The UK’s venture capital market is one of the most important in the world. Last year, £9 billion was invested into UK venture-backed businesses by general partners alongside other co-investors, such as corporates and financial institutions. This helped to maintain the UK’s status as the third largest venture capital (VC) market in the world, behind only the US and China.

This investment supports a dizzying array of entrepreneurs and founders building innovative businesses across the UK—9,000 in total, supporting more than 378,000 jobs across the UK.

The support provided to these companies is not just financial; it also represents a partnership. Venture capital firms work hand-in-hand with the leadership team, helping to turn a promising idea into a business that can scale and compete globally.

A hands-on approach

Good governance sits at the heart of this “active ownership” model. As well as providing essential finances, venture capital firms leverage their experience, networks and judgement to help some of the UK’s most innovative companies as they grow and scale, and taking an active role in guiding strategy. It is viewed as a mechanism for ensuring accountability, managing risk and supporting effective decision making.

For early-stage companies, the stakes are high. Founders are juggling rapid growth, product development, hiring, fundraising and regulatory complexity, all with limited resources. Good governance helps management teams to operate effectively and focus on the things that will build long-term success.

One place where this influence is felt most keenly is immediately post investment. In our recent survey of senior decision-makers within the venture capital industry, the majority of VC firms (54%) sought to introduce or improve governance processes within the first 100 days of backing a company. That early focus matters. It ensures the business is built on solid foundations before complexity accelerates, thereby allowing for early identification of any areas of weakness.

Accountability relies on having clarity about goals, responsibilities and progress. Venture capital firms play a key role here by helping portfolio companies to define and track meaningful metrics. Early steps might include formalising board processes, introducing or reviewing KPIs or strengthening financial controls.

Our survey found that 62% of VC firms reviewed and updated KPIs within the first 100 days following investment. Monitoring plays a vital role not only in creating value, but also in demonstrating it—for example, through showing a company’s adherence to regulatory standards.

A report, produced by Public First for UK Private Capital, highlighted that private capital backers are essential in supporting the capabilities of management teams, and in setting up and running effective boards. VC-backed businesses are typically fast-growing, with founders still present and so they stand to benefit from the broader set of corporate governance expertise that their backers can provide.

Building equity value

The expertise of venture capital firms can also provide a broader focus for value creation. That same report finds that private capital firms highlighted how they emphasised governance as an essential part of building equity value within their portfolio companies.

A final way in which the venture capital firms leverage their expertise is by supporting internationalisation. Penetrating foreign markets can be essential for national players to find new companies and achieve growth. VC firms can provide the contacts, know-how and resources to sell into these markets, driving up exports. This has an additional benefit for the UK.

According to a report from The Enterprise Research Centre, there is a strong relationship between growth and exporting, and so increasing exports could play a key role in closing the UK’s productivity gap. This internationalisation can also enable companies to source talent more effectively, providing access to broader talent pools and capitalising on comparative skills advantages in different countries.

Venture capital firms don’t even have to invest in companies to make an impact on them. Recent academic research has found that simply going through a due diligence process, even without ultimately receiving capital, can deliver a positive impact. Startups that are selected for due diligence by a prospective VC backer—even without securing investment from that investor—grow, on average, 30% within two years. The analysis also found that weaker firms wound down faster than they would otherwise.

Through due diligence processes, founders learn from feedback, benefit from referrals, and can gain credibility simply by being shortlisted. Preparing for due diligence creates stronger governance structures and a better foundation for long-term growth.

Mitigating risk and building resilient businesses

Governance plays a crucial role in risk management, something which is particularly important as businesses get ready to scale. Being prepared for increased exposure to cyber threats, data protection requirements, reliance on supply chains and regulatory scrutiny puts VC-backed companies in the best place to grow at pace.

UK Private Capital’s annual ESG survey confirms that these issues are on the radar of VC-backed firms. It shows that most member backed firms have clear policies in place covering cybersecurity, customer privacy and anti corruption. These frameworks are essential for portfolio companies, protecting value across the business and maintaining trust with external stakeholders.

Good governance doesn’t always make headlines, but it is one of venture capital ownership’s most important strengths. It ensures that the rapid growth achieved by successful scale-ups is underpinned by strong fundamentals, and that contribution has never been more important.

Karim Palant is director of external affairs at UK Private Capital