Patience is a Virtue – the State of Life Sciences Capital Transactions in the UK

March 16, 2026

Life sciences investment transactions have shown a clear trend over the last few years – fewer transactions, but for higher value and more mature companies.

In the first half of 2025 the total number of life sciences investment transactions fell compared with the first half of 2024, but the total capital raised increased to £1.23 billion (an increase from £1.1 billion in the first half of 2024). [1] If you look back further, this trend is reflected in the 2023 – 2024 data, with total deals falling by 61, whilst the total amount raised increased by £630 million.

In a turbulent economic environment, investors are holding off from early-stage investment favouring well-established and “proven” business models.

However, the data on M&A for the same periods shows a trend towards smaller bolt-on transactions with less money paid upfront on completion. Large consolidators are acquiring innovation early, provided its value is protected and it has a credible financial model.

Whilst these two clear trends in investment and M&A may seem contradictory, they both point towards a risk averse attitude to capital transactions in the life sciences sector. Investors want a low-risk investment with a shorter timeline to exit, and industry buyers want to tie a greater portion of the purchase price to the future performance of the company. It is therefore crucial for founders to adapt their approach to finance and realise value from these businesses – commercially, financially and legally.

Key legal considerations for life sciences founders

From a legal perspective, the following considerations are important:

1. Selective financing tools – since traditional venture capital funding is arriving at a later stage, founders need to utilise alternative sources of funding whilst their product is still at the “idea” stage until they can show robust preclinical data, strong intellectual property protection and early-stage clinical trial results.

  • Grants and non-dilutive funding – use of government and charitable grants for research and development (R&D) assists “idea” stage life sciences businesses in building credibility without giving away an equity stake. Examples of various grants include:

    • UK Research and Innovation (UKRI) – the national funding agency investing in science and research in the UK. Life sciences businesses can apply for government backed funding to R&D products and test innovation ideas using their InnovateUK funding.
    • The Life Sciences Innovative Manufacturing Fund (LSIMF) – a government backed fund which provides up to £520 million in grants for investment within human medicines as well as medical technology. It remains open to all eligible companies after an application has been completed.
  • R&D tax credits – early-stage life sciences businesses should take advantage of the generous tax credits offered for R&D expenditure.

    The R&D Expenditure Credit (RDEC) scheme applies to most companies and provides a tax credit of 20% of qualifying R&D expenditure, subject to certain nuances in its rules.

    Whereas the enhanced R&D Intensive Support (ERIS) scheme provides a more generous tax credit of up to c.27% for loss making R&D intensive SMEs. The rules around when ERIS applies are nuanced but include at least 30% of total expenditure being in R&D and for loss making companies.

    In some circumstances, where R&D is funded by the external grants described above, part of the R&D spend of an ERIS qualifying business may be treated as subsidised and therefore fall under the less generous RDEC rules instead.  
  • Accelerators and incubators – university accelerators and incubators assist early-stage companies in both building credibility for future investors, and reduce their costs, by providing them with the equipment and scientific support necessary to develop their businesses ahead of funding.

    Most of these programmes do not charge money to participate in their programs, but they instead provide support and funding in exchange for a small minority equity stake (5 – 10%) in the business. 

    Whilst experiences vary from programme to programme, the equity asked for typically standard form and relatively founder friendly, including either:

