The fintech landscape in the UK is experiencing remarkable growth, with numerous startups making headlines for their impressive financial performances. For instance, Allica Bank, a fintech based in London, recently reported a significant profit increase, reaching £29.9 million in 2024. Similarly, the neobank Revolut has announced a staggering £1 billion profit for the same year. This surge in profitability highlights London’s status as a global fintech hub, a title earned through its rich financial history and its pioneering role in Open Banking. Currently, there are over 185 fintech startups in the UK valued at more than £1 billion, as per research conducted by HSBC Innovation Banking.
In light of this thriving environment, a new venture capital fund has been launched, amounting to $100 million, aimed at supporting fintech innovation. This initiative is spearheaded by a UK-based investment firm that specializes in fintech, artificial intelligence, and software as a service (SaaS) startups.
This new fund, developed in collaboration with Japanese venture capital partners, marks the second dedicated fund for the firm, following the success of its initial $30 million fund.
According to the firm, a considerable number of its existing limited partners have chosen to reinvest in this new fund, demonstrating strong confidence in the UK fintech sector.
The focus of this fund will be on companies that have already established revenue streams but are in need of additional capital to scale their operations further.
James Codling, the Managing Partner of the firm, shared insights with TechCrunch, emphasizing the current funding landscape in the UK. He noted that while the government is prioritizing productivity and growth, there exists a structural challenge in funding, particularly for early-stage companies post-Series A funding. The firm aims to support businesses that have achieved product-market fit and possess a robust go-to-market strategy.
“We typically invest in companies generating between five million and twenty million in revenue. This segment is crucial in the current market, especially following the corrections seen in the venture capital landscape during 2021-2022. Many funds are struggling to secure new capital and are facing challenges with their existing portfolios,” Codling explained.
Among the notable companies previously supported by the firm are Signal AI, Flagstone, Cognism, and Zopa Bank, with the earlier fund achieving three successful exits.
Tomoyuki Nii, a director at the Japanese investment firm, remarked on the UK’s position as a leader in fintech and AI, citing its world-class educational institutions, favorable regulatory framework, and vibrant entrepreneurial ecosystem as key factors attracting investment. The commitment to this new fund coincides with efforts from both the Japanese and UK governments to strengthen economic ties and foster growth in both markets.
Additionally, the firm is implementing an ESG-focused initiative called “Carbon Carry,” aimed at promoting responsible and sustainable growth within its investment portfolio.
Despite the positive developments in fintech, the broader UK technology sector has encountered challenges, with Series A funding experiencing a 44% decline in 2024 compared to the previous year, and Series B conversion rates dropping by over 50% in the last five years.