This year, the Venture Capital Trust (VCT) scheme is celebrating its 30th birthday. Over the past three decades, VCTs have played a crucial role in supporting high-growth businesses, fostering innovation and driving economic growth across the UK.
From their inception, they’ve offered investors a unique blend of tax advantages and access to early-stage businesses with high growth potential. As we celebrate this milestone, what role will VCTs play in fostering the next generation of groundbreaking UK businesses?
To discuss these questions, a media roundtable was hosted today by the Association of Investment Companies (AIC) featuring James Hendry, Investment Director of Gresham House Ventures which manages the Baronsmead VCTs, Peter Dines, Managing Director of Mercia Ventures which manages the Northern VCTs, and Robert Whitby-Smith, Partner of Albion Capital which manages the Albion VCTs. Their comments are collated below together with remarks from other VCT managers and industry leaders.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said:
“VCTs are celebrating 30 years of supporting the UK’s most ambitious smaller companies. They have generated thousands of jobs and boosted economic growth across innovative sectors like tech and healthcare. Uniting capital from private investors with the expertise to find and develop cutting-edge businesses has helped VCTs become a great British success story. A number of companies that are household names have been backed by VCTs.
“VCTs have provided British private investors with a tax-efficient way to support the country’s entrepreneurs and fast-growing businesses. From small beginnings 30 years ago, there are now 45 VCTs managing £6.3 billion of assets.”
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said:
“Over the last three decades, VCTs have become a fundamental pillar of the UK’s innovation economy, consistently delivering capital to the most ambitious, high-growth businesses that drive productivity, job creation and technological progress.
“Traditionally, it has been difficult for retail investors to gain access to those investments and VCTs have offered a unique route to backing a portfolio of these high-growth companies, alongside the opportunity to invest in portfolios of AIM-listed companies.
“VCTs provide exposure to sectors in which the UK has become a world leader, such as fintech, life sciences and AI. These emerging sectors can be built into a diversified offering for investors, making them an attractive proposition. By combining tax-efficient investment with exposure to dynamic, high-growth businesses, VCTs have continued to attract strong investor support, reinforcing their position as a mainstream investment option.”
James Hendry, Investment Director of Gresham House Ventures, which manages the Baronsmead VCTs, said:
“VCTs have been highly successful in the UK for a number of reasons, notably the attractive tax incentives to encourage investment in growth businesses. They have also delivered strong long-term returns for investors, driven by investments in high-growth sectors such as technology, healthcare, fintech and consumer. Despite some rule changes, the UK government has maintained a supportive stance towards VCTs, ensuring their continued attractiveness to investors.
“VCTs have evolved to navigate economic downturns, regulatory changes and shifting investment trends, ensuring continued relevance in the market. Over time, financial advisers and wealth managers have increasingly recommended VCTs as a tax-efficient investment strategy, expanding their popularity.”
Richard Court, Head of VCTs and EIS at Octopus Investments, said:
“Since their introduction in 1995, VCTs have acted as a great source of investment into Britain’s exciting, entrepreneurial businesses. VCTs offer much needed patient capital and provide specialist support for businesses looking to grow. At the same time, VCTs have given investors the opportunity to share in the success of these companies.
“Today VCTs have grown to become a mainstay in individuals’ financial planning. VCTs offer a valuable way to invest tax-efficiently for the future and help diversify an investor’s portfolio. Most recently, in 2024, the government extended the legislation that governs VCTs to continue running until at least 2035, a testament to VCTs’ positive impact on the UK’s smaller businesses and their broader economic performance.”
Rupert West, Fund Manager of Puma VCT 13, said:
“Over the past three decades, VCTs have played a crucial role in bridging the funding gap for growing companies, enabling them to scale and thrive. This has helped develop VCT managers who really care about the companies they back and bring multi-decade investor experience to help support UK scale-ups.”
What types of companies are you investing in and why?
Robert Whitby-Smith, Partner of Albion Capital, which manages the Albion VCTs, said:
“Our investment approach is to identify where technological innovation can address key challenges facing the world and redefine the future. We therefore target opportunities within software, healthcare and deep tech, as we believe these offer the greatest return potential for all our stakeholders.
“We focus on companies offering mission critical software to businesses (rather than consumers), tackling long-term structural challenges and which operate in big markets with potential to scale globally. All this makes them less sensitive to economic tides. Underpinning everything is the need for us to identify true visionary founders with domain expertise and bold ambitions because, while we invest in companies, it is the people who lead them that can determine that business’s success.”
