UK VC funds launched since 2020 outperform US
UK venture capital market continues to perform well as UK funds launched after 2020 outperform US funds, and earlier vintages performed in line with the Rest of Europe
New research from the British Business Bank, UK Venture Capital Financial Returns 2025, finds that the UK venture capital (VC) market continues to perform well compared to European and US counterparts. UK VC funds with 2020-2023 vintages generated a pooled Total Value to Paid-in Capital (TVPI) multiple of 1.22, outperforming the US at 1.14. Whilst historically US VC returns were perceived by many commentators to be substantially higher than UK funds, this research indicates the UK market has been more resilient than its counterparts for funds launched since 2020.
UK VC funds across the earlier 2002-2020 vintage period also performed well compared with the Rest of Europe but were behind the US, though the gap has narrowed compared to last year. UK funds generated a pooled TVPI multiple of 1.84, compared to 1.95 for US funds and 1.85 for funds across the rest of Europe. When focusing on realised returns, the UK’s pooled Distributions to Paid-In Capital (DPI) of 0.69, whilst lower than the US (0.99), is in line with the rest of Europe (0.70), though UK funds are younger on average meaning they have had less time to achieve exits and return capital to investors.
Returns of UK funds stabilised over the past year and company level valuations increased
To assess changes in fund performance over the past year, the report also analysed a sample of 149 UK funds that reported performance data in both 2024 and 2025, covering data up to March 2025. The UK’s pooled TVPI value for this sample of 1.51 remained in line with last year’s figure (1.52). After a decline in the pooled TVPI of 7% in the Bank’s 2024 UK VC Financial Returns report and 9% in the 2023 report, this latest data indicates that UK fund managers are no longer writing down portfolio valuations to the same extent and implies a recovery in deal valuations over the past year.
After a steady decline since the market downturn in 2022, this year’s report also found that the median valuation for UK company level VC deals increased by 5% in the year to 2025 Q1, indicating a recovery in the level of competition in the market.
Matt Adey, chief economist at the British Business Bank said: “It is encouraging to see signs that UK VC returns have stabilised over the past year and that valuations have increased. Despite the challenging environment, recent UK funds have been fairly resilient, outperforming recent US funds, whilst long term performance has been in line with the Rest of Europe.
“Our survey data shows that exit conditions are gradually improving, and over three quarters of General Partners see the quality of the UK market as good or very good, representing a significant improvement on last year’s survey.”
The UK has a similar proportion of funds as the US and Rest of Europe reporting positive returns
This year’s report found that 52% of UK funds have a TVPI of between one and two, compared with 48% of US funds and 51% of funds in the rest of Europe, demonstrating that the UK has a similar proportion of funds that are achieving a good return for investors.
Looking at the highest performing funds however, just 8% of UK funds reported a TVPI of three or more, compared with 13% for the US and 14% for the rest of Europe, revealing that top performing UK funds lag behind top performing US and Rest of Europe funds.
Private Equity and VC outperform infrastructure, private debt and real estate and the top performing venture funds can generate higher gains than any other asset class
The report also provides data on the returns of UK VC compared to other alternative asset classes. UK Private Equity and VC funds demonstrated the strongest performance across the 2002-2020 vintage years, with median TVPIs of 1.74 and 1.48 respectively. Infrastructure has been the third best performer with a median TVPI of 1.30, followed by private debt (1.24) and real estate (1.21).
For VC in particular, financial returns are more variable given the greater risk involved in investing in high-growth companies. However, strong performing funds can achieve significantly higher returns than in other asset classes. For example, the upper quartile TVPI multiple for VC across this period was 2.15, higher than any other asset class.
Exit conditions remain challenging but market participants expect conditions to improve
The Bank’s survey of 50 UK fund managers found that whilst the exit environment remains challenging, over two thirds (68%) of General Partners (GPs) expect conditions to improve over the next year. Over three quarters (79%) of GPs also see the quality of investment opportunities in the UK market as good or very good. This represents a significant improvement on last year’s survey and indicates that investors recognise the strength of the UK innovation ecosystem.
Fund managers see opportunities across the eight Industrial Strategy sectors
Looking specifically at the eight growth-driving sectors in the UK’s modern Industrial Strategy, the survey found that digital and technologies was the sector with the strongest investment appetite, with 85% of GPs considering investing in the sector, followed by financial services (64%) and life sciences (47%).
British Business Bank’s ECF programme continues to perform well
The Bank’s Enterprise Capital Funds (ECF) programme has outperformed the UK market across the 2006-2023 vintage period, as ECF-supported funds produced a pooled DPI multiple of 0.62 compared to 0.48 for wider market funds. The upper quartile DPI of 1.15 is also higher than the market benchmark (0.80) and shows that that the top 25% of funds are delivering positive realised returns.
For venture and growth funds across the 2018-2023 vintage period, the Bank’s portfolio has generated a pooled DPI multiple of 0.09, which is in line with the pooled return generated by funds in the wider UK VC market (0.08).