Venture capital funding way down on last year

Amounts raised by VCs in H1 2023 fall by nearly two thirds compared with same period in 2022

Venture capital has raised just £2.5 billion so far this year in new funding – down by nearly two thirds compared with the same period last year, according to VC database Pitchbook.

In 2022 VCs raised £6.8 billion throughout 2022. And that compared with £7.4 billion in 2021.

Meanwhile, the value of UK VC deals has fallen by almost 60 per cent compared with the first half of last year.

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In 2021, VC deal value rocketed to £27.7bn from £13.7bn in 2020. And in 2022 it edged even higher to £29bn. So far this year though, it has slumped to £7.9bn.

Broken out by sector, venture capital dealmaking in media and IT hardware has slowed the most since the second half of last year. Healthcare however continues to be robust.

Why this is important is that because without fresh investment, Britain’s vaunted ambition to become a science and technology superpower remains just words. Perfectly valid tech start-ups typically need two or three years of funding – or “runway” – before they can take off. Without that cash fuel, they are grounded.

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Commenting on the figures, one insider told The Times: “UK venture capital could do without this. We need it to be successful and we need new world class, well-funded businesses.”

One light at the end of the tunnel though is the Government’s plan to inject £75 billion of pension-fund capital into venture capital funding. In July 2023, Chancellor Jeremy Hunt announced a plan to unlock at least 5 per cent of assets from the nine largest UK pension funds to invest into private startups by 2030. Such an intervention “could be meaningful and timely,” say the report authors “but the impact is uncertain … uptake of such reforms is not certain, nor is the impact on the growth of UK companies”.

Further reading

Tech unicorns UK – complete guide to the billion-dollar clubThe UK is the go-to breeding ground for tech unicorns in Europe with 44 billion-dollar companies so far spanning fintech, e-commerce and artificial intelligence