Volution Launches $100M Fund for UK Fintech Innovation

U.K. Fintech Sector Demonstrates Continued Strength

The United Kingdom's financial technology (fintech) industry is experiencing a period of notable success. Allica Bank, a fintech company headquartered in London, recently reported a doubling of its profits for 2024, achieving £29.9 million in earnings. Simultaneously, neobank Revolut announced a profit of £1 billion for the same year.

London continues to be a breeding ground for these types of companies, solidifying its position as a global fintech leader. This prominence stems from both its established financial history and its early adoption of open banking principles.

Research conducted by HSBC Innovation Banking indicates that there are currently over 185 U.K. fintech startups with valuations exceeding £1 billion.

Volution Launches $100 Million Fund

Against this backdrop, Volution, a U.K.-based venture capital firm specializing in fintech, artificial intelligence (AI), and Software as a Service (SaaS) startups, has unveiled a new $100 million investment fund.

This fund is the second dedicated offering from Volution, following an initial fund of $30 million. It has been launched in collaboration with SBI Investment Co., a Japanese venture capital investor.

Volution reports that a substantial portion of its existing Limited Partners (LPs) have reinvested in this new fund.

The firm’s investment strategy will focus on companies that have already generated revenue and are seeking further capital to fuel expansion.

Addressing the Funding Gap

James Codling, managing partner at Volution, explained to TechCrunch that despite the U.K. government’s emphasis on productivity and economic growth, a significant funding challenge exists. Specifically, early-stage funding has become scarce following Series A investment rounds.

Volution aims to provide capital to companies that have demonstrated product-market fit and possess a robust go-to-market strategy. They are targeting businesses with annual revenues ranging from £5 million to £20 million.

Codling highlighted a critical need in the current market, exacerbated by the venture market correction of 2021-2022. Many funds are currently facing difficulties in securing new capital and addressing existing portfolio challenges.

Portfolio and Investment Strategy

Volution’s previous investments include Signal AI, Flagstone, Cognism, and Zopa Bank. The firm’s prior fund resulted in three successful exits.

Tomoyuki Nii, a director at SBI Investment, stated: “The U.K. stands as a global frontrunner in both fintech and AI, boasting world-class universities, a robust regulatory framework, and a dynamic entrepreneurial environment. These attributes render it a highly appealing destination for investment.”

He further added that SBI Investment’s commitment to Volution aligns with strengthening economic ties between Japan and the U.K., aiming to stimulate growth in both nations.

ESG Initiatives and Market Trends

Volution is also implementing an ESG-focused initiative called “Carbon Carry,” designed to promote responsible and sustainable growth within its investment portfolio.

While the fintech sector is thriving, the broader U.K. technology sector has experienced a downturn. Funding for Series A rounds has decreased by 44% in 2024 compared to the previous year.

Furthermore, Series B conversion rates have declined by over 50% in the last five years, indicating a challenging environment for scaling startups.