Venture Capital Update | The voice of VC in the UK
The VC View
Welcome to the first edition of the Venture Capital Update (VCU). Written and delivered by the British Private Equity and Venture Capital Association (BVCA), the trade body has been the voice of UK VC and other private capital funds for over 40 years. Throughout that time, we have consistently worked with Governments, policymakers and regulators to shape the policy environment so that the industry can prosper. VC has grown and matured as an industry with a strong track record of delivering investment and returns. What’s more, Governments over decades have turned to our members to shape innovation extending above and beyond our industry.
The scale of opportunity is significant, especially in the age of AI. The engagement with the industry’s stakeholders required to support VC and make Britain a great place to invest and set up a fund has grown significantly, which is why we are launching this monthly update.
We will be covering:
- Industry trends: What is changing in VC and how can policy change to harness opportunities to invest.
- Access to capital: The latest developments on fundraising and areas such as unlocking pension investment.
- Technical updates & analysis: Understanding the latest regulatory, legal, tax and sustainability developments and their impact on your firm.
- Political developments: Updates on the BVCA’s political engagement to support VC.
There are also updates on the BVCA’s VC training and events, including the BVCA’s flagship Accelerate Conference taking place on 8 May.
As mentioned, the BVCA has a long established role in shaping VC and startup/scaleup policy in the UK, whether through our leadership on the Mansion House reforms via the Investment Compact, or our efforts to engage the new Government on carried interest & renew the sunset clause for EIS & VCTs. In the coming months, we will update you on existing workstreams like the Series A Model Documents, as well as new initiatives such as a new Technical Network for CFOs and COOs at smaller and emerging VC funds.
We are grateful to have strong VC representation on the BVCA board from Atomico (Chris Barnes, COO) and Cambridge Innovation Capital (Andrew Williamson, Managing Partner), as well as through the Venture Capital Forum, our sounding board for discussing VC policy, which is chaired by Stephen Chandler, Managing Partner at Notion Capital (see his latest Insight article below) and members from VC funds across the funding spectrum. Kerry Baldwin, Managing Partner at IQ Capital has played a key role in recent years as BVCA Chair and in our pensions work.
As VC navigates an ever-changing and uncertain world, the BVCA is here to keep you and your colleagues ahead of the curve. You can sign up for our weekly Private Capital Update for news on VC and the wider private capital ecosystem here. Please contact us if you have any feedback on the first edition or want to get involved in our work.
Chris Elphick,
Head of Venture Capital, BVCA
Insight
VC Outlook 2025: A Return to Growth & Global Ambition
Stephen Chandler, Managing Partner at Notion Capital and BVCA VC Forum Chair, looks ahead to what’s in store for the VC industry in 2025.
BVCA Round-Up
POLICY:
BVCA engagement on changes to Carried Interest regime
Following the changes announced in the Autumn Budget to the UK carried interest regime, the BVCA will be submitting a response to a technical consultation on how Government proceeds with implementation.
The BVCA response, which is supported by extensive input from venture capital and private equity members, will provide information on how proposed changes can cause the least possible disruption for the industry. The response will also set out detail about the relative attractiveness of the UK as a destination for investment and investors, underlining the importance of getting the regime right and minimising the impact on UK competitiveness.
The BVCA would like to thank members who provided their feedback as part of this process, which in some instances has been quoted (in anonymised form) in the submission. The response will be published soon and will be available here.
Please contact Rachel Gauke, BVCA’s Senior Tax Policy Manager, for further details.
RESEARCH:
BVCA-backed report calls on the Government to channel more institutional investment into scale-ups
A Mountain to Scale’, the new report from the Future Governance Forum (FGF) which was produced with support from the BVCA, reveals that British firms take almost twice as long to scale from £10 million to £100 million in revenue as their US counterparts.
The report demonstrates how late-stage funding gaps, regional imbalances and a shortage of technological and leadership skills are holding back the UK’s scale-up potential.
Recommendations include calling on the Government to drive more investment into businesses through the British Growth Partnership, creating pension ‘mega funds’, and extending the Enterprise Investment Scheme with a new Scale-Up Investment Scheme to support larger, faster-growing businesses. Read the full report here.
For any questions, contact Juliette Gerstein, BVCA’s Senior Public Affairs Manager.
POLICY:
BVCA supports government moves to increase pension fund consolidation
The BVCA reiterated its support for moves to increase consolidation and scale of UK pension funds.
In its responses to recent consultations, the BVCA supported the Government’s assessment that a minimum defined contribution (DC) pension fund size of £25bn-£50bn is essential to achieve the level of scale needed to invest in venture capital funds, and urged the Government to retain its focus on value for money to address the risk that funds prioritise low-cost over performance.
The response also repeated its support for moves to pool local government pensions (LGPS) funds but also called for a range of measures to ensure that LGPS pools can continue to invest in regional VC funds.
For more information contact BVCA Policy Manager, Karen Hurst.
