UK venture capital (VC) firms have £8.4 billion in reserves, according to new analysis which suggests that it could be used to provide crucial funding for innovative companies as they emerge from the Coronavirus crisis.

Data from the British Business Bank’s Small Business Equity Tracker found that VCs are currently holding a record amount of capital yet to be invested.

In addition, the value of total equity investment in unlisted small companies rose 24 per cent to £8.5 billion in 2019.

British Patient Capital, part of the British Business Bank, supported funds which were almost double their deal count in 2019.

Follow-on funding for scale ups also outstripped first time equity deals, according to the data.

Catherine Lewis La Torre, chief executive of British Patient Capital and British Business Investments, explained: “In addition to the record amounts of venture dry powder, I’m pleased to see that for the first time that follow on funding - investment in companies that had already received equity finance - outstripped first-time deals, which shows our innovative companies are able to raise multiple funding rounds.

"This, together with the significant amounts of institutional capital invested alongside British Patient Capital demonstrates the increasing importance of the private markets for institutional investors.”

She added that given negative bond-yields, asset owners are continuing to seek out higher returns from private markets.

"The Equity Tracker demonstrates a maturing of the market, as investors seek returns from unlisted companies in the UK technology sector, which accounted for 47 per cent of investment by value in 2019.”

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