UK venture capital produces similar returns to that of US

Contrary to misperceptions, UK venture capital funds produce similar returns to those out of the US since 2002

Contrary to widespread misperceptions, UK venture capital funds have produced similar returns to those based in the US, according to research.

And between 2002-2006, UK VC funds actually outperformed US VC funds. If you invested a dollar in every UK VC fund pooled together over the five years, roughly speaking you would have got your money back plus one third compared with just breaking even with US VCs.

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Although more recent UK VC funds are still playing out, between 2007 and 2011 indicators are that UK funds are keeping up with their US counterparts. So far, UK fund returns are lagging behind US fund returns by 30pc.

Researcher Alice Hu Wagner of British Business Bank said: “The race is not quite run but UK VCs are still giving their US brethren a run for the money.

“The perception is that no one makes money from UK VCs compared to VCs out in Silicon Valley, but the reality is that UK VCs are something to be proud of. UK VCs compete with their American brothers.”

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The BBB’s Analysis of UK Venture Capital Financial Returns drew together data from existing sources such as Pitchbook and Prequin with the bank’s own intel.

Catherine Lewis La Torre, CEO of the bank’s British Patient Capital VC arm, said: “Taken over the period from 2002-2011, it is encouraging to see returns from UK VC come out ahead of those of the US – contrary to the received wisdom about those markets.”

The data will be used to support the BBB’s wider push for pension funds to allocate 5pc of their investments into UK VCs, which would have the effect of turbocharging British tech start-ups.

The bank published a separate pensions report last month pointing out that publicly available data on VC returns comes only from a handful of data sources, and that it can be spotty.

Lewis La Torre added: “Improving the quality of the data available to the market more generally is vital in helping the advisory community and investors to understand the value of the asset class.

European companies raised a record-breaking €10.6bn of venture capital during the first six months of 2019, an increase of 61pc year on year, according to Refinitiv.

Further reading on venture capital

How to pitch to a venture capitalist – a Growth Business guide


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