Growth Capital Update: Q4 2025
Private equity stalls as public markets strengthen
216
deals completed
+12%
number of deals
£1.154 billion
growth capital raised
Our view of the market
2025 was not a stellar year for the UK’s growth capital market, despite small signs of improvement in the UK economy, Bank of England rate cuts bettering the environment for leveraged transactions and significant amounts of available private equity dry powder. Geopolitical and market uncertainty ruled and many investors remained cautious, opting to make fewer, but bigger, bets on more established UK companies.
Our research into UK private companies raising between £1 million and £20 million of growth equity capital each found that, in 2025, 825 UK businesses raised a total of £4.23 billion. This is a 20% year-on-year decline in the number of transactions completing and a 14% fall in the amount of funds raised, compared with the 1,030 deals raising £4.92 billion in aggregate in 2024.
However, the Q4 picture is brighter, since 216 UK businesses raised a total of £1.154 billion in that period. This is a significant 12% increase in the number of deals completing and a 15% increase in the overall amount of growth capital being raised, compared with Q3’s 193 deals raising £1.0 billion. The average deal size in Q4 was £5.34 million, which is the highest value in the last eight years.
Regarding the types of deals that were most common in 2025, later-stage VC retained the top spot it had held for the previous four years. It accounted for 40% of all deals completed and 46% of total funds invested last year. Companies with a proven track record were more attractive to investors in 2025 than early-stage businesses. This may help explain the higher-than-usual deal sizes throughout most of the year, since later-stage businesses tend to raise larger amounts.
Annual number of deals and aggregate funds raised
Q4 2025 deal volume and value by deal type
2025 deal volume by type
Technology sector
Technology was the most popular sector for investors every quarter last year (as for the previous four years), accounting for 43% of all transactions by volume and 44% by value in Q4 2025. Despite an overall contraction in the UK growth capital market, technology investments are capturing a growing proportion of deployed capital, indicating a relative reallocation of investor focus rather than a broad-based retreat from risk.
This shift is mirrored in the M&A landscape, where transaction volumes involving technology businesses increased throughout 2025, even as acquisition activity in other sectors softened. The divergence suggests both cyclical and structural drivers: near-term concerns around trade tariffs appear to weigh more heavily on product-led sectors, while service-based technology companies are viewed as more resilient. At the same time, sustained investor interest reflects the structural growth opportunities arising from disruptive technologies, particularly AI, which continue to support valuation and deal momentum for new and scaling businesses.
Notable tech sector deals
London-based HRtech start-up Jack & Jill, which creates AI agents for recruitment, announced in October that it had raised $20 million, in a seed round led by Creandum, to expand into the US. The company, which was only established in 2025, has created two conversational AI systems: Jack, which interacts with job seekers to understand their skills, experience and career objectives; and Jill, which engages with hiring teams to capture the requirements of open roles and identify suitable candidates.
Q4 2025 deal volume and value by sector
In December, BGF invested £16.6 million in Reading-based CRM platform business Workbooks to further scale its mid-market SaaS platform, support its product development and expand its presence in the US.
“As conditions stabilise in 2026, growth capital will increasingly reward discipline, durability and demonstrable paths to value.”
John Cowie, Head of Growth Capital, Moore Kingston Smith
Trending: Financial services
More than three times as many financial services deals completed in Q4 as in Q3, indicating that investors are beginning to look again at this sector, after a period of it being generally out of favour.
Investors are attracted to UK financial services businesses due to their predictable, recurring revenues, defensive characteristics and suitability for leveraged value creation. The sector’s fragmentation and regulatory complexity create consolidation opportunities, allowing PE-backed platforms to scale efficiently through acquisitions and operational improvement. Ongoing digital transformation and multiple exit routes further enhance the sector’s appeal within PE investment strategies.
Notable financial services deals
In October, London-based insurance technology platform Instanda announced it had raised $20 million in a funding round led by Frankfurt-based fintech specialist VC CommerzVentures. The funding will be used to accelerate Instanda’s international expansion and support strategic acquisitions.
Also in October, UK fintech start-up Clove announced it was launching with $14 million in pre-seed funding led by Accel. Clove, which is a new challenger in the personal finance and wealth management arena, aims to reshape the economics of financial advice by pairing human expertise with AI efficiency. Clove will use the funding to continue building its team and platform with a view to a full launch in 2026, subject to receiving FCA authorisation.
Active investors
Portfolio Ventures and Mercia Ventures tied for first place in our most active investor table in Q4, with the completion of six transactions each.
Portfolio Ventures has not featured in our league table before. It is an early-stage investor with an angel fund. It tends to co-invest alongside other VCs, rather than lead £1 million+ rounds itself. In Q4, its investments included:
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- participating in the $15 million funding round, led by Kennet Partners, for tax automation platform Yonda Tax.
- participating in a £3.5 million funding round for UK fintech Bourn.
- participating in a $4 million seed funding round, led by MTech Capital, in London based start-up Curvestone AI, which provides a workflow automation platform that maintains consistent accuracy throughout entire document-heavy and compliance workflows.
Mercia Venture’s Q4 investments included:
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- investing £3 million in its existing portfolio company, Leeds-based Uniphy, which develops smart-surface technology, enabling integrated user interfaces to be built into 3D plastic or glass panels.
- investing £2.5 million to back the MBO of Paul Mathew Transport, a logistics company that specialises in the transport of theatre sets and equipment.
- investing £1.9 million in eco-friendly cleaning brand OceanSaver.
Q4 2025 top investors
Outlook
2025 was a disappointing year in terms of the number of growth capital deals that completed. While average deal values increased, persistent valuation gaps, extended holding periods and fewer exit options made for a challenging environment for deal-doers. The year confirmed a pronounced flight to quality, with premium assets commanding strong valuations. Meanwhile, other businesses had to rely on more innovative structuring to get deals done, such as the use of ratchets and other performance-related conditions, creating further complexity in negotiations and deal timelines.
Although there were modest signs of economic improvement, they fell short of delivering the market uplift anticipated at the start of the year. Against this backdrop, growth capital investors have increasingly shifted away from a ‘growth at all costs’ approach, placing greater emphasis on sustainable business models.
“Investment is being directed towards companies with robust unit economics, strong margins and clearly defined paths to profitability. This reflects a broader pattern of disciplined capital deployment amid ongoing macroeconomic volatility.”
John Cowie, Head of Growth Capital, Moore Kingston Smith
The outlook for 2026 is unclear but we remain hopeful of an improving environment for would-be seekers of growth capital. The UK’s economic outlook is currently characterised by cautious optimism for modest short-term growth. Inflation is predicted to keep falling and economists expect the Bank of England to announce further rate cuts in the coming months, which will help leveraged transactions. There is still plenty of growth capital funding available for well-positioned UK businesses, particularly within the technology sector.
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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.
