What Are the Major Differences in Venture Capital Practices in the UK and the U.S.?

As U.S.-based venture capital funds have become an increasingly significant source of capital for UK start-up and scale-up companies, the negotiation of terms often give rise to gaps in expectations and market norms between the two jurisdictions. 

Many of the differences are often a function of the investment styles in the respective markets. Generally speaking, U.S. venture and growth investors tend to invest with a more aggressive high risk/high return approach, whereas UK-based funds often take a more targeted approach with less potential for upside but similarly less risk of downside. While neither approach is right or wrong, it is important for the parties to enter into any deal with full awareness as to the differences in expectations among investors. Without alignment, founders, management, and investors often find themselves at odds soon after investment leading to painful changes that often limit value for all parties or even complete failure of the business and loss of investment.

In addition, while the U.S. and UK share a common legal tradition, there are systemic differences in deal structure as well driven by both differences between various elements, both substantive and structural, of UK and U.S. law and regulatory processes.

While there still remain more similarities than differences in the style of deals in both jurisdictions, this article highlights the top differences in structure, process and terms between a U.S. and UK-style venture/growth capital deal.

For more information, please read our article here.