Latest news with #JamesCodling
Forbes
29-04-2025
- Business
- Forbes
What's Behind Britain's Growth Funding Gap? A VC View
James Codling, Managing partner at Volution Ventures says VCs can be too stage specific 'We need a holistic approach to investment in the U.K.,' says James Codling. 'It can't remain as an amazing market for Seed and Series A, but with nothing when you get to growth. That just doesn't work.' Codling is the Managing Partner at Volution Ventures, a London-based VC that has just announced the launch of a $100 million fund focused on supporting companies in sectors such as fintech and enterprise software. Created in partnership with Japanese investment company SBI, the fund is intended to play a part in addressing a thorny problem that afflicts the United Kingdom's venture ecosystem - namely, a relative shortage of growth-stage capital. It's a problem ackknowledged by, the British Venture Capital Association in its latest report on U.K. VC finance. As the report points out, U.S. firms raise twice as much capital as their British counterparts, with the gap being much larger at later funding rounds. The BVCA also notes that the dominant presence of overseas investors at later stages is a factor in British startups relocating abroad, just at the point when they begin to generate real value. And even the jump from Series A to Series B can be difficult. Volution cites Dealroom figures suggesting that conversion rates have dropped by 50% in five years. 'The growth journey from Series A onwards is one of the toughest that any founder will ever go on,' says Codling. So why is that the case? Well, at least partly because founders often struggle to meet the expectations of VCs. As Codling points out, once a company moves beyond series A, investors are looking for tangible evidence of execution and delivery. 'Founders get very excited when they raise Series A, but to attract growth finance, they need to be ten to twenty times Xing where they are at Series A," he says. It's not just about revenue growth and profits. Codling says companies need to build out their systems, processes and teams, along with their sales and distribution models if they are to successfully scale the funding ladder. However, there are also structural factors at work. Successive UK governments have taken action to encourage investment in startups, with the tax system playing an important role. Initiatives such as the Enterprise Investment Scheme, British Patient Capital and the regulation of Venture Capital Trusts have all provided tax breaks for investors. This has generally been considered to be a good thing, but it can skew the market. 'These schemes don't really support late-stage investment,' says Codling. And as he sees it, there is a need to encourage support for businesses at every stage. 'The UK is phenomenally good at driving the creation of companies that can access Seed and Series A. But if the funnel isn't bigger, we won't be able to support companies as they grow," he says. This, he says, should be of concern not just to founders but also to the government and citizens alike. If taxpayer money is poured into supporting early-stage companies who struggle to raise the finance they need at a later point in their development, there is a risk that the cash will be wasted. So Codling argues for a more 'holistic' approach to investment on the part of VCs. Rather than seeing themselves as specialising in Seed, Series A, Series B, they should provide funds for good companies throughout their journeys. In other words, they should become less stage-focused. That might be a big ask at a time when VCs are adapting to a market in which valuations have fallen and exits are thin on the ground. So what is giving Volution the confidence to invest across stages with the aim of supporting companies from Seed to growth? Well, there are opportunities. Codling says Volution's approach is to align with the government's emerging 'industrial strategy.' What that is, isn't yet entirely clear, but it is likely to include fintech, AI, defence, energy, biotech and deeptech. These are sectors that will drive growth in the UK while also having the potential for international sales. Currently, the fund favors businesses with revenues between $5 and $20 million, with a current focus on fintech and AI-driven enterprise software. Stepping back to look at policy, Codling says current business support strategies could be better directed. 'There should be more emphasis on venture going towards a long-term growth strategy,' he says. 'Taxpayers' money might be better spent on growth drivers.' By that, he means businesses that could contribute significantly to boosting the U.K.'s flatlining growth. The government is addressing later-stage funding through its Mansion House accord, an agreement with pension funds aimed at directing more institutional money into scaleups. However, Codling says current regulations on fees make it difficult for institutions to align with VCs. The launch of Volution's fund is just part of a bigger and quite complicated picture. While late stage finance is recognised as a problem, figures published by HSBC Innovation Banking and Dealroom suggest that in first quarter of 2025, breakout deals (Series B and C) accounted for the bulk of capital raised ($1.8 billion) while later-stage financing amounted to $1.7 billion. The same report notes that the UK has created 185 unicorns. However, these headline figures can disguise the problems faced by individual companies. Looking forward, the creation of a framework that supports more growth-stage companies remains the next step in the evolution of the U.K.'s innovation economy. .
Yahoo
28-04-2025
- Business
- Yahoo
Volution doubles-down on booming UK fintech with new $100M fund
The UK fintech sector is on a bit of roll. Allica Bank – a London-based fintech – recently announced it had doubled its profits in 2024, bringing in £29.9 million, while Neobank Revolut announced a £1bn profit in 2024. Companies of this nature continue to spring out of London, a city which has become a fintech global leader, partly because of its long financial heritage but also because it was a pioneer of Open Banking. There are now over 185 UK fintech startups valued over £1 billion, according to research from HSBC Innovation Banking. So it's with that context that Volution, a UK-based VC investing in FinTech, AI, and SaaS startups, has launched a new $100 million fund. Launched in partnership with Japanese VC investors, SBI Investment Co., this will be Volution's second dedicated fund following its first, which came in at $30 million. Volution said a 'significant number' of Volution's existing LPs recommitted to the new fund. Volution said it would aim at companies that have already established revenue streams but which require additional capital. James Codling, Managing Partner at Volution, told TechCrunch that while UK Government is focused on productivity and growth there's a structural funding challenge, with early-stage funding evaporating post Series A. He said they are out to fund companies with product-market fit and a solid go-to-market strategy 'We back companies that are typically anywhere between five million in revenue and up to 20. That's a badly needed part in the market at the minute, and it's become increasingly so given what happened in the correction in the venture markets 2021-22. There's an awful lot of funds out there that are struggling to raise new capital and trying to deal with issues that they've already got within their portfolio.' Previous companies Volution has backed include Signal AI, Flagstone, Cognism, and Zopa Bank. The previous fund had three exits. In a statement, Tomoyuki Nii, a director at SBI Investment, said: 'The UK is a global leader in FinTech and AI, with world-class universities, a strong regulatory environment, and a thriving entrepreneurial ecosystem. These strengths make it an attractive destination for investment. Our cornerstone commitment to Volution comes at a time when Japan and the UK government are strengthening economic ties to drive growth across both markets.' Volution is also running an ESG-focused 'Carbon Carry' initiative designed to encourage responsible and sustainable growth across its portfolio. Although Fintech is doing well, the UK technology sector has faced a downturn with funding at Series A dropping by 44% in 2024 compared to the previous year, and Series B conversion rates plummeting by over 50% in the last five years.
