The transition rate of UK startups from Seed to Series A funding has decreased from 8% to 2% over the past 18 months, according to a report by ScaleWise using Crunchbase data. The report, titled “Bridging the Gap: The Graduation Crisis in Early-Stage Start-ups,” identifies weak go-to-market (GTM) strategies, poor hiring decisions, and misinterpretations of Product-Market Fit as primary causes of this decline.

ScaleWise conducted a survey of 100 startup and scale-up leaders to explore the difficulties faced by young businesses in advancing through funding rounds. The survey results indicate that execution, rather than ambition, is the main issue. Many founders encounter challenges in converting their strategies into reliable, structured actions that investors find credible.

Impact of Hiring Decisions on Growth

Approximately 25% of UK startups have experienced a growth delay of up to a year due to suboptimal hiring decisions. The research by ScaleWise reveals that 24% of founders acknowledged that hiring inappropriate GTM leaders postponed their progress by as much as 12 months.

Many Series A chief executives manage GTM strategies personally, despite lacking the necessary time and structure to scale effectively. Only 32% of Series A firms have designated GTM ownership beyond the CEO, leading to challenges in unifying team efforts.

Mishires in GTM roles, such as heads of sales, can result in valuation losses, missed milestones, and slower fundraising, ultimately depleting financial resources and necessitating bridge rounds, which weaken founders’ positions during investment pursuits.

Misinterpretation of Product-Market Fit

About 18% of startups are overly dependent on a single large customer, which can create a misleading sense of market traction. This dependence conceals gaps in repeatability and may lead founders to mistakenly believe they have achieved Product-Market Fit.

ScaleWise’s findings indicate that many businesses confuse early successes or loyal clients with long-term product validation. This misinterpretation often leads to premature scaling and missed sales targets, making it challenging to convince investors of the company’s readiness for expansion.

Structural Challenges

Structural inadequacies and inefficient internal processes are significant barriers to progress. ScaleWise’s research indicates that only 31% of founders have structured, benchmark-driven plans for their next funding round. A reactive approach to execution often results in missed targets and slow growth.

Extended recruitment and onboarding timelines, along with misaligned sales and marketing functions, contribute to poor lead handling and high acquisition costs. Additionally, one-third of founders are not utilizing AI to enhance GTM productivity, limiting operational efficiency.

Founder Confidence Levels

Only 38% of founders express high confidence in their GTM strategies. Another 32% are uncertain, which can be a warning sign for investors. Although confidence improves post-Series A, many UK founders remain cautious.

Economic conditions are cited as a primary obstacle by 53% of founders, followed by hiring mistakes at 24% and reliance on a single customer at 18%. These factors contribute to what ScaleWise describes as a “graduation crisis” in the UK startup ecosystem.

The data suggests that founders capable of translating vision into measurable execution are more likely to secure growth funding, while inadequate structure, unreliable hires, and lack of repeatable sales models hinder progress from Seed to Series A.