David Hall, Executive Chairman of the British Smaller Companies VCTs, said:
“The nature of VCT investments has evolved significantly. Our very first investment was in a coffee wholesaler; today, we focus on enterprise software with global reach – spanning data analytics, cybersecurity, and advanced machine learning (AI).
“Rather than investing in AI as a standalone category, we see it as an essential element embedded within most of our investments. AI is no longer a niche sector – it underpins innovation across industries. That said, perhaps not in coffee drinking… yet!”
Peter Dines, Managing Director of Mercia Ventures, which manages the Northern VCTs, said:
“Despite economic uncertainty, the Northern VCTs remain focused on investing in high-potential businesses with strong fundamentals, innovative propositions and scalable models. Our approach spans multiple sectors, with software and AI presenting significant opportunities as demand accelerates. Health and life sciences remain a priority, driven by an ageing population, increasing healthcare needs and advances in medical technology. We continue to back consumer-facing businesses that demonstrate resilience and strong customer engagement, particularly those with digital-first or subscription-based models. The UK’s rich research base also makes deep tech a key focus, supporting companies commercialising breakthroughs in clean energy and advanced materials.
“Market challenges persist, but we continue to see outstanding businesses emerge. With a long-term investment approach, we back ambitious management teams and provide the capital needed to scale high-growth ventures.”
Ken Wotton, Co-Manager of the Baronsmead VCTs, said:
“The Baronsmead VCTs invest in a mix of private and AIM-listed UK companies, focusing on businesses with strong management teams, scalable business models and high growth potential.
“This typically leads us to technology led companies such as software, data, marketplaces, high skilled consulting/services, with innovative digital solutions and recurring revenue models. For instance, business services companies offering essential services to other companies; healthcare and life sciences firms developing medical technologies, healthcare services and pharmaceuticals; consumer businesses with high-growth brands in retail, e-commerce, and lifestyle sectors; and fintech and other financial sector companies with disruptive business models.
“We invest in these businesses for their long-term growth potential given that the businesses we identify have strong market positions and multiple growth opportunities. We also look for strong management teams with a track record of delivering growth to unlock this potential.”
What’s the current appetite for VCT investment?
Rupert West, Fund Manager of Puma VCT 13, said:
“We’re unbelievably proud of the support we get from our investor base, who have helped us towards several strong fundraises over recent years. Puma VCT 13 is a top performing VCT over five years on a total return basis and we have also delivered dividends underpinned by real gains even during periods of economic uncertainty. As we approach tax year end, current fundraising for Puma VCT 13 is equally positive with less than 50% capacity remaining having raised over £25 million to date.”
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said:
“Despite market volatility, investor confidence in VCTs remains strong. VCTs raised £882 million last year, marking the third-highest total on record and a clear indication that investors recognise the long-term value of VCTs in delivering access to the UK’s most exciting growth companies. While broader economic uncertainty persists, the demand for VCTs continues to reflect their role as a stable and established investment vehicle. Investors remain drawn to the combination of growth potential, diversification and government-backed tax incentives, reinforcing VCTs as a key mechanism for funding UK innovation.”
David Hall, Executive Chairman of the British Smaller Companies VCTs, said:
“Investor demand for VCTs remains steady. While fundraising this year is slightly ahead of the previous year, it is below the peaks seen in 2022 and 2023.
“However, it’s important to recognise the broader trend: fundraising levels over the past five years have stepped up to a sustained, higher level. Today’s ‘new normal’ for VCT investment is significantly stronger than in previous decades, reflecting ongoing demand for capital from the UK’s most innovative small businesses.”
What economic and social benefits do VCTs provide?
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said:
“With more than 20 regional offices in 15 towns and cities, VCTA members are investing in companies based across the length and breadth of the UK, supporting the government’s desire to level up the economy by creating local jobs and supporting communities. VCTs have a proven track record of stimulating well-paid jobs in innovative, fast-growing industries across the UK, delivering on the government’s intention to level up regional economies outside of London and the Southeast. Currently over 106,000 people are employed by firms backed by VCTA members across the UK, earning significantly higher-than-average salaries.”
Robert Whitby-Smith, Partner of Albion Capital, which manages the Albion VCTs, said:
“VCTs which back UK innovation to address the key challenges facing the world, including AI, healthcare, the energy transition and defence, naturally align with economic and social benefits and government priorities.