    • Simple Agreements for Future Equity (SAFEs) – these are contractual rights to receive shares in the future in exchange for capital provided now. The equity right is typically triggered on the occurrence of a funding round, but may have other criteria attached to it as well. They are low risk for founders because if the conversion event never happens, the money is not repayable (unlike a convertible loan), and they are fast for accelerators to implement due to their low risk.
    • Convertible loans – allows the programme to provide a loan to the business which is repayable by equity being issued at a specific point in the future, typically on the occurrence of the first significant funding round. The debt is typically repayable at a future date with interest accruing if no conversion event has occurred. The significance of this is that convertible loans put more pressure on a business’s cash flow and conversion timelines – if no conversion occurs and the loan becomes repayable, the business may become insolvent if it doesn’t have the cash to fund the repayment.
    • Accelerator Contract for Equity (ACEs) – legal agreements which allow startups to exchange a right to future equity for not only funding, but accelerators experience, resources and mentorship as well. They are like SAFEs in that they are not structured as an accruing debt, but they are designed specifically for the context in which accelerators operate by linking the contractual rights to equity with the accelerator relationship, and completion of the accelerator programme.
  • Angel Investors / crowd funding – these are way of raising capital in exchange for equity from private individuals and the public, as opposed to institutions.

    Angel investment comes from high-net-worth individuals who are typically experienced investors. Their degree of involvement in the business varies, but sometimes they provide mentorship to the developing business in addition to capital.   

    Crowd funding is slightly different, as the funding comes from multiple different sources which are collected via an online platform. This is often a faster source of gaining capital from friends, family and strangers without any additional involvement. This also has the added benefit of providing publicity for future investors.  

2. Protecting the cap table in early-stage life sciences businesses – since later venture capital funding is increasing the likelihood of other forms of equity finance in early-stage businesses being used, founders need to invest earlier in legal documentation which protects their shareholding.

If, for example, an angel investor receives shares in the business, a future venture capital investor or buyer will want to see that the Company’s articles of association and / or shareholders’ agreement includes provisions which:

  • entitle the majority shareholders to force the angel investor and other minority shareholders to sell their shares in the event of a sale, meaning they cannot veto a sale process; and
  • includes appropriate protections such that they cannot sell, pledge or grant security over their shares to any unknown third parties without the founders and / or company’s consent.

Sometimes angel investors and other pre-venture capital investors will require their own protections, including board roles, information rights and anti-dilution protections from future rounds of investment, all of which will be important to take appropriate legal advice on.

3. Early investment in regulatory compliance and intellectual property (IP) – given the tough market conditions life sciences start-ups are operating in and shorter exit timelines, regulatory compliance and strong intellectual property protections are essential to both achieve an appropriate valuation and maintain investor confidence.

Patents are often the most valuable asset of a start-up in the life sciences sector and will be one of the first agenda items on any prudent investor or buyer’s due diligence.

Investors and prospective buyers will also be keen to receive assurances that start-ups are compliant with the regulations of the Medicines and Healthcare Products Regulatory Agency (MHRA) to avoid fines and other sanctions in the future.

Final Thoughts

Traditional venture capital investors are taking a cautious approach to life sciences start-ups, favouring more mature businesses with strong intellectual property protection and early-stage clinical trial results.

It’s therefore crucial for founders are aware of the other funding options available to them, but this must be balanced with a cautious approach to diluting equity at an early stage.

Given the increasing complexity of funding and the shorter timelines to exit, early-stage investment in clear equity documentation, regulatory compliance and IP will assist founders in maximising their valuation multiples and minimising the risk of investor or buyer non-confidence.

How we can help

If you would like guidance on navigating funding, investment strategy, or legal protections for your life sciences business, our team is here to help. Please contact us to speak to a member of our team and discuss how we can support your growth and safeguard your valuation.

[1] <https://www.bioindustry.org/resource/uk-biotech-holds-firm-in-the-first-half-of-2025-bia-report-finds.html>

Stephen Taylor
Solicitor, Corporate
<script>
document.addEventListener('DOMContentLoaded', function () {
  const deptEl = document.getElementById('acf-author-department');
  const department = deptEl?.dataset?.department;

  if (typeof gtag === 'function' && department) {
    gtag('set', { author_department: department });
  }
});


  window.dataLayer = window.dataLayer || [];
  const dept = document.getElementById("author-department")?.textContent?.trim();
  if (dept) {
    window.dataLayer.push({
      event: "authorDataReady",
      author_department: dept
    });
  }

</script>
View profileContact Us

This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

Latest Legal Insights