European asset owners dial up VC investments as UK market edges ahead
In the five years since the pandemic there have been 30 expressions of interest in venture capital amounting to around $11bn - mainly driven by a huge $8.8bn investment from the British Business Bank last summer (Chris Ratcliffe/Bloomberg)
Venture capital investments from European asset owners have risen steadily since the pandemic, with the UK pushing ahead given large commitments from the British Business Bank and venture investments made by pension funds, endowments and family offices.
Still, industry executives believe the the UK's venture ecosystem has some way to go before it can rival that of the US.
Up until December 31 2025, AOX sister title MandateWire tracked 30 expressions of interest* in venture capital amounting to around $11.1bn, mainly driven by a mammoth $8.8bn planned investment from the $34bn British Business Bank last summer, which has committed to back emerging fund managers in the UK.
It will invest $5.3bn through the bank's Industrial Strategy Growth Capital, focused on eight different economic sectors including manufacturing, clean energy and the creative industries, while the remaining $3.5bn will be allocated to entrepreneurs in need of capital backing.
By contrast, 2024 saw investors plan to plough around $938mn in ventures, with 21 expressions of interest, while in 2023 there were 15 expressions of interest worth a total of $536mn, and 12 planned investments worth $268mn in 2022.
Net inflows** into VC have also risen significantly in recent years, with 60 new mandates and asset reweightings tracked in 2025 (between January 1 and October 30) valued at $824mn. In 2024, $2.3bn in net inflows came from 38 awarded mandates and reweightings.
By comparison, 2023 saw 20 new mandates and asset reweightings worth just $320mn, and only around $94mn of net inflows were tracked in both 2021 and 2022.
UK pension funds and family offices outpace Europe in VC
Evidence suggests that UK VC investment is particularly strong. Alongside the large-scale commitment to local ventures and entrepreneurs from the British Business Bank, more than $4bn has been invested by UK defined contribution workplace schemes in VC, according to an October report from Pensions for Purpose, a UK-based organisation that bills itself as a "bridge" between pension funds, asset managers and their wider advisers.
This compares with $400mn in venture investments from pension funds in the Nordic countries — Denmark, Sweden, Finland, Norway and Iceland — and $200mn from France and the Benelux countries — Belgium, the Netherlands and Luxembourg.
Further UK investment in VC could be enabled by the Mansion House Accord, endorsed by 17 large workplace pension providers last May, which committed signatories to invest at least 10 per cent of their default DC fund arrangements in unlisted UK assets by 2030.
The Pensions for Purpose report states that initiatives such as the 2023 Mansion House Compact can "mobilise greater pension engagement with VC", but adds that schemes "must be empowered to evaluate risks, assess manager performance and understand the implications of different structures, such as single-fund commitments versus fund of funds".
It says that signatories of the accord have been "building private market capability through vehicles like long-term asset funds", while Sarah Hopkins, WTW's head of equity solutions, tells AOX sister title MandateWire that the industry commitments have paved "the way for more discussions with our defined contribution client base on private markets allocations".
Endowments are also finding ways to back VC investments, and are on the hunt for strategies that can generate consistent returns. Fabian Thehos, co-chief investment officer at the $50.4bn Wellcome Trust, tells MandateWire Analysis that it has "significant exposure to venture capital", but adds that this must be balanced with the "need to keep returning cash for the mission in every year, so there's a natural limit on how large a proportion of the portfolio it can be".
“[We] need to keep returning cash for the [endowment] mission in every year, so there’s a natural limit on how large a proportion of the portfolio [VC] can be”
For this reason, he says the Wellcome Trust looks out for VC funds that have "virtuous circles of creating successful businesses and [they are] repeatedly building on learning and networks".
Family offices engage in early-stage funding
UK and Irish family offices have also proven an important part of the UK's venture investor ecosystem, particularly for earlier-stage opportunities. In October the Fink Family Office made a seed investment in the Bristol-based biotech company EnsiliTech. It was the firm's second funding round, which saw $4.5mn committed in total.
That month the Irish multi-family office Elkstone Partners led a funding round for the software company Barespace in September, committing $3.3mn. Rick Kelley, the former managing director of Meta in Ireland (the firm's European headquarters) joined the funding round.
Indeed, according to the European Investment Fund's annual "Equity Survey" released at the end of last year, which polled more than 1,200 VC and private equity fund managers on industry trends, family offices and sources of private wealth are "the most important investor group in both start-up and growth [funds]".
Growing the UK VC ecosystem
According to the British Private Equity & Venture Capital Association, the UK remains the third-largest VC market in the world, behind the US and China, though the organisation and others have highlighted the challenges the market still faces that inhibit further growth.
Shaaf Alam, a solicitor at Burges Salmon who often advises clients in the VC space, wrote in a blogpost for the firm in June last year that while UK early-stage funding was "thriving", the country faced a challenge with later-stage funding rounds.
"In many cases, founders overly rely on overseas investors, particularly US investors, for the next stage of funding," he noted.
Meanwhile, in its half-yearly poll of more than 85 VC and private equity leaders undertaken in September, the BVCA found that most investors plan on keeping investment in UK private capital at the same level (51 per cent) over the next five years, but only a fifth (22 per cent) of investors plan to increase investment in UK private assets.
While 35 per cent described the UK as a "good" environment to build a nascent business, a greater proportion (41 per cent) described it as "fair", while only a small proportion (4 per cent) described the UK as "excellent".
More than half (56 per cent) of respondents thought the US had a more attractive investment environment than the UK, with nearly two-fifths (38 per cent) of investors flagging the need for a good regulatory environment when determining in which geographies to invest.
Measures such as the Mansion House Accord could lead to further uptake. In the foreword for Pensions for Purpose's report into European VC, UK chancellor Rachel Reeves wrote that through "unlocking" institutional capital and "backing more women-led and diverse businesses", the UK could deliver "more dynamic and more inclusive" growth.
Michael Moore, chief executive of the BVCA, said UK VC funds "today face a significant shortage of late-stage and follow-on funding, creating a scale-up gap".
"This shortage of capital has led to many UK companies to either rely on foreign investment or have them relocate overseas, taking intellectual property, quality jobs and innovation with them," he says. "Getting more pension investment in fast-growing businesses could be a game changer for the UK economy — providing additional finance for some of Britain's most innovative businesses across our most exciting sectors."
*Expressions of interest comprise manager searches, planned investments in individual new asset classes, and planned investments in individual existing asset classes recorded by MandateWire.
**Net inflows comprise total inflows from mandate awards, plus total inflows from assets reweighted to the asset class, minus outflows from asset reweights and terminated mandates.