UK venture capital: returns stabilise, recent vintages edge the US - British Business Bank

The British Business Bank’s UK Venture Capital Financial Returns 2025 report shows a steadying UK VC market with modest improvements in valuations and broadly competitive performance versus the US and Rest of Europe.

Recent fund performance (2020–2023)

• UK VC funds launched since 2020 posted a pooled TVPI of 1.22, ahead of the US at 1.14. This suggests greater resilience in recent UK vintages during a challenging exit environment.

Longer-term performance (2002–2020)

• UK funds recorded a pooled TVPI of 1.84, slightly behind the US (1.95) and broadly in line with the Rest of Europe (1.85). Realised returns (DPI) for the UK were 0.69, below the US (0.99) and comparable to Europe (0.70), with the caveat that UK funds are younger on average, giving them less time to exit and distribute capital.

Stabilisation over the past year

• Among 149 UK funds reporting in both 2024 and 2025, pooled TVPI held at 1.51 versus 1.52 last year, indicating stabilisation after prior write‑downs. Company‑level median deal valuations rose 5% year‑on‑year to Q1 2025, pointing to firmer pricing and competition returning.

Distribution of fund outcomes

• 52% of UK funds have TVPI between 1 and 2, similar to the US (48%) and Rest of Europe (51%). At the top end, 8% of UK funds reached TVPI ≥3 versus 13% in the US and 14% in Europe, indicating fewer outliers at very high multiples in the UK.

Comparisons across private markets

• Across 2002–2020 vintages, UK Private Equity and VC had the highest median TVPIs at 1.74 and 1.48 respectively, ahead of infrastructure (1.30), private debt (1.24) and real estate (1.21). VC showed greater dispersion, with an upper quartile TVPI of 2.15, the highest among asset classes, reflecting higher risk and upside.

Exits and sentiment

• Exit conditions remain difficult, but 68% of UK GPs expect improvement over the next year. 79% rate UK investment opportunity quality as good or very good, a meaningful uptick from last year.

Sector appetite

• Fund managers see the strongest interest in digital and technologies (85%), followed by financial services (64%) and life sciences (47%), consistent with the UK’s Industrial Strategy focus areas.

Enterprise Capital Funds (ECF) programme

• ECF-backed funds outperformed the UK market on realised returns across 2006–2023 vintages, with pooled DPI at 0.62 versus 0.48 for the wider market. Upper quartile DPI was 1.15 compared to 0.80, indicating stronger top‑quartile distributions. For venture and growth funds in 2018–2023, pooled DPI was 0.09, broadly in line with the wider market at 0.08.

UK VC has stabilised with improving valuations and competitive recent‑vintage performance versus the US. While long‑term realised returns still trail the US, they are comparable to the Rest of Europe and may benefit as funds mature and exits resume. Dispersion remains high in VC, so manager selection and vintage timing are important. Sector momentum is strongest in digital/tech, with supportive sentiment from UK GPs despite a still‑challenging exit backdrop.

Read the full report here: https://www.british-business-bank.co.uk/about/research-and-publications/uk-venture-capital-financial-returns-2025

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