The UK’s tech sector is battling a growing funding gap, especially as startups move beyond early-stage rounds. In 2024, Series A funding dropped by 44% compared to the previous year. Even more concerning, the rate of startups progressing from Series A to Series B has fallen by over 50% in the last five years. Now, Volution VC is stepping up with a $100 million fund, aiming to back revenue-generating startups that need extra fuel to scale.
This move comes at a time when the UK is deepening its economic ties with Japan through initiatives like the Hiroshima Accord, which promotes cross-border tech collaboration. The new fund not only helps UK startups but also opens fresh pathways for Japanese investment into Britain’s vibrant tech scene.
Volution VC, known for supporting high-growth FinTech, AI, and SaaS businesses, is tackling two major issues at once: the UK’s venture funding bottleneck and the global productivity slowdown. With output per hour worked in the UK falling by 1.8% year-on-year in Q3 2024, the need for smarter investments has never been clearer. Volution’s focus on automation, process optimization, and AI solutions is closely aligned with what economists recommend to boost productivity.
Partnering with Japan’s SBI Investment Co., Ltd., Volution is using an innovative co-GP structure. This model, which shares risk and management duties, is gaining traction among investors looking for stability in volatile markets. It also positions the fund to attract interest from Japan’s massive $3.6 trillion pension sector while giving UK startups easier access to Japan’s corporate networks.
Following the success of its first fund, Volution has seen strong backing from existing LPs who believe in its vision.
Bridging the UK’s Series A-B Funding Crisis
Volution VC was founded by James Codling and Edward Peter Bardos to address one of the UK startup ecosystem’s most critical issues: securing follow-on funding after Series A. Many startups with strong early growth still struggle to raise the capital they need to reach the next stage. Fragmented funding options and a scarcity of Series B capital in the UK only make this transition harder.
James Codling, Managing Partner at Volution, points out the deeper structural problem. According to him, the government’s focus on unlocking early-stage funding through tax incentives has led to a system where many companies stall or fold after Series A. Without enough capital at the growth inflection point, promising startups either get acquired too early or become “walking zombies” — stuck in limbo.
Volution VC’s mission is to back ambitious FinTech and SaaS founders who have proven product-market fit and secured initial traction, helping them reach Series B and beyond. Along with flexible capital, the firm offers operational guidance, helping startups avoid common pitfalls. It also champions strong ESG practices, encouraging portfolio companies to join initiatives like its “carbon carry” program, which offsets emissions tied to growth.
Unlocking Japanese Capital for UK Innovation
Japanese investors, especially SBI, are known for taking a patient, strategic approach to venture investing. Their focus goes beyond financial returns to fostering long-term growth and innovation. Partnering with Volution gives UK startups the chance to tap into Japan’s $5 trillion economy and build valuable corporate relationships.
Tomoyuki Nii, Executive Officer at SBI Investment, emphasized that the UK remains a global leader in FinTech and AI, backed by strong universities and a regulatory framework that fosters innovation. Nii highlighted that the partnership with Volution fits perfectly into Japan’s broader strategy to invest in high-growth markets and support digital transformation efforts at home.
A Proven Track Record and Bold New Bets
Volution has already shown it knows how to pick winners. Its first fund achieved an impressive 300% average revenue growth across 11 portfolio companies. It boasts three successful exits and even helped Zopa Bank — a standout unicorn — cut operational emissions by 40% ahead of its planned 2025 IPO.
With the new fund, Volution is targeting companies that are already thriving. These startups typically generate at least £5 million in annual recurring revenue (ARR), have product-market fit, and a solid go-to-market strategy. They’re not early experiments — they’re proven businesses ready to scale globally.
The fund has already made its first investments, including an AI-powered supply chain optimization platform and a blockchain-based ESG reporting tool. Both sectors are expected to grow at over 28% annually through 2030.
Importantly, Volution also reinvests part of its profits into carbon offset projects. Recognizing the heavy computing demands of AI companies, the firm stays ahead of upcoming regulations like the EU’s emissions reporting mandates, making it attractive to climate-conscious institutional investors.
Industry Leaders Applaud the Move
Janine Hirt, CEO at Innovate Finance, welcomed the fund’s launch, calling it a vital step for fast-growing UK tech firms. She noted that by focusing on AI, machine learning, and blockchain innovations, Volution addresses a critical funding gap that could otherwise stifle the UK’s global ambitions.
Michael Moore, Chief Executive of BVCA, added that the partnership is well-timed, especially as both UK and Japanese investors recognize Britain’s leadership in FinTech and AI. Moore highlighted that Volution’s focus on scaling businesses taps into a swiftly growing market segment full of promise.
With strong backing, a bold strategy, and a powerful UK-Japan partnership behind it, Volution’s new fund could be the catalyst many UK startups need to break through the Series A-B bottleneck — and take their innovation to the world stage.
