New report shows domestic fundraising environment for Venture Capital remains challenging despite strong returns
A new annual report by the British Private Equity & Venture Capital Association (BVCA) finds that while the UK Venture Capital (VC) sector has proven resilient, fundraising from domestic investors remains a significant challenge.
The report, Venture Capital in the UK shows that over the long-term average, only around 40% of capital raised by UK venture funds typically comes from domestic sources, compared to over 70% in France and Germany. The BVCA suggests that this indicates significant headroom for growth in domestic VC investment in the UK, including capital coming from UK pension funds, to fully unlock their potential and boost investment in the UK economy.
To support the development of the UK’s vibrant VC sector, the BVCA is calling for the Government to work with industry to ensure the package of pension reforms announced by Rachel Reeves in her Mansion House speech encourage more investment by UK pensions in VC funds, fuelling the growth of Britain's most exciting new businesses.
The report shows UK managed VC funds have delivered strong returns over the long term - collectively achieving an internal rate of return (IRR) of 11.2% per annum since 2002, outperforming key market indices like the FTSE All-Share Index and MSCI Europe Index.1
In 2023, £8 billion2 was invested in UK VC backed businesses, highlighting a strong year for a sector that fuels a diverse range of startups and scale-ups across the country.
Rising number of Venture Capital- backed businesses in the UK’s nations and regions
Venture Capital in the UK in the UK found that an increasing share of VC investment is going to businesses located in the UK’s nations and regions. It shows that almost half (49%) of businesses backed by VC in 2023 were located outside the Capital. Almost one in five (18%) VC backed businesses outside London were located in the East of England. The South East (16%) and Scotland (14%) were also popular destinations for investment outside the Capital. The BVCA notes that key centres such as Oxford, Cambridge, and Edinburgh have developed strong ecosystems that foster entrepreneurship, supported by local initiatives and a robust infrastructure.
| Nation / Region | Proportion of companies outside London, backed by General Partners in 20233 |
| South East | 16% |
| South West | 6% |
| East of England | 18% |
| West Midlands | 8% |
| East Midlands | 4% |
| Yorkshire and The Humber |
4% |
| North West | 8% |
| North East | 6% |
| Scotland | 14% |
| Wales | 6% |
| Northern Ireland | 8% |
Michael Moore, BVCA Chief Executive said:
“Venture capital already makes a huge contribution to the wider economy, and the UK is home to one of the largest hubs for the industry in the world. However, firms continue to find fundraising challenging, especially from domestic sources.
“It’s important that the very promising reforms to the UK pensions system outlined by the chancellor in her Mansion House speech increase the opportunity for pension savers to benefit from investing in our vibrant venture capital sector.”
Notes to editors
For further information, please contact:
BVCA Press Office
Email: [email protected]
About the British Private Equity & Venture Capital Association
The British Private Equity & Venture Capital Association (BVCA) is the voice of private capital in the UK.
We have been advocating for the UK’s private equity and venture capital industry for over 40 years, helping it to uphold its vision and achieve its goals.
We actively represent this diverse community of long-term investors, enabling them to speak with one clear and consistent voice to society, including the Government, media and MPs. We connect institutional investors, fund managers, companies, advisers and service providers together, with our membership currently comprising more than 600 businesses from across the private capital ecosystem.
This includes more than 260 private equity and venture capital firms, 100 institutional investors and over 190 professional services firms.
The BVCA supports its members to help companies grow and achieve their long-term ambitions, creating value for the country, both economically and socially.
From creating medicines to protect us against COVID-19, to backing innovative companies in their quest to find solutions to our low-carbon future, private capital also plays a critical role in addressing the future challenges we face as a society.
Together we are invested in a better future.
1 Source: Performance measurement survey 2023
2 £8bn includes equity provided by VC funds, venture debt and co-investments. It does not include growth equity investments, angel investments or venture secondaries.
3 Source: Economic contribution of UK private equity and venture capital in 2023
