The UK venture capital (VC) market continues to perform well compared to European and US counterparts, according to new research from the British Business Bank: UK Venture Capital Financial Returns 2025
UK VC funds from 2020-2023 generated a pooled total value to paid-in capital (TVPI) multiple of 1.22, outperforming the US at 1.14.
While 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 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, while 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.
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.
“It is encouraging to see signs that UK VC returns have stabilised over the past year and that valuations have increased,” said Matt Adey, chief economist at the British Business Bank. “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.”
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 period, 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.
The bank’s survey of 50 UK fund managers found that while 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 seems to indicate that investors recognise the strength of the UK innovation ecosystem.
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%).
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