The U.K. fintech sector is on a bit of a roll. Allica Bank — a London-based fintech — recently announced it had doubled its profits in 2024, bringing in £29.9 million, while neobank Revolut announced a £1 billion profit in 2024. Companies of this nature continue to spring out of London, a city that has become a fintech global leader, not only because of its long financial heritage but also because it was a pioneer of open banking. There are now over 185 U.K. fintech startups valued over £1 billion, according to research from HSBC Innovation Banking.
So it’s with that context that Volution, a U.K.-based VC investing in fintech, AI, and SaaS startups, has launched a new $100 million fund.
Launched in partnership with Japanese VC investors, SBI Investment Co., this will be Volution’s second dedicated fund following its first, which came in at $30 million.
Volution said a “significant number” of Volution’s existing LPs recommitted to the new fund.
The firm said it would aim at companies that have already established revenue streams but that require additional capital.
James Codling, managing partner at Volution, told TechCrunch that while the U.K. government is focused on productivity and growth, there’s a structural funding challenge, with early-stage funding evaporating post-Series A. He said they are out to fund companies with product-market fit and a solid go-to-market strategy.
“We back companies that are typically anywhere between 5 million in revenue and up to 20. That’s a badly needed part in the market at the minute, and it’s become increasingly so given what happened in the correction in the venture markets 2021-22. There’s an awful lot of funds out there that are struggling to raise new capital and trying to deal with issues that they’ve already got within their portfolio.”
Previous companies Volution has backed include Signal AI, Flagstone, Cognism, and Zopa Bank. The previous fund had three exits.
In a statement, Tomoyuki Nii, a director at SBI Investment, said: “The U.K. 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 Japan and the U.K. government are strengthening economic ties to drive growth across both markets.”
Volution is also running an ESG-focused “Carbon Carry” initiative designed to encourage responsible and sustainable growth across its portfolio.
Although fintech is doing well, the U.K. technology sector has faced a downturn, with funding at Series A dropping by 44% in 2024 compared to the previous year, and Series B conversion rates plummeting by over 50% in the last five years.