Venture Capital Trusts (VCTs) invested £506 million in new and follow-on investments in small private companies and companies listed on the Alternative Investment Market (AIM) last year. This represents a 28% decrease from 2022, when VCTs invested £705 million.
The decline mirrors a wider slump in venture capital investment across the UK and Ireland. According to the Pitchbook European Venture Report, total investment across the venture capital industry fell 46% to €19.4 billion in 2023, down from €35.6 billion in 2022.
“Last year VCTs’ investment in private companies slowed due to challenging investment conditions. It took time for businesses to adapt to higher interest rates and sluggish economic growth which impacted valuations and deal times. However, VCT investment activity held up better than the broader venture capital industry,” said Richard Stone, Chief Executive of the Association of Investment Companies (AIC).
The lion’s share of VCT investments – £454 million – went to 251 private companies. A further £52 million was invested in 24 AIM-listed companies. In 2022, VCTs put £658 million into 341 private companies and £48 million into 22 AIM companies.
Despite the annual decline, VCTs have provided consistent support for private companies and AIM-listed firms over the past three years, investing a total of £1.89 billion between 2021 and 2023.
“The first half of 2023 was certainly sluggish in terms of quality new opportunities, in line with the trend across the market, due to uncertainty arising from the Budget turmoil in late 2022,” said Ewan MacKinnon, Partner, Maven Capital Partners, managers of the Maven VCTs.
“However, in H2 2023 and early 2024 we’ve seen an encouraging increase in activity and opportunities as economic conditions have improved and deal flow has now largely recovered across our UK regional teams.”