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UK venture capitalists saw slight dip in 2023

Compared to their US and European counterparts, UK VC funds continued to perform well this year

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A rocky market environment in 2023 meant UK venture capitalists saw their fund returns decline slightly over the past year.

While UK VCs continued to perform well compared to VCs in the US and Europe, top performing UK funds lagged behind leading US funds, according to research from the British Business Bank.

Analysing a sample of 130 UK funds, the report found that the pooled Total Value to Paid-In Capital (TVPI) fell by nine per cent from 2.18 to 1.98 — the decline indicating UK fund managers wrote down valuations as market conditions worsened.

“The continued good performance and financial returns of UK venture capital are promising, showing that long term returns are in line with other major markets such as the US and Europe, and performing well compared to other alternative asset classes,” British Business Bank director of economics Matt Adey said.

“While our survey results show a recent deterioration in exit opportunities and fundraising conditions over the last 12 months amid a challenging market environment over the next year.”

The report also found a deterioration in exit opportunities and fundraising conditions over the last year when it surveyed 58 UK fund managers.

Nearly two thirds (64 per cent) said conditions for raising new funds were ‘poor’ or ‘very poor’ — up from 29 per cent last year — and 79 per cent said the availability of successful exit opportunities was ‘poor’ or ‘very poor’.

This led to fewer deals, with 48 per cent saying their investment pace slowed because of economic conditions and 45 per cent saying they have been prioritising existing portfolio companies over new investments.

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