Venture capital (VC) is vital to the health of the UK economy. It provides much-needed funding for the nation’s startups and early-stage companies, helping to boost innovation, employment and overall growth.
VC can also be an exciting investment opportunity – especially areas such as life sciences, IT and FinTech. In this article, our team at Bure Valley Group explore the state of venture capital in the UK in 2024, especially in light of recent economic developments and forecasts.
We hope these insights are helpful. If you’d like to make sure you’re taking the right steps to safeguard your financial future, please get in touch.
Latest Trends
Venture capital has experienced some ups and downs in the UK recently. Between 2018 and 2022, VC enjoyed steady growth, reaching almost £30bn.
In 2023 total funding fell, reaching nearly £16bn. However, the first half of 2024 has shown initial encouraging signs of recovery.
Large transactions in the artificial intelligence (AI) and fintech sectors contributed to a 5% year-on-year increase, reaching £5.7bn in the second quarter.
Firms in specific sectors have been particularly attractive to buyers, such as Software as a Service (SaaS), technology, media & telecommunications (TMT), AI and mobile.
Standout Deals
Some notable transactions have caught the media’s attention. Wayve – a pioneering in AI automated driving – made headlines with its $1bn Series C venture led by Softbank.
The British firm (founded in 2017) attracted contributions from investors such as NVIDIA and Microsoft. The venture is poised to help the company achieve its goal of soon developing and launching its “Embodied AI products” for production vehicles.
Another interesting case study is Abound; a new UK-based credit technology firm. In May 2024, reports emerged of a new funding round (up to £800 million) comprising a mix of equity and debt financing.
This follows a previous successful funding round of £500 million last year. Until May, the firm had issued over £300 million in loans and now aims to double the size of its workforce in 2024, from 65 to 130 people.
How is the Economy Affecting VC?
Venture capital tends to thrive during periods of economic growth. During such times, business and investor confidence is often higher.
Corporate earnings typically improve, and consumers are happier to spend money. Banks may be more willing to lend. Overall, there is a higher appetite for entrepreneurship and risk-taking.
The opposite also typically occurs. This partly explains why VC funding was down in 2023. That year, the economy grew by a mere 0.1%, and the UK ended the year in recession. Inflation and interest rates had skyrocketed, eroding household disposable incomes.
Things have been improving slightly in 2024. Inflation has fallen down to near the 2% target for the Bank of England (BoE). GDP growth figures have risen compared to 2023, and there have been more positive signs from household finances and business investment.
However, concerns remain about the UK economy and its potential impact on venture capital. Hopes have fallen regarding further BoE cuts to the base rate.
The possibility of tariffs arriving from the US (after Donal Trump takes office in January 2025) could apply downward pressure on current “modest” growth forecasts.
The new budget – i.e. the 2024 Autumn Statement – also leaves little fiscal headspace and keeps the UK’s debt ratio high, raising questions about the nation’s ability to respond adequately to possible future shocks.
The benefits of VC for investors
When an investor gets involved with venture capital, they enter a new sphere of investing that offers unique opportunities and experiences.
Innovation and invention are the drivers behind any successful economy. They also exert a powerful pull on our communal imagination.
Think of past breakthroughs such as the steam train, the telephone and the world wide web. Investors provided the funds to make these dreams happen.
Today, startups and innovative companies are pushing new frontiers to solve pressing issues. As a VC investor, you can be a part of this engine of economic growth and progress.
Venture capital becomes particularly valuable when a firm wants to commercialise its innovation (e.g. helping to forge the infrastructure needed to grow the business). Prior to that, angel investors play a crucial role in getting the startup off the ground.
Looking ahead for VC
Where might the VC “hotspots” lie in 2025? The UK continues to be a world leader in the financial sector and has a growing tech ecosystem. It seems reasonable to assume that these areas will remain attractive destinations for VC funding.
Other promising areas to note include fintech, biotechnology and artificial intelligence. To date, UK health tech startups have raised $2.3bn 2024, making it the fastest-growing sector for VC funding. Myricx Bio, ViceBio, and F2G have been praised for securing significant investments.
The UK is also leading the way in Europe on the femtech front. Flo raised $200 million in 2024 (the largest UK VC round of Q3). Its valuation now surpasses $1 billion.
Overall, despite questions about the economy, the UK remains a highly attractive destination for startup innovation and investment.
Want to speak to us about our early-stage opportunities here at our exclusive investor network? Get in touch today to explore our startup projects here at Bure Valley Group.
