its most promising startups to look abroad for growth.
• US Cambridge (Boston) thrives on commercialisation and scale, with unparalleled access to capital, talent, and proximity to major markets. But its recent boom has led to overheating: soaring costs, a glut of lab space, and a funding environment that has grown risk-averse, leaving early-stage startups starved of support.

This dynamic is not unique to Cambridge. It reflects a fundamental cultural and structural divide in how the UK and US approach venture capital. Comparisons are often made between the experience of investors in the USA and the UK with the conclusion that we (the UK) should be more American – with higher risk appetites, greater pools of capital and a more hustle focused culture. However, our cultures are born of history and experience and whilst they can be changed, it would be naive to think we can change fundamental things like investor risk appetite quickly.

UK vs. US VC Cultures: A Study in Contrasts

The USA v UK comparison has 3 main facets – risk appetite and stage focus, commercialisation and ecosystem support, and investor mindset. Whilst the USA leads, it doesn’t have it all its own way with some interesting UK strengths.

Risk Appetite and Stage Focus

While the UK has some strength at pre-seed and seed funding (especially around the golden triangle), in the US investors are more willing to bet big on unproven ideas, especially in deep tech and frontier industries. The goal is rapid growth, often prioritising market capture over profitability. This has led to a “grow at all costs” ethos, particularly in sectors like biotech and AI. In the UK however, founders often spend a disproportionate amount of time and energy raising funds that keep them too lean. At every stage, UK investors tend to be more conservative, demanding clearer proof of concept and revenue traction before committing larger cheques.

The US also excels in Series B+ funding, with a deep pool of capital from institutional investors, corporates, and sovereign wealth funds. However, this can create a “valley of death” for startups that fail to achieve early traction. This is in contrast to the UK where startups often hit a wall when seeking £10M+ rounds. Domestic pension funds and institutional investors are less active in VC than their US counterparts, forcing founders to seek foreign capital.

When it comes to commercialisation and ecosystem support, the US has some major advantages: proximity to markets and customers: Boston’s Kendall Square is a stone’s throw from world-class hospitals, MIT, and Harvard, creating a feedback loop between research, validation, and commercialisation. The scale of their market is often a big differentiator with UK companies having to jump lots of hurdles for equivalent growth in Europe. Talent density is strong and exit opportunities are more visible. The NASDAQ and NYSE provide liquidity, while a robust M&A market (e.g. pharma acquisitions in biotech) offers alternative exit routes.

The UK’s challenges are around infrastructure, fragmented ecosystems and a commercialisation gap. Limited lab space, housing shortages, and transport constraints (e.g. Cambridge’s “medieval skin”) hinder growth. While the “Golden Triangle” (Cambridge, Oxford, London) is powerful, it lacks the critical mass of Boston-NYC-San Francisco that a continental scale economy provides. From a commercial standpoint, UK startups often excel in R&D but struggle to cross the chasm to mass-market adoption, particularly in capital intensive areas.

When it comes to investor mindset and collaboration, things are a little more nuanced. US VCs often spread bets widely, meaning high failure rates in exchange for outsized returns from a few winners. The UK, and I’m generalising here, tends to try to mitigate risk and go for lower, but more certain returns. From an investor returns perspective this isn’t necessarily a disaster. But from an ecosystem, cluster and economic perspective it leads to where we are today – dominance by the gigantic US firms, their founders and the vast pools of capital from their profits and exits.

Many US funds provide operational expertise, the exited founders of these companies reinvesting their exit proceeds and leveraging networks of serial entrepreneurs and industry veterans. This in itself creates competitive dynamic: the sheer volume of capital can lead to frothy valuations and a “winner takes all” mentality.

In the UK the approach is more relationship-driven: UK VC could be seen as more collaborative and founder-friendly, however, this is possibly just a reflection of how polite we are! When it comes to valuations, things are not founder friendly at all. Even some fund managers with pots of public money aimed at early-stage investing drive the valuations down, set high milestones for even minor investment and include non-dilutive terms that are punishing to founders.

There are bright spots. Funds like Cambridge Innovation Capital or Octopus Ventures often have strong domain expertise, particularly in deep tech. But in general, that lack of founder exit, or good fund return, means money just isn’t there in the same way, leading to capital flight. The lack of mid and late-stage capital forces UK startups to “graduate” to US investors, diluting domestic ownership and control.

All of these problems are exacerbated if you are a company outside of SaaS or AI, and if you are based outside of one of the big global clusters e.g. Silicon Valley, New York, Boston, London and Shenzen, to name a few.

