UK startup investors call for a lighter regime to boost early-stage funding.

 A coalition of prominent venture capital and startup figures is urging HM Treasury and the Financial Conduct Authority to create a British “Exempt Reporting Advisor” regime, designed to make the United Kingdom a more hospitable place to launch small investment funds.

The proposal, submitted in the context of the Treasury’s consultation closing on 14 October 2026, argues that Britain’s current framework imposes disproportionate costs on emerging fund managers.

According to the open letter, a $10 million fund in the United States may lose around 4.5% of its lifetime value to administration and compliance, while an equivalent UK fund can face costs approaching 14%, largely because managers must seek authorisation or operate under an appointed representative structure.

The signatories, including Entrepreneur First, Form Ventures, Mountside Ventures, Beauhurst, Isomer Capital, Antler, Seedcamp and Mozilla Ventures, contend that this burden suppresses experimentation at precisely the stage where it is most needed. Their central argument is simple: innovation requires many small bets, and small bets require low procedural costs.

The proposed reform would allow qualifying fund managers to begin operating through notification rather than full authorisation. The regime would apply to unleveraged, closed-end vehicles that do not solicit the general public and are aimed at sophisticated individuals or institutions familiar with venture risk and illiquidity.

Supporters say the current system favours larger, established firms and narrows the pool of investors able to write early cheques to young companies. They note that the median US venture capital fund stood at $21 million in 2024, compared with £70 million in the UK. Only 16 first-time UK venture funds closed in 2024, far below the ten-year average of 30.

For the authors of the letter, the matter is not merely administrative. It is industrial policy by another name. Lowering the cost of forming a small fund, they argue, would increase the number of emerging managers, broaden access to capital for founders, and strengthen innovation “in every postcode.”

The appeal comes as Britain seeks to sharpen its competitiveness in technology and finance after years of concern over scale-up funding and the migration of ambitious companies to deeper capital markets abroad. The letter’s authors suggest that public money is not the first answer. Before providing more capital, they argue, the state should remove avoidable friction from the system.

The proposed Exempt Reporting Advisor model borrows inspiration from the United States, where small fund managers can operate under lighter reporting obligations. Its advocates insist that such a regime would remain proportionate to risk, since the funds concerned would not be marketed to retail investors.

The Treasury and FCA now face a choice familiar to governments seeking growth: whether to preserve regulatory caution in its present form, or to accept that a little more room for experiment may be the price of future prosperity.