UK venture capital firm Volution has partnered with Japanese investor SBI Investment to launch a new $100 million fund, aimed at bridging the Series A to Series B funding gap for UK startups.
The UK technology sector has faced growing challenges in securing funding beyond the early-stage phase. In 2024, Series A funding dropped by 44% compared to the previous year, and the conversion rate from Series A to Series B has fallen by more than 50% in the last five years. With this new fund, Volution aims to address this issue by providing additional capital to businesses with proven revenue streams, helping them scale to the next stage of growth.
The UK-Japan Partnership
This move comes at a time when the UK has been seeking stronger economic ties with Japan. Through initiatives like the Hiroshima Accord, which promotes cross-border technology collaboration, the UK is opening up new opportunities for partnerships with Japanese investors. The Volution-SBI fund is expected to play a key role in this effort, especially in the tech sector.
The UK and Japan are focusing on boosting productivity and innovation in the global tech market. This partnership presents an opportunity to leverage Japan’s vast corporate networks and the UK’s growing tech ecosystem.
Tackling the UK’s Funding Bottleneck
The UK’s technology sector has struggled to overcome a significant funding bottleneck in recent years, particularly in the Series A and B stages. Series A funding in the UK fell sharply in 2024, reflecting broader concerns about economic uncertainty. The drop in conversion rates from Series A to Series B is also a critical issue, as many startups are unable to secure the necessary investment to continue their growth trajectory.
Volution’s new fund is designed to provide capital to companies that already have established revenue streams but need additional funds to expand and scale. This support is crucial as the UK tech ecosystem faces challenges related to productivity. According to recent data, output per hour worked in the UK dropped by 1.8% year-on-year in Q3 2024. By focusing on automation, process optimization, and AI-driven solutions, Volution aims to address this productivity slowdown, aligning with calls from economists to reverse the trend.
Volution’s Strategic Focus
Volution’s new fund will primarily target high-growth businesses in sectors like FinTech, AI, and SaaS (Software as a Service). These industries are central to solving productivity challenges in capital markets and enterprises. The fund’s focus on AI and automation aligns with broader economic goals to boost efficiency and output.
The businesses Volution is investing in are driving innovation in productivity. By helping them scale, the firm aims to address one of the UK’s key economic challenges.
The Volution-SBI Partnership
This new fund is a result of a strategic partnership between Volution and SBI Investment Co., Ltd., a leading Japanese venture capital firm. The fund will be managed under a co-GP (general partner) structure, a model that allows both firms to share risk and oversight. This collaborative approach is gaining popularity in volatile markets, offering a more balanced approach to venture capital investment.
The co-GP arrangement will help attract institutional investors, particularly from Japan’s $3.6 trillion pension fund market, which is known for its interest in long-term, high-growth investments. The fund also provides UK startups with access to Japan’s vast corporate networks, which could open doors for new partnerships and market opportunities.
Volution’s Growing Success
This marks Volution’s second dedicated fund, following the success of its first. The new fund has already seen significant interest, with many of Volution’s existing limited partners (LPs) recommitting to support it. The backing from established investors reflects the confidence in Volution’s ability to identify high-potential startups and provide them with the resources needed to succeed.
Volution’s approach to venture capital is seen as a key driver of innovation in the UK’s technology sector, and with the launch of this new fund, the firm is positioned to help UK businesses overcome the funding gap and accelerate their growth in the global market.
Looking Ahead
As the Volution-SBI fund begins its investment journey, the partnership represents a significant step in strengthening UK-Japan economic ties and addressing some of the most pressing funding challenges facing UK tech startups. Volution’s focus on sectors like AI, FinTech, and SaaS is expected to play a major role in boosting the UK’s productivity and global competitiveness in the coming years.