INNOVATION:
BVCA welcomes AI Opportunities Action Plan
The BVCA welcomed Prime Minister Sir Keir Starmer’s announcement of the Government's commitment to utilise Artificial Intelligence to 'turbocharge' economic growth across the UK.
The announcement comes following the development of the AI Opportunities Action Plan by Matt Clifford, the Prime Minister’s AI Opportunities Adviser, which aims to ensure that the UK continues to build on the innovative AI technologies developed domestically to generate economic growth. Currently the third largest AI market in the world behind the US and China, the Government is aiming to make the UK more attractive to AI firms looking to start, scale or grow their business.
For more information, please contact BVCA’s Senior Policy Executive, Olivia Green.
RESEARCH:
BVCA Annual Investment Survey – members invited to participate
The BVCA has launched its annual investment activity survey, which supports the development of a comprehensive and authoritative picture of the UK private equity and venture capital landscape.
The 2024 data will underpin the latest in a series of annual reports on investment activity, which are central to the industry’s engagement with policymakers.
All GP member firms have received a request to participate and are asked to respond as soon as possible. The survey deadline for submission is 21 February.
For more information or help with submissions, please contact the BVCA Research team.
Enrico D’Angelo
The BVCA is saddened to learn of the passing of Enrico D’Angelo, CFO at Parkwalk Advisors. Enrico was a member of the BVCA EIS-VCT Subcommittee and made a significant contribution to our work on startup and EIS policy. Always thoughtful and good humoured, he will be missed by everyone at the BVCA and the wider VC community. We send our condolences to his family, friends and everyone at Parkwalk.
Spotlight
ESG_VC, Invest Europe and EDCI update reporting frameworks
In December, three key reporting framework providers: Invest Europe, ESG Data Convergence Initiative (EDCI) and ESG_VC, updated their 2025 guidance to improve data collection and quality.
• Invest Europe’s iteration will be machine-readable to facilitate implementation by service providers. The framework itself will also increase proportionality for the smaller end of the market enhancing alignment with ESG_VC and EDCI as well as regulatory requirements like Sustainable Finance Disclosure Regulation (SFDR).
• The EDCI has expanded and clarified its metric guidance on collecting environmental and social metrics, whilst also providing further support to investors in the venture, private credit and infrastructure sectors.
By increasing proportionality, enhancing alignment and focusing on materiality, these providers continue to support companies with data reporting whilst ensuring more time can be spent implementing ESG practices and creating value.
Research Update
The UK continues to be Europe’s leading tech ecosystem
A new report from Dealroom and HSBC Innovation Banking UK has found that startups raised a total of $16.2bn in 2024, surpassing the amount raised by Germany and France combined. Although slightly lower than in 2023 ($19bn), the 2024 UK startup funding was comparable to pre-pandemic levels in 2019 and 2020 (c.$17.5bn) and 3.3x higher than a decade ago.
The report highlights that Artificial Intelligence (AI) startups continue to be a driving force in the UK accounting for 27% of all UK venture capital investments in 2024, the highest share to date. Additionally, UK-based VC firms raised over $11bn in dry powder in 2024, 59% more than in 2023, which is indicative of strong, long-term confidence in UK innovation businesses. The report also reveals that the combined enterprise value of UK tech has surpassed $1.2tn, with UK tech startups employing over 1.8m people.
Media Update
In the news this month, the FT reported that the UK will invest in a huge expansion of government-owned artificial intelligence computing capacity over five years including building a new supercomputer as it seeks to establish a globally competitive AI sector. The paper also reported that new research from market intelligence company Sightline Climate, global venture and growth equity investment in climate-related start-ups declined for a third successive year in 2024, to $30bn.
Meanwhile, London & Partners reported that AI venture capital investment in London has hit an all-time high, making up 32% of overall VC investment in the city, with London-headquartered AI startups raising a record $3.5B in VC in 2024. Finally, Tech Funding News provided a compilation article on which UK tech startups raised £100M + funding in 2024.
Several interesting reports were launched this month, Mercia Ventures launched its ‘Seven key projections for 2025’ focused on the implications of macroeconomics, geopolitics and scalability. The Entrepreneurs Network launched its ‘Gaining Altitude: Female Angel Investors Across the Regions’ which shines a spotlight on the critical role that female angel investors play in supporting female founders in every corner of the UK.
News
Financial Times:
UK Pledges Huge Increase in Computing Capacity to build AI Industry
Financial Times:
Resilience of Green Venture Finance put to the test
London and Partners:
AI Investments in London at an all-time high
BBC News:
DeepSeek: The Chinese AI app that has the World Talking
Mercia Asset Management:
7 predictions for 2025
Invest in Women Taskforce:
Diversity in Venture Capital: A Critical Conversation
Tech Funding News:
UK Tech Funding Resilience: Mega Deals of 2024
Sifted:
UK announces plans to create ‘Europe’s Silicon Valley’ in Oxford and Cambridge
