Health drives UK VC investment in first quarter of 2025
UK health tech and life sciences startups raised $1.8bn in venture capital investment in Q1 2025, the sector’s second strongest quarter on record, according to new analysis from HSBC Innovation Banking UK and Dealroom.
Health was the UK’s most funded sector this quarter by a wide margin, attracting more than twice the investment of the next largest sector. Notably, half of the quarter’s megarounds came from health, led by Isomorphic Labs ($600m) and Verdiva Bio ($411m).
Nearly half of all VC investment in the sector went to AI-powered startups, underscoring the technology’s growing influence on healthcare innovation.
VC investment up on 2024
Overall, UK innovation businesses raised $4.2bn in Q1 2025, an 8% increase compared to the same period last year and the highest Q1 amount since 2022.
Most UK venture capital in Q1 was raised at breakout stage (Series B and C) with over $1.8bn, closely followed by $1.7bn at late stage. Megarounds showed signs of recovery this quarter, with over six recorded and the second-highest average deal size since 2020.
There is also evidence that UK startups are looking beyond equity to alternative sources of funding. Debt funding surged to $1bn in Q1 2025, rebounding sharply from H2 2024 levels and signalling renewed lender confidence.
UK remains Europe’s top tech ecosystem
The UK leads Europe in several key areas, including VC investment, the number of unicorns, and overall enterprise value. In Q1 2025, it raised more venture capital than France, Germany, and Spain combined and accounted for nearly one-third of all European VC investment between 2020 and 2024.
The UK has produced 185 unicorns, more than any other European country, including one new addition this year and has a strong pipeline of potential IPO candidates.
Growth outside of London dominated by Oxford and Cambridge
Within the UK, Cambridge and Oxford startups raised the most new venture capital outside of London in Q1 2025. Part of the ‘golden triangle’, Oxford and Cambridge remain a focal point for the UK’s tech sector as a driver for innovation and an incubator of UK tech firms.
Glasgow jumped into 4th place, driven by a number deals, including a $50 million Series A round for supply chain tech company BLK.
25 years of UK tech innovation
After 25 years, the UK stands out as Europe’s powerhouse and has established itself as a leading global tech hub. The UK’s Innovation Economy is now worth $1.2 trillion in enterprise value, has raised $204 billion in VC funding and has seen 2.5K+ VC backed exits.
Fintech leads all sectors, contributing $288bn (25%) of total enterprise value. Health follows in second place at $137bn (12%), while semiconductors rank third at $131bn (11%)
Simon Bumfrey, CEO, HSBC Innovation Banking UK said: “It’s exciting to see UK health tech firms thriving and attracting near-record investment, driven by AI innovations transforming the sector and unlocking exciting new possibilities. This comes as VC investment in UK innovation businesses has risen year on year, with notable megarounds and increasing breakout-stage funding strengthening the pipeline. This is a testament to the resilience of the innovation ecosystem, which has weathered an uncertain operating environment to continue attracting investment.
The UK remains Europe’s innovation powerhouse – driving revenue, producing more unicorns, and capturing a growing share of VC investment. With rising early stage investment, fast-growing sectors, and standout IPO candidates, we’re excited to see what the rest of the year holds for the UK innovation economy and remain focused on supporting firms to accelerate growth across the ecosystem.”