The United Kingdom’s financial technology (fintech) sector is experiencing significant growth, with companies like Allica Bank and Revolut reporting substantial profits in 2024. Allica Bank, a London-based fintech, announced it had doubled its profits in 2024, bringing in £29.9 million, while Neobank Revolut announced a £1bn profit in 2024. This surge underscores London’s position as a global fintech leader, a status bolstered by its rich financial heritage and early adoption of Open Banking. Currently, over 185 UK fintech startups are valued over £1 billion, according to research from HSBC Innovation Banking.
In response to this thriving environment, Volution, a UK-based venture capital firm specializing in fintech, artificial intelligence (AI), and software-as-a-service (SaaS) startups, has launched a new $100 million fund. This initiative, developed in partnership with Japanese venture capital firm SBI Investment Co., marks Volution’s second dedicated fund, following its initial $30 million fund. A significant number of Volution’s existing limited partners have recommitted to this new fund, reflecting strong confidence in the firm’s investment strategy.
Volution’s investment focus is on companies that have already established revenue streams but require additional capital to scale. James Codling, Managing Partner at Volution, highlighted a structural funding challenge in the UK, noting that early-stage funding often diminishes post-Series A. He emphasized the firm’s commitment to supporting companies with product-market fit and solid go-to-market strategies, typically those generating between $5 million and $20 million in revenue. This approach addresses a critical gap in the market, especially in light of the correction in venture markets during 2021-2022, which left many funds struggling to raise new capital and manage existing portfolio issues.
Volution’s portfolio includes notable companies such as Signal AI, Flagstone, Cognism, and Zopa Bank, with the previous fund achieving three successful exits. The firm’s investment strategy aligns with the UK’s broader efforts to maintain its fintech leadership. In August 2023, the UK government launched a £1 billion Fintech Growth Fund, backed by industry leaders including Mastercard, Barclays, and the London Stock Exchange Group. This fund aims to invest between £10 million and £100 million into fintech companies, ranging from consumer-focused challenger banks and payments tech groups to financial infrastructure and regulatory technology. The initiative was created in response to a 2021 government-commissioned review led by former Worldpay Vice Chairman Ron Kalifa, which examined the UK’s listings environment for tech firms.
Despite these positive developments, the UK technology sector faces challenges. Funding at Series A dropped by 44% in 2024 compared to the previous year, and Series B conversion rates have plummeted by over 50% in the last five years. This decline underscores the importance of targeted support for fintechs transitioning from Series A to B, ensuring the UK retains its coveted fintech crown.
Volution’s new fund, coupled with its ESG-focused Carbon Carry initiative designed to encourage responsible and sustainable growth across its portfolio, represents a significant step in addressing these challenges. By providing much-needed capital to growth-stage fintech companies, Volution aims to bridge the funding gap and support the continued expansion of the UK’s fintech sector.
