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New VCTA research finds scale-ups held back by growth funding gap

by | Nov 14, 2023

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The Venture Capital Trust Association (VCTA) today publishes a new report, featuring insights into the concerns, constraints and opportunities facing the UK’s most ambitious scale-ups.

The research – gathered from a survey of 119 fast-growing firms – highlights that scale-ups identify insufficient capital as the most significant barrier to growth, with over a third (36%) identifying it above all other factors.

Although the UK remains a top five global market for venture capital investment, recent research by Dealroom and HSBC Innovation Banking found that $4.9bn was invested in UK start-ups in Q3 2023 – a decline of more than 60% from the market peak in Q1 2022.


This challenging fundraising market for start-ups and scale-ups highlights the crucial role of the VCT scheme, and other similar initiatives, play in driving growth amongst the UK’s class of fast-growing businesses.

Venture Capital Trusts (VCTs) are evergreen funds that provide patient capital to growing companies. Alongside the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS), VCTs provide a steady stream of investment and support to early-stage companies that is less driven by market cycles. The latest figures from the VCTA show that VCT investment grew in 2022 to £664m from £613m in 2021, unlike the wider market downturn.

Despite identifying a lack of investment options as a potential barrier to growth, entrepreneurs remain overwhelmingly positive towards the UK as a location to build cutting edge, technology-enabled businesses, with close to three quarters (73%) identifying the UK as an attractive place to grow a company.


Despite the UK’s reputation as global tech hub, accessing talent remains an ongoing challenge for many companies, particularly those in highly technical sectors such as life sciences or deeptech. Close to two fifths (17%) of respondents identified a lack of tech talent as their biggest barrier to growth. It speaks to the ambitious mindset of company leaders that macro issues such as inflation (14%) and regulatory uncertainty (11%) were identified far less often as a significant barrier.

Will Fraser-Allen, Chair of the VCTA, commented:

“The vital role of VCTs in the investment ecosystem has never been clearer, and we are delighted to see that – despite the tough economic and investment climate – fast-growing scale-ups continue to back the UK as a place to grow, and there is substantial demand for the capital and talent required to drive further expansion.


“VCTs provide critical investment in dynamic growth companies, and we look forward to continuing this with the support of both the entrepreneurial community and government policy, which has continued to take positive steps towards extending the VCT scheme.”

Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said:

“It’s clear from this report that lack of funding and talent are real barriers to growth for the UK’s most promising companies. VCTs successfully help companies overcome these obstacles by providing essential scale-up capital and support which helps founders realise their aspirations. This is particularly important during economic downturns, when funding is even harder to come by, and VCTs may be the only source of capital.


“In challenging times, VCTs have continued to attract record levels of new capital to invest in promising young companies. The optimism of these ambitious companies about the UK’s position as a tech hub and a good place to do business bodes well for the future.”  

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