At Steampunk we currently have a big focus on autonomy, and in particular, marine autonomy. The marine autonomy sector — encompassing uncrewed surface vessels (USVs), autonomous underwater vehicles (AUVs), and AI-driven maritime systems – exemplifies these transatlantic tensions and more. The sector demands high upfront R&D investment, long development cycles, regulatory navigation and global market access. Whilst the UK has some strengths e.g. our excellent universities and long maritime heritage, the USA leads on almost every metric from actual R&D spending to global heft in markets and regulatory conversations.

There is also a funding gap between early-stage grants (e.g. Innovate UK, itself a less prolific provider than it once was) and late-stage commercialisation capital, a talent gap in niche areas like hydrodynamics, AI for maritime, and regulatory compliance, and a collaboration gap between academia, industry, and investors.

So far I probably haven’t told anyone anything they didn’t already know or have a general feeling for. However, what do we do about it? Can our entrepreneurs be more aggressive? Should our investors take more risks and buy into grand visions? Can our ecosystems be brought together to work seamlessly from academia through to big business? Can we put forward deeper pools of capital?

The answer to all of these questions is undoubtedly yes. But none is a silver bullet. Can you change entrepreneurial culture? Yes, but not quickly – that’s a generational process. Can ecosystems be brought together? Yes, and the UK is putting huge amounts of effort into this, with sterling work by the likes of Scottish Enterprise, Tech South West, Science Creates and the collaboration of major universities that set up Northern Gritstone. However, it is hard graft building ecosystems of capital, lab spaces, talent and all the other support required and again takes 10-20 years to bring to fruition.

But from an investment perspective (the thrust of this article), what can be done? Can you change investor risk appetite? Probably, but that’s not a quick cultural ask. Centuries of history have made people cautious and sceptical, and recent history has given us an obsession with property (at least in the UK). Can we unlock bigger pools of capital? Again, yes we can, but that is a tanker that will take some turning. The UK Government has started a process of leveraging the billions in pension funds that could invest at an earlier stage but, apart from a few early indicators, that process seems slow. Pension funds are inherently risk averse and the UK has only just started a process that North American (and in fairness, some European) pension funds started decades ago.

So what do we do for immediate impact? The answer is three fold. Firstly, stop apologising for our lower risk appetite and less pushy entrepreneurs. US cultural exports are not always amazing and we need to accept that the UK and the rest of Europe is different, more socially aware and, to a significant degree, more interested in equality of outcome, rather than maximising personal opportunity. Why try and retro-fit a US model onto a European culture?  We can develop our own model based on collaboration, relationship-building and a two-way exchange of ideas between founders and investors, rather than the perception of the more adversarial approach that often characterises existing relationships.

Secondly, we need to accept that we aren’t big enough on our own. The USA is a highly integrated continent including most of the Canadian economy and significant chunks of Mexico’s. Some 500m people with lots of regulatory and market integration, lots of space for development, huge natural resources (oil and gas amongst those), deep pools of capital, giant markets and bigger companies. The UK is a smaller country with tiny natural resources (except in a few key areas), a population of only around 70m people and commensurately smaller markets, talent pools, and depth of capital, on top of high energy, land and property costs. We need to lean into our neighbours and, with London being the closest thing Europe has to New York or Silicon Valley, realise that we are more akin to California than the USA. Ireland is Delaware. Germany our Texas, and Paris our Chicago. Forgive the imperfect comparisons but you get the idea – we need to be operating on a continental scale with global vision.

Thirdly, lean into our strengths. A recent report by Dealrooms comparing South Yorkshire’s economy to that of Pittsburgh and Helsinki highlighted the benefits of playing to a strength or a niche where you have particular advantages. This approach has led to significant economic success for those two areas, in comparison to South Yorkshire’s economic growth more aligned with the much slower UK average.

To address at least some of these issues Steampunk Ventures has launched the Marine Autonomy Investor Catalyst: building a new model that works for everyone (but particularly companies from the UK and the rest of Europe). Taking advantage of a specific cluster of activity and expertise in the UK, creating a community of specialist and interested investors, going global to ensure the pools of capital are there and focused where they need to be.

The Marine Autonomy Investor Catalyst (MAIC) is designed to be a new model of finding capital for startups. Why get “investor ready” when you can work with investors that help you to become investable?  Why pitch when you can build relationships? Why try and persuade an investor that your market is valid and commercial strategy works when industry leaders (and possibly your customers) have explained the market and investors have helped you develop your market approach? Over the coming months we’ll be introducing the companies, the concepts, the markets and the technologies – doing it our way. Join us on the journey to something new, something different, something ours.