SFC Capital has for several years now been the most active venture capital fund in the UK. According to Pitchbook Data, SFC made 106 investments in 2025 – that’s 38 more than the second fund on the list (Haatch) and 63 more than the third (Fuel).
That is not accidental. It is the result of a strategy that we have developed over more than a decade based on broad diversification, disciplined deployment, deep access to high-quality opportunities, and the operational ability to execute at scale.
Our strategy was built around one of the main constraints of SEIS investing: the £250,000 limit on how much a company can raise under SEIS. For us, that meant that we had to design a strategy that allowed us to deploy this limited ticket across a large number of companies.
That constraint turned out to be a blessing, as it forced us to build a model based on diversification: diversification by number of companies, sectors, regions and founder profiles.
At the earliest stages, where failure rates are high but potential upside from winners is very significant, a high level of diversification is essential to manage risk and improve the probability of long-term returns.
Of course this is true across many different asset classes, but it is particularly crucial in early-stage investments which follow a power-law where typically a relatively small proportion of investments will generate the majority of returns, while many others will fail or produce more modest outcomes.
This is why each tranche of our pre-seed SEIS fund typically includes around 15-20 companies. We see this as the right balance: concentrated enough that successful companies can make a meaningful impact, but diversified enough to give us a decent probability of backing several strong performers.
As we tend to close five SEIS tranches of 15+ companies per year, in addition to c. 20 EIS fund follow-on investments, we easily end the year with more than 100 investments in total.
A portfolio of only a handful of seed-stage companies can be highly dependent on one or two outcomes. That may work occasionally, but we do not think it is the right strategy for most investors at this stage. Early-stage investing is inherently uncertain. Even experienced investors cannot reliably predict, at the point of first investment, exactly which companies will become the biggest winners.
We have learnt this from experience: in the early years of SFC, our portfolios were much smaller and concentrated, which meant that they were highly dependent on one or two outcomes and that there was a huge variance between vintages. For example, our Fintech SEIS Fund 2016 returned several times its invested capital to investors - thanks mostly to the partial exit of our investment in Cognism - and remains our most successful SEIS fund to date. However, the tranche that immediately followed it (SFC SEIS 2017 I) is performing below target with no exits to date.
This is why we now pay much more attention to portfolio size to increase the chances of capturing the outliers consistently, across all of our funds.
But volume alone is not enough. The quality and the diversity of that volume matters just as much.
The UK has one of the richest innovation ecosystems in the world, with strengths spread across several sectors. Life sciences benefits from world-class universities, B2B software and AI are being driven by deep technical talent and the presence of tech giants and enterprise customers. Fintech benefits from the UK’s long tradition in financial services combined with a sophisticated regulatory environment and a strong technology base. Consumer innovation continues to draw on the UK’s history of building major brands with international presence.
Doing the kind of volume that we do at SFC would be absolutely impossible if we restricted ourselves to a single sector. But I would argue that it would also be a great missed opportunity to get exposure to all these different innovation trends that the UK is producing.
No one can know in advance which themes will create the most value over the next decade. Some will be transformative. Some will disappoint. Some will become overfunded. Others will quietly produce exceptional companies before they are widely recognised.
That is why sector diversification is central to our approach. We want exposure to the major themes shaping the innovation economy, but we do not want to be overexposed to any single one of them. The current wave of AI companies is a good example. AI will undoubtedly create enormous value, but it may also create inflated valuations and crowded markets, with huge question marks about long term return potential for investors. If seed-stage AI valuations are 50-100% higher than in other sectors, will exit valuations follow? A diversified strategy allows us to participate in the upside without going all-in on one particular theme.
Doing a large number of deals is not, by itself, a strategy. Poor-quality volume would simply create a large portfolio of poor-performing investments.
Successful seed investing requires volume AND access. I have reviewed the approach of dozens of successful seed funds and angel investors across the world. The strategies and profiles can differ widely, but they usually show the same underlying picture: a unique dealflow combined with a large volume of bets (at least 50 portfolio companies, often hundreds).
That means that the best opportunities need to reach you, and in good numbers. SFC has built partnerships across the UK startup ecosystem: with universities, public bodies such as Innovate UK and the British Business Bank, accelerator programmes, specialist incubators, angel investors and other early-stage investors. These organisations trust SFC’s ability to move quickly, add value and behave consistently.
These relationships give us access to a very large pipeline of opportunities. Today, we review more than 3,000 opportunities a year, many of which are already qualified by the time they reach us.
That means that we only invest in the top 5% of opportunities that come to us [1]. High volume certainly doesn’t mean to “spray and pray”. That level of access is critical. It allows us to be selective while still deploying at significant scale.
The final piece of the strategy is execution. Many investors say they want more diversification. Far fewer have the operations, discipline and team culture required to make a high volume of investments properly.
At SFC, we are able to execute this strategy for two main reasons.
The first is work ethic. Our team is consistently active throughout the year. We meet founders, review opportunities and progress investments even during quieter periods such as summer and Christmas. Early-stage investing does not happen in neat cycles. The best founders do not always raise money when it is convenient. If you want access to the best companies, you have to be present consistently.
The second is standardisation. We have developed a clear and repeatable investment process. While every company is different, many of the key factors that determine success or failure are surprisingly consistent across sectors: the quality of the founding team and dynamics between the founders, the incentives within the company, the ability to commercialise innovation, focus, resilience, capital efficiency, and the scale of the market opportunity.
Where deep sector expertise is required, we bring it in through our network. That may include technical validation from organisations such as Innovate UK, insight from specialist investors, or input from sector experts. But the core investment criteria remain consistent, whether we are looking at a Consumer Goods brand or a Life Science company.
We have also standardised our terms. We do not reinvent the process for every investment. Our documentation, structures and preferred terms are designed to be efficient, transparent and repeatable, with sensible variation where appropriate, particularly around valuation, round size and exit potential. That standardisation allows us to move quickly without losing discipline.
Put together, these elements have allowed SFC to build what we believe is the largest portfolio of startup investments ever assembled by a private fund in the UK.
But the objective has never been volume for its own sake. Our mission is to generate strong returns for our investors. Our view is that, at seed stage, this requires exposure to enough companies, across many sectors, sourced from a high-quality pipeline, and selected through a disciplined and repeatable process.
That is the foundation of our investment strategy and it is why our performance has compared strongly against the wider UK venture capital market. Based on our comparison with British Business Bank’s report on UK VC returns, our performance track record is currently ahead of the industry benchmark. [2]
Deployment is only the first part of the story. The next question is how those returns are generated: how we identify the companies with the potential to become outliers and how we support them after investment.
That will be the subject of upcoming articles.
Capital at risk.
[1] Based on 2,321 applications reviewed between 01/01/2025 and 31/12/2025
[2] Source: British Business Bank, UK Venture Capital Financial Returns December 2025, Median UK VC TVPI of 1.54x in 2014-19 (vs. 2.19x for SFC) and 1.22x for 2020-23 (vs. 1.86x for SFC).