“Albion’s own portfolio has created over 4,600 jobs, helped power some 7,400 UK homes with renewable energy and improved the outcomes of over 700,000 patients. As a VCT manager, Albion has also played a role in supporting more female participation in the ecosystem through the launch of our Radia programme.”
Peter Dines, Managing Director of Mercia Ventures, which manages the Northern VCTs, said:
“Beyond financial returns, VCTs play a vital role in driving innovation, creating jobs and supporting businesses that might otherwise struggle to access growth capital. Our portfolio companies have increased their headcount by 45% during our investment period, helping to fuel employment growth and skills development across the UK. Unlike many traditional investors focused on London and the Southeast, we back businesses nationwide driving economic diversification.
“We actively support underrepresented founders, recognising the need for greater inclusivity in venture capital. Many of our portfolio companies are also tackling some of the most pressing environmental and social challenges. One example is Promethean Particles, a climate tech innovator that has raised £8 million in a funding round co-led by Mercia Ventures and Aramco Ventures. The company has developed a unique continuous flow process to produce metal-organic frameworks (MOFs) at an industrial scale – materials that are crucial in applications such as carbon capture, biogas upgrading and water harvesting. Their technology makes gas capture, particularly carbon dioxide removal, far more efficient than traditional methods, with applications across multiple industries.
“This investment will allow Promethean Particles to scale up production and accelerate the commercialisation of MOFs. It is just one example of how VCT funding goes beyond financial backing, supporting companies that are creating real-world impact while driving long-term economic and social progress.”
Richard Court, Head of VCTs and EIS at Octopus Investments, said:
“In the 30 years since launching, VCTs have delivered more than £12 billion in funding to start-up companies. Today, 45 VCTs manage over £6 billion, each with its own investment approach and points of difference – so the economic benefit to the UK’s start-ups is clear. As for social or environmental benefits, we can look at the Octopus Future Generations VCT, which launched in 2022. The VCT invests in businesses tackling global challenges across three investment themes: building a sustainable planet, empowering people, or revitalising healthcare. This means VCT funding can help support entrepreneurs who are improving lives through digital health solutions, working to reduce carbon emissions or seeking to democratise education.”
This year, the venture capital trust (VCT) scheme is celebrating its 30th birthday. Over the past three decades VCTs have played a crucial role in supporting high-growth businesses, fostering innovation and driving economic growth across the UK. From their inception, they’ve offered investors a unique blend of tax advantages and access to early-stage businesses with high growth potential. As we celebrate this milestone, what role will VCTs play in fostering the next generation of groundbreaking UK businesses?
To discuss these questions, a media roundtable was hosted today by the Association of Investment Companies (AIC) featuring James Hendry, Investment Director of Gresham House Ventures which manages the Baronsmead VCTs, Peter Dines, Managing Director of Mercia Ventures which manages the Northern VCTs, and Robert Whitby-Smith, Partner of Albion Capital which manages the Albion VCTs. Their comments are collated below together with remarks from other VCT managers and industry leaders.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said:
“VCTs are celebrating 30 years of supporting the UK’s most ambitious smaller companies. They have generated thousands of jobs and boosted economic growth across innovative sectors like tech and healthcare. Uniting capital from private investors with the expertise to find and develop cutting-edge businesses has helped VCTs become a great British success story. A number of companies that are household names have been backed by VCTs.
“VCTs have provided British private investors with a tax-efficient way to support the country’s entrepreneurs and fast-growing businesses. From small beginnings 30 years ago, there are now 45 VCTs managing £6.3 billion of assets.”
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said:
“Over the last three decades, VCTs have become a fundamental pillar of the UK’s innovation economy, consistently delivering capital to the most ambitious, high-growth businesses that drive productivity, job creation and technological progress.
“Traditionally, it has been difficult for retail investors to gain access to those investments and VCTs have offered a unique route to backing a portfolio of these high-growth companies, alongside the opportunity to invest in portfolios of AIM-listed companies.
“VCTs provide exposure to sectors in which the UK has become a world leader, such as fintech, life sciences and AI. These emerging sectors can be built into a diversified offering for investors, making them an attractive proposition. By combining tax-efficient investment with exposure to dynamic, high-growth businesses, VCTs have continued to attract strong investor support, reinforcing their position as a mainstream investment option.”
