Twenty British venture capital firms have committed to working with UK pension funds to pump more investment into UK startups.
The British Private Equity and Venture Capital Association (BVCA) is bringing together pension funds and VC firms in a “Venture Capital Investment Compact” — one of the main elements of the UK government’s Mansion House reforms to help startups benefit from untapped capital in pension funds.
The list of VC firms joining the compact include the likes of Albion, Amadeus Capital, Balderton, Cambridge Innovation Capital, IQ Capital, Lakestar, Molten and Octopus, among others. Together they support more than 1,800 companies and have more than £25bn of assets under management.
As compact signatories, these VC firms have agreed to attract UK pension funds as limited partners into the funds they manage, and will team up with pension investors to discuss tailored investment structures.
Nine of Britain’s biggest pension funds signed up to the compact this summer, committing to allocate at least 5% of their assets into British startups and VC firms by 2030. The move could unlock up to £50bn in assets from private defined contribution (DC) pension schemes by 2030, if all such schemes in the UK committed to the agreement, according to the government. For comparison, UK tech raised £24bn in 2022.
The compact has been widely welcomed by the startup community, but some founders have warned the VC industry will need to adapt technically to meet pension fund requirements, and VC firms might have to scale up to make it worthwhile for a fund to invest.
Dan Mahony, the government’s life sciences investment envoy, says the UK has an “expert community of investors ready to work with pension funds” to facilitate investments into startups.
“The VC Investment Compact is an important signal of their commitment to working collaboratively with pension funds, government and the UK’s innovative industries to overcome the remaining barriers that will unlock up to £50bn of new investment,” he says. “There are many more expert investors beyond the initial signatories of the Compact.”
The BVCA plans to gather pension investors and VC fund managers at a large event next year to discuss plans for new fund vehicles.