One of Britain’s most prominent technology investors has called on pension funds to step up their support for domestic scale-ups, warning that too much of the financial upside from fast-growing companies is flowing abroad.
Saul Klein, co-founder of venture capital firm Phoenix Court, said the UK has become Europe’s leading hub for “thoroughbreds” — high-growth technology firms generating annual revenues of more than $100 million. However, he argued that these businesses face a chronic shortage of homegrown growth capital.
According to figures from data provider Dealroom, the UK is home to 191 venture-backed thoroughbreds and more than 600 companies reporting annual revenues above $25 million. Yet just 20% of the capital supporting these businesses originates from UK investors, with 80% coming from overseas.
“For over a decade, venture capital has been gripped by unicorns — start-ups valued at over $1 billion,” Klein said. “But the real test of a company is not valuation, it is fundamentals. The UK now has more than 800 scale-ups generating over £25 million in revenues — more than France, Germany and the Netherlands combined — making us second only to Silicon Valley.”
Household names including Revolut, Monzo, Tide and Multiverse are among the companies now regarded as thoroughbreds. In earlier years, Klein said, firms of this size would already have pursued stock market listings. He argued that investors today must adopt a longer-term approach, focusing on growth and fundamentals rather than valuation milestones.
Europe is estimated to trail the United States by $57 billion in late-stage growth funding, according to Dealroom. Klein said UK pension funds are uniquely placed to fill that gap, creating both stronger domestic returns and long-term value for savers.
Chancellor Rachel Reeves is seeking to address the issue through her Mansion House reforms, which are designed to encourage pension schemes to invest in private companies. Klein suggested that the changes could unlock up to £200 billion of committed capital for UK scale-ups, noting that the British Business Bank now operates on a scale similar to a sovereign wealth fund.
“With the chancellor’s reforms, there is significant upside if local authority funds reach equivalent levels of commitment,” he said. “Yet only 20 per cent of the capital backing UK scale-ups is domestic. When these firms succeed, 80 per cent of the upside flows overseas to fund pensions and infrastructure abroad.”
Klein, whose firm backs 54 UK scale-ups, said pension funds should view British technology companies as engines of jobs, productivity and long-term growth. “Britain must back the very businesses that are creating jobs, driving productivity and powering its future,” he said.
The intervention comes as Reeves prepares her autumn budget, where balancing fiscal discipline with economic growth remains a central challenge. For many in the industry, unlocking pension capital is seen as vital if the UK is to maintain its global competitiveness in technology and innovation.
