Tougher investment outlook for UK start-ups following move to larger venture deals
New figures have revealed that a shift towards bigger transactions is creating a challenging environment for UK start-ups.
The latest KPMG Private Enterprise Venture Pulse report shows that the UK notched up a total of £4.1bn raised across 507 deals during the first quarter of 2025, securing four out of the top 10 global deals, including the biggest in Europe when London-based AI drug discovery Isomorphic Labs landed £453m.
This was also partly driven by strong investment in the health and biotech sector during Q1 2025, including London and San Francisco-based Verdiva Bio securing £309m and London-headquartered software platform and in-home healthcare provider Cera receiving £113m.
However, overall, the quarter recorded a fall when compared to Q4 2024 in both the overall level of investment (from £4.4bn to £4.1bn) and total volume of UK VC deals (from 569 to 507) – driven by investor confidence currently being aligned with more established, proven start-ups given uncertain market conditions and ongoing lack of exits.
Nicole Lowe, UK head of KPMG’s Emerging Giants practice, said: “In a financial climate that is currently fluctuating on a daily basis following the recent activation of tariffs across the globe, investors are backing companies that offer the fastest path to profitability.
“This has made it challenging for UK start-ups in IP-rich areas as these are longer-term investment areas, which, while not favourable at this moment, could actually provide excellent opportunities in the coming weeks, months and years.
“This switch could indicate we are at risk of missing out on important investment in these sectors, which are key to driving long-term economic growth and supporting our future workforce, and therefore should ensure we all be doing as much as we can to make these investments as attractive as possible.”
The sentiment echoed the conclusions of a powerful panel discussion at TheBusinessDesk’s Rainmakers conference in Manchester last month, highlighting the UK tech ecosystem’s potential.
Chaired by TheBusinessDesk.com’s Anna Cooper, it addressed the funding landscape’s current disparities, and with only 15% of UK angel investors being women – compared to 46.7% in the US – there’s significant room for improvement.
Helen Oldham, from angel investment group Lifted Ventures, highlighted this gap, actively encouraging professional women to consider angel investing, with investment tickets starting as low as £2,000. AI emerged as a transformative force, with experts suggesting it’s not just about technological prowess but deep domain expertise.
The panel unanimously agreed that the start-up ecosystem requires more than just financial investment. Steve Purdham, who built one of the UK’s first tech unicorns SurfControl, stressed the importance of investing in people, technology, and opportunities, rather than getting bogged down in restrictive term sheets.
