TLDR:
- UK venture capital fund returns outstrip all other private equity investments.
- Tech-focused VC funds have delivered substantial returns over the last two decades.
Returns on UK venture capital investments have outperformed all other types of private equity investments since 2001, with VC funds returning an average of 2.13 times their investors’ initial investment compared to an average of 1.78x across all PE funds. This data, provided by private equity firm Growthdeck, challenges the assumption that the largest private equity deals deliver the highest returns. The rapid scaling of tech companies has been a major contributing factor to the market-beating returns of VC funds.
Simon Emary, Director and Head of Portfolio at Growthdeck, highlights that investments in tech and fintech companies have driven the success of VC funds in the UK. The average annual IRR return of VC funds between 2005 and 2018 was 22%, compared to 16.6% for all other PE funds. Additionally, the Enterprise Investment Scheme (EIS) provides high-net-worth individuals with access to equity investment in scaleup businesses, offering the potential for VC-type returns through tax advantages.
Overall, the article underscores the value of venture capital investments, particularly in the tech sector, and the opportunities available to individual investors through schemes like EIS. The data presented challenges traditional assumptions about the performance of private equity investments and highlights the potential for substantial returns from VC funds.
