The UK technology sector faces significant funding challenges beyond early-stage investment. In 2024, funding at the Series A level decreased by 44% compared to the previous year. More concerning, the conversion rates from Series A to Series B have declined by over 50% in the last five years. Through its new fund, Volution aims to bridge this gap by backing businesses with established revenue streams that need additional capital to expand.
The UK has been actively seeking partnerships with Japanese investors, and this fund presents an opportunity to lead the way, particularly as the UK and Japan strengthen their economic ties through initiatives such as the Hiroshima Accord, which promotes cross-border tech collaboration.
Volution, a leading UK-based venture capital firm investing in high-growth FinTech, AI, and SaaS businesses that address productivity challenges in capital markets and enterprises, has launched a new $100 million fund. The fund tackles both the UK’s funding bottleneck and the global productivity slowdown — output per hour worked in the UK fell by 1.8% year-on-year in Q3 2024. Volution’s focus on automation, process optimisation, and AI-driven solutions aligns with economists’ recommendations for reversing this stagnation.
The fund launches in partnership with SBI Investment Co., Ltd., a leading Japanese venture capital investor, through a co-GP (general partner) arrangement that leverages the strengths of both managers. This innovative structure, increasingly popular in volatile markets, enables shared risk and strategic oversight, attracting institutional investors from Japan’s $3.6 trillion pension fund market while giving UK startups access to vast Japanese corporate networks.
This is Volution’s second dedicated fund, and following the success of the first, many existing LPs have recommitted to the new fund.
Focus on the funding challenges companies face between the Series A and B stages
Volution VC emerged in 2021 after its founders identified a critical funding gap within the UK startup ecosystem, particularly for companies moving from Series A to Series B funding. They found that this transition poses significant challenges, with many promising startups struggling to secure necessary investment and operational support. Fragmented funding structures and scarce Series B capital in the UK intensify these difficulties.
James Codling, Managing Partner at Volution, said: “The UK faces a huge challenge. While the Government focuses on productivity and growth, we have a fundamental structural funding problem. We’ve overemphasised unlocking early-stage capital through tax-efficient schemes, but funding tends to evaporate after the Series A round. Companies get sold, fold, or become walking zombies. Investment at the international growth inflexion point is crucial for tech companies and offers the highest returns for LPs.”
Volution VC’s primary objective is to support ambitious FinTech and SaaS businesses that have secured Series A funding and are ready to accelerate toward Series B and beyond. The firm provides flexible financing solutions and operational guidance to help founders successfully bridge the gap between funding stages.
Additionally, Volution VC fosters a community for entrepreneurs, sharing best practices and integrating strong environmental, social, and governance (ESG) principles into their portfolio. Their mission is to help companies reach their full potential and become category leaders, while promoting ESG initiatives through programs like their “carbon carry” scheme.
How Volution bridges UK innovation with Japanese investment
Japanese investors, particularly SBI, are known for their long-term outlook and strategic approach, seeking both returns and exposure to cutting-edge technologies and global growth markets. This partnership comes as Japan works to overcome its own digital transformation challenges and productivity gaps through investment in high-growth international tech. For UK startups, the fund offers entry to Japan’s $5 trillion economy and its extensive corporate networks, creating new opportunities for expansion and collaboration.
Tomoyuki Nii, Director, Executive Officer (Overseas Investment) SBI Investment Co., Ltd 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 the Japanese and UK governments are strengthening economic ties to drive growth across both markets. Building on the success of Volution’s first fund, it will provide a new funding option for fast-growing UK businesses looking to scale.”
A strong track record and future outlook
The firm invests in post-Series A companies, providing capital and expertise to help them scale to Series B and beyond. Its portfolio includes promising UK companies like Zopa, Cognism, Signal AI, Flagstone, and Wrisk. Volution’s first fund achieved 300% average revenue growth across 11 companies, with three successful exits and one unicorn — Zopa Bank, which reduced operational emissions by 40% through cloud migration ahead of its planned 2025 IPO.
The new fund has begun deployment with initial investments in one FinTech and one AI business. “The businesses we back aren’t just an idea and a couple of letters of intent. These are successful businesses aligned with the Government’s Industrial Strategy. They have figured out product-market fit, have a solid go-to-market strategy and are achieving significant revenue of at least £5m ARR. Volution is the catalyst to propel them to the next stage, both financially and by leveraging the team’s extensive experience in scaling tech businesses,” said Codling.
Recognising the high computing resource demands of AI-driven companies, Volution reinvests a portion of its profits into carbon offset initiatives to mitigate the environmental impact of its portfolio companies. This approach not only aligns with global regulatory trends, such as the EU’s forthcoming emissions reporting mandates, but also appeals to institutional investors with decarbonisation priorities, like SBI’s $20 billion commitment to net-zero initiatives.
Janine Hirt, CEO at Innovate Finance, said, “We are delighted to see the launch of the Volution SBI Co-GP vehicle, a testament to the strength and global appeal of the UK FinTech sector. By focusing on innovative companies that leverage AI, machine learning, and blockchain to drive productivity, the fund addresses a critical funding gap. It supports the growth of UK businesses seeking to reach global markets. This partnership both aligns with the UK’s strategic priorities on FinTech, AI, and innovation, and it reinforces the collaborative synergies between the UK and Japan.”
Michael Moore, Chief Executive of BVCA, said, “The SBI Volution Venture fund is both a significant and timely partnership. With the rapid evolution of technology globally, both UK and Japanese investors recognise the unique strengths of Britain’s leadership in FinTech and AI as well as its robust investment ecosystem. The fund’s focus on scaling businesses is vital, tapping into a swiftly developing market segment with a promising opportunity pipeline”
