The British Business Bank has published a report on venture capital activity in the UK. The research states that the performance of UK VC funds declined slightly during the 2023/24 period, matching the US and the rest of Europe. While conditions are said to be “challenging,” the report does share that VC returns have been higher for older vintages when compared to Europe and the US.
To quote the report:
“… for 2002-2019 vintages, UK VC funds generated a pooled TVPI [Total Value to Paid-In Capital] multiple of 1.87, compared to 2.01 for US funds and 1.96 for funds in the rest of Europe.
Looking at specific vintage year cohorts, UK funds outperformed other markets during the vintage period after the dot-com bubble. UK funds established across the 2002-2007 vintage period outperformed both the US and the rest of Europe on both DPI and TVPI measures. For more recent 2014-2022 vintages, while portfolio valuations are continuing to be marked down amid more challenging market conditions, the UK’s pooled return (1.64) is in line with the US (1.63) but below the rest of Europe (1.76).”
The report states that 139 UK funds that reported the latest returns data in both 2023 and 2024 indicate a lack of exit opportunities. The aggregate TVPI dropped from 1.73 to 1.61 in 2024.
Continental Europe funds are said to have declined from 1.87 to 1.75, and those in the US saw a pooled TVPI multiple drops from 1.82 to 1.66.
Christine Hockley, Managing Director of Funds at British Patient Capital, shared the following comment on the report:
“Despite managers reporting a challenging fundraising environment over the last year, there is clear cause for optimism with initial indications that exit conditions and valuations are improving. Overall, UK funds are keeping pace with the US and the reward of long-term capital is clear. In fact, despite perceptions, UK funds established after the dot-com crisis have delivered higher pooled DPI returns than both the US and rest of Europe. From a sector perspective, the research shows that life sciences funds have outperformed others when measuring realised returns, which is significant considering this is a sector often requiring extensive upfront R&D before commercializing.”
“The fact that British Patient Capital-backed funds have delivered higher median returns than the market on both DPI and TVPI measures shows we are delivering on our mission to enable long-term investment in innovative companies with the potential to become the UK’s next success stories.”
One would assume that the Labour government is reviewing this report, as some of their policies may exacerbate the challenges facing risk capital and venture funding which is needed to drive an innovation economy.
