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Against a backdrop of increasing global tensions and cautious capital markets, the UK did something few expected: it outpaced every other European nation for venture capital investment in Q1 2025.
The UK showed surprising resilience, proving that Britain still produces disciplined, credible, and innovative startups capable of attracting serious capital. It’s still early in 2025, but we are seeing a shift from fintech to healthtech, the government is doubling down on deeptech, and regional hubs outside of London are gaining momentum.
The question, then, is what are investors looking for, and what does it mean for the next wave of founders?
UK still leading
The latest KPMG Private Enterprise Venture Pulse report shows that, in Q1, British startups raised £4.1 billion across 507 deals. This was a small drop from Q4 2024, but keeps the UK at the top of the leaderboard.
The same can be said about dealflow, where we saw a small decrease in the overall number of deals as well. Interestingly the report suggests it is “driven by investor confidence currently being aligned with more established, proven start-ups given uncertain market conditions and ongoing lack of exits.”
There is a shift to quality over quantity, which should lead to better outcomes for investors. Oxford Capital sees hundreds of deals a year but selects only 7-9, and it appears that other investors are starting to see the importance of that approach too.
Compared to EU markets like Germany and France, the UK remains a massive draw for VC activity.
Healthtech surpasses fintech for Q1
Oxford Capital has supported several healthtech companies in recent years including HealthKey, HelloSelf, Log My Care, Blueberry Life, and Scan.com. We’re now seeing that focus mirrored across the wider VC landscape.
In Q1 2025, over $1.8 billion was invested into UK healthtech, more than double the amount raised by fintech in the same period. The sector is gaining traction as investors respond to shifting demographics and growing demand from an ageing population.
That said, deeper healthtech comes with long development cycles and the high cost of medical trials. The opportunity now is in backing companies that address critical health needs but operate on more realistic timeframes and capital requirements.
The government’s strategic investment in deeptech
Innovate UK has invested £1.6 million of public funding into the development of open architecture for quantum computing. The award was given to a consortium of quantum pioneers including Rigetti, Oxford Ionics, and others.
On the surface this looks like a modest investment; it comes on the heels of the UK’s first AI growth zone being announced for Culham, Oxford. It signals that the government sees deeptech as a pillar of future competitiveness.
What does this mean for emerging startups?
Funding is still available, though we are seeing that this is going to credible, scalable propositions. Healthtech, biotech, and hardtech sectors are drawing the most attention, but one quarter doesn’t mean that fintech, AI, or Enterprise software should be ignored.
The UK’s lead isn’t accidental. Our world-class universities, disciplined founders and “patient” capital are all factors that give us that edge. For early-stage founders this is both a challenge and an opportunity: the money is there but the bar is higher.
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment. Take 2 minutes to learn more.