James Hendry, Investment Director of Gresham House Ventures, which manages the Baronsmead VCTs, said:
“VCTs have been highly successful in the UK for a number of reasons, notably the attractive tax incentives to encourage investment in growth businesses. They have also delivered strong long-term returns for investors, driven by investments in high-growth sectors such as technology, healthcare, fintech and consumer. Despite some rule changes, the UK government has maintained a supportive stance towards VCTs, ensuring their continued attractiveness to investors.
“VCTs have evolved to navigate economic downturns, regulatory changes and shifting investment trends, ensuring continued relevance in the market. Over time, financial advisers and wealth managers have increasingly recommended VCTs as a tax-efficient investment strategy, expanding their popularity.”
Richard Court, Head of VCTs and EIS at Octopus Investments, said:
“Since their introduction in 1995, VCTs have acted as a great source of investment into Britain’s exciting, entrepreneurial businesses. VCTs offer much needed patient capital and provide specialist support for businesses looking to grow. At the same time, VCTs have given investors the opportunity to share in the success of these companies.
“Today VCTs have grown to become a mainstay in individuals’ financial planning. VCTs offer a valuable way to invest tax-efficiently for the future and help diversify an investor’s portfolio. Most recently, in 2024, the government extended the legislation that governs VCTs to continue running until at least 2035, a testament to VCTs’ positive impact on the UK’s smaller businesses and their broader economic performance.”
Rupert West, Fund Manager of Puma VCT 13, said:
“Over the past three decades, VCTs have played a crucial role in bridging the funding gap for growing companies, enabling them to scale and thrive. This has helped develop VCT managers who really care about the companies they back and bring multi-decade investor experience to help support UK scale-ups.”
What types of companies are you investing in and why?
Robert Whitby-Smith, Partner of Albion Capital, which manages the Albion VCTs, said:
“Our investment approach is to identify where technological innovation can address key challenges facing the world and redefine the future. We therefore target opportunities within software, healthcare and deep tech, as we believe these offer the greatest return potential for all our stakeholders.
“We focus on companies offering mission critical software to businesses (rather than consumers), tackling long-term structural challenges and which operate in big markets with potential to scale globally. All this makes them less sensitive to economic tides. Underpinning everything is the need for us to identify true visionary founders with domain expertise and bold ambitions because, while we invest in companies, it is the people who lead them that can determine that business’s success.”
David Hall, Executive Chairman of the British Smaller Companies VCTs, said:
“The nature of VCT investments has evolved significantly. Our very first investment was in a coffee wholesaler; today, we focus on enterprise software with global reach – spanning data analytics, cybersecurity, and advanced machine learning (AI).
“Rather than investing in AI as a standalone category, we see it as an essential element embedded within most of our investments. AI is no longer a niche sector – it underpins innovation across industries. That said, perhaps not in coffee drinking… yet!”
Peter Dines, Managing Director of Mercia Ventures, which manages the Northern VCTs, said:
“Despite economic uncertainty, the Northern VCTs remain focused on investing in high-potential businesses with strong fundamentals, innovative propositions and scalable models. Our approach spans multiple sectors, with software and AI presenting significant opportunities as demand accelerates. Health and life sciences remain a priority, driven by an ageing population, increasing healthcare needs and advances in medical technology. We continue to back consumer-facing businesses that demonstrate resilience and strong customer engagement, particularly those with digital-first or subscription-based models. The UK’s rich research base also makes deep tech a key focus, supporting companies commercialising breakthroughs in clean energy and advanced materials.
“Market challenges persist, but we continue to see outstanding businesses emerge. With a long-term investment approach, we back ambitious management teams and provide the capital needed to scale high-growth ventures.”
Ken Wotton, Co-Manager of the Baronsmead VCTs, said:
“The Baronsmead VCTs invest in a mix of private and AIM-listed UK companies, focusing on businesses with strong management teams, scalable business models and high growth potential.
“This typically leads us to technology led companies such as software, data, marketplaces, high skilled consulting/services, with innovative digital solutions and recurring revenue models. For instance, business services companies offering essential services to other companies; healthcare and life sciences firms developing medical technologies, healthcare services and pharmaceuticals; consumer businesses with high-growth brands in retail, e-commerce, and lifestyle sectors; and fintech and other financial sector companies with disruptive business models.
“We invest in these businesses for their long-term growth potential given that the businesses we identify have strong market positions and multiple growth opportunities. We also look for strong management teams with a track record of delivering growth to unlock this potential.”
