Growth Capital Update: Q2 2026
Investors target fewer deals but deploy larger amounts in response to uncertain market conditions
200
deals completed
£6.30 million
average deal size, the highest recorded
£1.261 billion
growth capital raised
Our view of the market
After a strong start to 2026, we are not surprised to report a slowdown in growth capital investment activity in the UK in Q2. Investor sentiment in the second quarter was undoubtedly affected by the outbreak of conflict in the Middle East and concerns over its potential impact on both the global and UK economies. While uncertainty persists in the region, the outlook for the market remains difficult to predict. According to our research into UK private companies raising between £1 million and £20 million of growth equity capital each, 200 UK businesses raised a total of £1.261 billion in the second quarter of the year. The average deal size was £6.30 million.
Our Q2 figures reveal a 23% decrease in the number of deals completed compared with the 259 deals we recorded in Q1. However, the aggregate amount of growth capital raised in Q2 was only 2% lower than in Q1, meaning that the average deal size rose considerably, from £4.94 million last quarter to £6.30 million in Q2. This represents a 28% increase in average deal size and is the highest figure that we have ever recorded. The number of active investors may have declined in Q2, but those still in the market invested significantly much larger amounts.
Later-stage VC deals were the most common in Q2 2026, accounting for 40% of all deals completed, and 47% of total funds invested. Companies with a proven track record, seeking larger funding rounds, continue to have the edge over early-stage businesses, helping to explain the increase in average deal size that we are seeing.
Quarterly number of deals and average deal size
Q2 2026 deal volume and value by deal type
Technology sector
The technology sector remained the top choice for investors, representing 42% of all transactions by volume and 44% by value in Q2.
UK technology businesses continue to attract strong interest from growth capital investors due to their combination of innovation, scalable business models and access to deep pools of technical talent. Many operate in high-growth areas such as AI, cybersecurity, software and data analytics, where demand is being driven by long-term structural trends rather than short-term economic cycles. The UK also benefits from a well-established technology ecosystem, supported by leading universities, entrepreneurial founders and a mature investment landscape, creating a strong pipeline of businesses with the potential to scale.
In addition, UK technology companies often offer attractive valuations compared with comparable businesses in the US, providing investors with the opportunity to back high-quality assets at more compelling entry points. For growth capital investors, these businesses provide the opportunity to support expansion through investment in product development, international growth and strategic acquisitions, while benefiting from the reduced execution risk associated with more established companies with proven technology and market traction.
Notable tech sector deals
In June, Gigaton, formerly known as Carbon Re, announced it had raised $26 million in Series A funding led by Plural. Gigaton is an AI company focused on replacing manually operated control software systems used in energy-intensive industries. This funding will support an increase in headcount, and expansion into steel, glass, and chemicals, enabling the company’s mission to strengthen industrial controls and reduce emissions on a gigaton scale.
Also in June, Gradient Labs, which builds specialist AI agents for financial institutions, announced it had raised $26 million in Series A funding, led by Octopus Ventures and CommerzVentures. The funding will help Gradient Labs build the foundation for autonomous banking, with the aim of improving the experience of both bank operators and their customers.
Q2 2026 deal volume and value by sector
Nick Thompson, Corporate Finance Partner.
Trending: B2B
The B2B sector was the third most popular with investors in Q2 2026, having been in fourth place last quarter. B2B deals accounted for 16% of all transactions by volume, and 15% by value in Q2. Although total growth capital deal volumes declined in Q2 compared with the previous quarter, B2B businesses represented a larger share of completed investments. This reflects a more selective investment environment, with investors prioritising companies that offer revenue visibility, scalable business models and strong customer retention. B2B businesses continue to benefit from these characteristics, as well as from long-term trends such as digital transformation, automation and the adoption of data-driven solutions, making them increasingly attractive targets for growth capital.
“B2B businesses remain a key focus for growth investors, with scalable models, predictable revenue streams and strong customer relationships providing an attractive foundation for long-term growth.”
John Cowie, Head of Growth Capital.
Notable B2B deals
In June, commercial electric vehicle manufacturer, Superlight, announced it had raised $21 million in an oversubscribed Series A funding round led by Engine Ventures and 2150. The new capital will be used to complete Superlight’s UK manufacturing facility, fulfil initial sales in the UK and the EU and prepare vehicles for US market entry.
