Midlands startups quadruple venture capital investment in Q2

Venture Capital (VC) investment into the Midlands’ start-up and scaling businesses increased in the second quarter of 2025, bucking the national trend, according to the latest KPMG Private Enterprise Venture Pulse report.

The Midlands’ start-ups raised £108.5million in the second quarter of 2025, more than four times the £26million raised in the first three months of the year.

Twenty-eight investments were concluded in the region – 11 in the East Midlands and 17 in the West Midlands – compared to 12 in the previous quarter, highlighting increased appetite among VC investors looking to support the region’s burgeoning start-up community.

The largest raise included a £14.9million investment into Nottingham-based scheduling platform developer Cronofy – enabling the pursue further growth both at home and overseas in the US.

Cronofy was one of six Midlands companies in the business and productivity software sector securing VC funding this quarter – reflecting the national trend – as start-ups focused on products and services that streamline business operations continue to gain popularity among funders.

Andy Bostock (pictured), Birmingham office senior partner at KPMG UK, said: “Venture capital investment in the Midlands’ most promising early-stage businesses has surged this quarter, rebounding from a Q1 lull.

“While national investment remains subdued, the Midlands has bucked the trend, demonstrating real resilience.

“The most active areas were innovation-led sectors such as business and productivity software, many of which are leveraging AI as a key development tool.

“This reflects the adaptability of Midlands businesses in embracing high-growth technologies and leading the charge in innovation.

“The Midlands is fast becoming a hub for high-growth ventures. With continued public and private backing and the right advisory support, these investments have the potential to drive long-term growth, research and commercialisation.”

The UK suffered its slowest quarter of VC investment in five years despite a surge in interest in the artificial intelligence (AI) sector.

Levels of investment dropped to £2.6 billion across 435 deals in the second quarter of 2025 – down from £3.8 billion in Q1 across 507 deals – as a result of a pullback across corporate VC activity.

However, AI remained a dominant investment theme alongside the areas of health, tech and fintech with megadeals during the quarter including £251 million for EV charging firm Believ (London), cloud computing business XY Miners (Brighton) securing £223 million, and £148 million for health tech firm CMR Surgical (Cambridge). This meant that, despite the overall downturn, the UK secured three of the top 10 deals across the whole of Europe.

Looking ahead, Q3 is likely to see VC investment levels remain subdued, due to uncertainty caused by fluctuating tariffs being imposed by the US. However, tech investment is set to remain high as AI continues to be the focus for investors in the UK and further afield.

Nicole Lowe, UK head of KPMG’s Emerging Giants practice, said: “While quarter two marked the slowest quarter for UK venture capital since early 2020, the long-term outlook remains strong, particularly in AI.

“We’re seeing growing confidence from investors in the UK’s innovation ecosystem, and the government’s significant AI-focused commitments, including job creation and infrastructure investment, signal a clear intention to position the country as a global leader in next-generation technologies.”