The Tech Nation Report 2025 confirms what many in Wales’ entrepreneurial community have known for years namely we are being left behind when it comes to investment and the current approach to funding new businesses is making the situation worse.
According to the report, Welsh start-ups raised just $32m in venture capital (VC) in 2024, the lowest of any º£½ÇÊÓƵ nation or region and accounting for only 0.2% of the º£½ÇÊÓƵ total. While locations like Scotland and the east of England have seen investment levels soar up 120% and 90% respectively since 2020, Wales has suffered a 67% drop over the same period.
This matters because venture capital is not just about money but is about scale, ambition, and growth. It enables businesses to move quickly, create high-value jobs, commercialise research, and compete globally. When Wales fails to attract VC funding, we’re not just missing out on money, we’re missing out on the future economy.
But the investment gap is only part of the story, and the Tech Nation data reveals something even more troubling namely Welsh founders are giving up more of their companies than almost anywhere else in the º£½ÇÊÓƵ just to access capital.
It shows that early-stage founders in Wales give up 21% of their business in a funding round which is nearly twice as much equity dilution as those in London who give up just 12% on average. In practical terms, this means Welsh entrepreneurs receive less capital at lower valuations and are sacrificing far more of their ownership to secure it.
This is not just a market anomaly, it’s the direct consequence of how public funding is delivered and it appears that the very institutions meant to support Welsh entrepreneurs may be entrenching the problem.
According to a recent Beauhurst report, the Development Bank of Wales (DBW) dominates the public funding landscape in terms of early-stage investment. Established to address a market failure in SME finance, its role has grown significantly particularly in the absence of a strong private investment base.
But this data shows that DBW’s equity model is flawed with founders routinely offered low valuations, high equity for cash deals, and limited flexibility. Rather than supporting ambitious, fast-growth firms to scale, the bank’s cautious, risk-averse approach is limiting growth before it even begins.
This has long been suspected, but now the data seems to confirm it. By offering lowball valuations, DBW is not just de-risking its own position, but is undermining the ability of Welsh firms to grow, attract follow-on funding, and compete with counterparts elsewhere in the º£½ÇÊÓƵ.
High dilution early in a company’s life severely reduces the likelihood of long-term success as it deters external investors, weakens founder motivation, and signals to the wider market that Wales is not a competitive place to invest. And when that perception takes hold as many in the venture capital industry as many are telling me, it becomes self-fulfilling.
What makes this situation worse is that this investment approach is now being replicated elsewhere and some have already expressed concerns that the British Business Bank’s regional investment programme in Wales, which was meant to provide an additional source of early stage capital, is following the same pattern of conservative valuations, high equity stakes, and little regard for the long-term implications of such deals. Rather than providing an alternative or injecting dynamism into the market, the British Business Bank’s Welsh presence appears to be doubling down on the same broken model.
The result is a funding ecosystem that is increasingly closed, constrained, and out of step with the needs of modern businesses. This means we have a situation where public capital dominates, private capital stays away, and promising companies cannot grow. Given the state of the Welsh economy, we cannot afford to continue like this and need to be honest about what’s going wrong and take urgent action to fix it.
As I’ve said many times, the development bank needs to fundamentally rethink its approach and move away from excessive dilution and embrace a more founder-friendly, growth-focused model. That means offering competitive valuations, introducing co-investment frameworks to bring in private capital, and focusing on long-term impact rather than short-term portfolio metrics.
Likewise, the British Business Bank must review how its Wales fund operates and if it’s merely mirroring the development bank’s practices, then it too is part of the problem as º£½ÇÊÓƵ Government-backed capital should be a vehicle for unlocking ambition not reinforcing caution.
At the same time, more must be done to diversify and expand the investor base which means building stronger angel networks, supporting spinouts from our universities, creating opportunities for early-stage founders to connect with national and international VCs, and improving the visibility of Welsh startups on the º£½ÇÊÓƵ stage. Indeed, as several successful Welsh entrepreneurs have suggested, it is also important to reduce dependence on public funding, arguing that a truly dynamic ecosystem requires competitive, market-driven capital rather than reliance on state-backed sources that are distorting valuations and expectations.
Last week’s º£½ÇÊÓƵ StartUp awards in Cardiff demonstrated once again that Wales has talent in abundance from green energy to fintech, health tech to AI, and there is no shortage of founders building exciting, globally relevant businesses. Unfortunately, they are being let down by a funding environment that limits their potential from the outset.
We can fix this but only if we stop pretending that everything is working perfectly. It clearly isn’t and the Tech Nation Report lays bare the reality that Wales is falling behind not because we lack ideas, but because we have failed to build an investment model that supports them from both private and public funding sources.
Our entrepreneurs deserve better and if Wales is to reclaim its place in the º£½ÇÊÓƵ’s innovation economy, we need a funding model that values founders fairly, rewards growth, and attracts private investment. The time for half-measures has passed and it is time to rethink, reform, and rebuild Wales’ investment ecosystem from the ground up and support those founders that want to grow their businesses fairly.