What’s the current appetite for VCT investment?
Rupert West, Fund Manager of Puma VCT 13, said:
“We’re unbelievably proud of the support we get from our investor base, who have helped us towards several strong fundraises over recent years. Puma VCT 13 is a top performing VCT over five years on a total return basis and we have also delivered dividends underpinned by real gains even during periods of economic uncertainty. As we approach tax year end, current fundraising for Puma VCT 13 is equally positive with less than 50% capacity remaining having raised over £25 million to date.”
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said:
“Despite market volatility, investor confidence in VCTs remains strong. VCTs raised £882 million last year, marking the third-highest total on record and a clear indication that investors recognise the long-term value of VCTs in delivering access to the UK’s most exciting growth companies. While broader economic uncertainty persists, the demand for VCTs continues to reflect their role as a stable and established investment vehicle. Investors remain drawn to the combination of growth potential, diversification and government-backed tax incentives, reinforcing VCTs as a key mechanism for funding UK innovation.”
David Hall, Executive Chairman of the British Smaller Companies VCTs, said:
“Investor demand for VCTs remains steady. While fundraising this year is slightly ahead of the previous year, it is below the peaks seen in 2022 and 2023.
“However, it’s important to recognise the broader trend: fundraising levels over the past five years have stepped up to a sustained, higher level. Today’s ‘new normal’ for VCT investment is significantly stronger than in previous decades, reflecting ongoing demand for capital from the UK’s most innovative small businesses.”
What economic and social benefits do VCTs provide?
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said:
“With more than 20 regional offices in 15 towns and cities, VCTA members are investing in companies based across the length and breadth of the UK, supporting the government’s desire to level up the economy by creating local jobs and supporting communities. VCTs have a proven track record of stimulating well-paid jobs in innovative, fast-growing industries across the UK, delivering on the government’s intention to level up regional economies outside of London and the Southeast. Currently over 106,000 people are employed by firms backed by VCTA members across the UK, earning significantly higher-than-average salaries.”
Robert Whitby-Smith, Partner of Albion Capital, which manages the Albion VCTs, said:
“VCTs which back UK innovation to address the key challenges facing the world, including AI, healthcare, the energy transition and defence, naturally align with economic and social benefits and government priorities.
“Albion’s own portfolio has created over 4,600 jobs, helped power some 7,400 UK homes with renewable energy and improved the outcomes of over 700,000 patients. As a VCT manager, Albion has also played a role in supporting more female participation in the ecosystem through the launch of our Radia programme.”
Peter Dines, Managing Director of Mercia Ventures, which manages the Northern VCTs, said:
“Beyond financial returns, VCTs play a vital role in driving innovation, creating jobs and supporting businesses that might otherwise struggle to access growth capital. Our portfolio companies have increased their headcount by 45% during our investment period, helping to fuel employment growth and skills development across the UK. Unlike many traditional investors focused on London and the Southeast, we back businesses nationwide driving economic diversification.
“We actively support underrepresented founders, recognising the need for greater inclusivity in venture capital. Many of our portfolio companies are also tackling some of the most pressing environmental and social challenges. One example is Promethean Particles, a climate tech innovator that has raised £8 million in a funding round co-led by Mercia Ventures and Aramco Ventures. The company has developed a unique continuous flow process to produce metal-organic frameworks (MOFs) at an industrial scale – materials that are crucial in applications such as carbon capture, biogas upgrading and water harvesting. Their technology makes gas capture, particularly carbon dioxide removal, far more efficient than traditional methods, with applications across multiple industries.
“This investment will allow Promethean Particles to scale up production and accelerate the commercialisation of MOFs. It is just one example of how VCT funding goes beyond financial backing, supporting companies that are creating real-world impact while driving long-term economic and social progress.”
Richard Court, Head of VCTs and EIS at Octopus Investments, said:
“In the 30 years since launching, VCTs have delivered more than £12 billion in funding to start-up companies. Today, 45 VCTs manage over £6 billion, each with its own investment approach and points of difference – so the economic benefit to the UK’s start-ups is clear. As for social or environmental benefits, we can look at the Octopus Future Generations VCT, which launched in 2022.
“The VCT invests in businesses tackling global challenges across three investment themes: building a sustainable planet, empowering people, or revitalising healthcare. This means VCT funding can help support entrepreneurs who are improving lives through digital health solutions, working to reduce carbon emissions or seeking to democratise education.”