Also in June, NewOrbit Space announced it had raised $18.5 million in a Series A round led by Voyager Ventures to build and launch a new type of satellite, capable of operating in very low Earth orbit (VLEO), which until now has been seen as too challenging for conventional satellites. NewOrbit’s CEO, Anatoli Papulov, commented: “For sixty years VLEO has been treated as too hostile for commercial satellites. It is in fact the most valuable empty real estate in space.”*
*Source: NewOrbit’s press release
Active investors
Mercia Ventures achieved first place in our most active investor table in Q2, with the completion of nine transactions in the quarter. Future Planet Capital and PXN Ventures, neither of which have featured highly in our league table before, were in joint second place, with six transactions each.
Mercia’s investments in Q2 included:
- participating in the $26 million funding round for Fifth Dimension, a London-based company developing an AI-powered decision intelligence platform for real assets.
- investing in a £7 million follow-on funding round for its existing portfolio company, StudentCrowd, based in Wolverhampton, which aims to help students make more confident decisions about where to study and live.
- participating in a £7.5 million follow-on funding round for its portfolio company, Warwick Acoustics, a spin-out from the University of Warwick, which produces electrostatic sound systems for the automotive industry.
- leading a £3.7 million funding round for Go Swag, a corporate gifting company which enables global brands to deliver premium, on-brand gifts worldwide.
Future Planet Capital’s Q2 investments included:
- participating in a £5.4 million seed funding round into Spaceflux, a space situational awareness specialist, whose ground-based optical sensors track satellites and debris across all orbits.
- investing in a £1.5 million seed round into Houdini Bio, a spin-out from the University of Cambridge, which develops software that redesigns therapeutic DNA to help it evade the body’s natural defence mechanisms.
- participating in a £5 million fundraising for Stockport-based Silveray, which specialises in flexible, ultra-thin X-ray film that could make medical imaging sharper, less rigid and more comfortable for patients.
PXN’s investments in Q2 included:
- leading a £12 million funding round for Aveni, an AI fintech specialist.
- leading a £5 million seed round into Manchester-based biotech form Imperagen, which has developed an AI-driven enzyme engineering platform.
- investing £1.4 million of seed funding into VASO Global, a construction company which has developed innovative technology to build homes from recycled glass panels.
Q2 2026 top investors
Outlook
After a strong start to the year, growth capital investment slowed in Q2 as uncertainty surrounding the conflict in the Middle East caused many investors to take a more cautious approach. While fewer deals completed during the quarter, overall funding levels remained relatively robust, reflecting continued demand for high-quality businesses with strong growth prospects. The significant increase in average deal size also highlights investors’ willingness to commit significant capital where they have strong conviction in both a business and its management team.
Looking ahead, the outlook for the second half of 2026 is difficult to predict. A clear end to the conflict in the Middle East would help improve investor confidence. However, while uncertainty remains over the fragility of the truce, and economic conditions remain mixed, then financing conditions will continue to present challenges for some transactions.
Investors are likely to stay disciplined in their approach and there is still significant capital waiting to be invested. We would hope that activity will pick up during the second half of the year, particularly for businesses with scalable models, strong recurring revenues and exposure to long-term growth trends such as AI, software, healthcare and specialist B2B services. As has been the case throughout 2026, businesses that can demonstrate resilience, clear growth opportunities and a compelling investment case are likely to remain in the strongest position to attract growth capital.
“The story in Q2 wasn’t a lack of capital – it was greater selectivity. Investors remain keen to back ambitious businesses with strong fundamentals, and we expect confidence to build further if market conditions stabilise.”
John Cowie, Head of Growth Capital.
Contact us
If you’re an ambitious entrepreneurial business with revenues of at least £1 million and are looking to scale, get in touch for an initial discussion. We can work together to assess the best action and then assist with finding the right partner for you. Contact us to find out more about our raising finance and growth capital services. We also assist investors and are experts at providing advice throughout the acquisition or investment process. Our team can help identify and evaluate potential opportunities and run the financial and tax due diligence process, allowing you to make decisions quickly and confidently.
Methodology
Moore Kingston Smith has analysed transactions by UK-based companies that involve the issue of less than 50% of equity share capital to third parties and funds raised of between £1 million and £20 million. Accordingly, these numbers do not include senior debt and mezzanine debt fund raisings and smaller fund raisings by companies and start-up funding unless more than £1 million is raised. Start-up funding is generally significantly less than this amount.
The research aims to capture all transactions by UK companies that fall within the criteria. Inevitably there will be transactions that have taken place but have not been captured. The research is based on data extracted from Pitchbook.
