Support for UK University Spinouts

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The UK university spinout landscape has seen significant growth over the past decade and is now only second to the US in total investment with spinout investment increasing five-fold from £1.06 billion in 2014 to £5.3 billion in 2021.
What are the main aims and objectives?

The main aims and objectives of supporting university spinouts are to translate academic research into commercial success and drive economic growth and innovation. Universities aim to maximize the impact of their research by creating spinout companies that can develop and commercialize new technologies. This helps bridge the gap between academic discoveries and practical applications that can benefit society. Supporting spinouts allows universities to foster an entrepreneurial culture, create jobs, attract investment, and generate revenue through equity stakes and licensing deals. It also enables academics to pursue commercial opportunities while maintaining connections to their research. 

More broadly, spinouts are seen as crucial for positioning the UK as a global science and technology leader, contributing to regional development, and addressing major societal challenges through innovation. The government and universities aim to create supportive ecosystems with funding, infrastructure, and expertise to help spinouts start, grow, and scale successfully.

How does the program work?

UK universities support spinouts through a combination of policies and infrastructure designed to foster innovation and facilitate the commercialization of research. Key elements include:

  1. Technology Transfer Offices (TTOs): These offices are crucial in managing intellectual property (IP) and supporting the spinout process. They work with academic researchers to identify commercial opportunities, protect IP, and decide whether to license it or create a spinout. TTOs often provide guidance on patent applications, licensing agreements, and negotiations with investors.
  2. Entrepreneurial Training and Support: Many universities offer training programs to equip researchers with the necessary skills to launch and manage spinouts. This includes workshops on business planning, fundraising, and commercialization strategies. Universities also provide mentorship and access to networks of experienced entrepreneurs and investors.
  3. Funding and Investment: Universities often have affiliated investment funds or partnerships with external investors to provide financial support for spinouts. These funds help bridge the gap between research and market, offering seed funding and access to venture capital. Some universities have established shared TTOs to pool resources and expertise, particularly beneficial for smaller institutions.
  4. Infrastructure and Facilities: Universities provide access to essential infrastructure, such as laboratory space, equipment, and collaborative workspaces. This infrastructure supports the development and scaling of spinouts, offering a conducive environment for innovation.
  5. Founder-Friendly Policies: To streamline the spinout process, universities are adopting more transparent and founder-friendly policies. This includes standardizing deal terms, reducing university equity stakes, and ensuring fair equity distribution among founders. These policies aim to attract investment and encourage academic entrepreneurs to commercialize their research.
  6. Collaborative Ecosystems: Universities foster partnerships with accelerators, incubators, and industry stakeholders to create supportive ecosystems for spinouts. These collaborations provide additional resources, expertise, and market access, enhancing the potential for spinout success.

Overall, UK universities are actively developing policies and infrastructure to support spinouts, recognizing their role in driving economic growth and technological advancement.

What is the overall cost?

There is no information on the overall cost of supporting university spinouts across the UK.

How was it implemented?

The UK university spinout landscape has seen significant growth and development over the past decade, with investment in spinouts increasing five-fold from £1.06 billion in 2014 to £5.3 billion in 2021. The UK is now second only to the US in total investment into spinouts globally. This growth reflects the strength of the UK's research base and the increasing focus on commercialization of university research.

Many UK universities have developed sophisticated technology transfer offices and support structures to facilitate spinout creation. Leading institutions like Oxford, Cambridge, Imperial College London, and University College London have particularly strong track records in generating successful spinouts across sectors like life sciences, AI, quantum technologies, and clean energy. These universities have implemented founder-friendly policies, streamlined processes, and developed partnerships with investors to accelerate spinout formation and growth.

However, the spinout landscape is not uniform across the UK. There is a concentration of activity and investment in the "golden triangle" of Oxford, Cambridge, and London, which accounts for around 75% of spinout investment. Other regions, particularly in the North of England, Scotland, Wales, and Northern Ireland, face greater challenges in accessing investment and support for spinouts. Some universities and regional partnerships are working to address this imbalance through initiatives like Northern Gritstone and Midlands Mindforge.

Overall, while the UK has made significant progress in developing its university spinout ecosystem, there are opportunities to build on this success by addressing regional disparities, improving processes, and ensuring spinouts have access to the support and capital needed to scale within the UK.

What impact has been measured?

The UK government's independent review of university spintout companies found: 

  1. Increasing numbers: The number of spinouts created each year has generally increased over time. For example, in 2014/15 there were 126 spinouts created, while in 2021/22 there were 176 spinouts created.
  2. Growing investment: The amount of external investment raised by spinouts has increased substantially. In 2014/15, spinouts raised £1.06 billion in external investment. By 2021/22, this had grown to £5.29 billion.
  3. More active spinouts: The number of active spinouts (those still operating after 3 years) has grown over time. In 2014/15 there were 1,090 active spinouts, increasing to 1,547 by 2021/22.
  4. Increasing patent activity: Universities have been filing more patent applications and being granted more patents over time, providing more intellectual property to potentially commercialize through spinouts.
  5. Growth in staff/graduate start-ups: In addition to formal spinouts, there has been growth in the number of start-up companies created by staff and recent graduates, from 4,160 in 2014/15 to 5,447 in 2021/22.
  6. More licensing income: Income from intellectual property licensing to spinouts and other companies has generally increased, from £155 million in 2014/15 to £244 million in 2021/22.

The data shows a clear trend of growth and increased activity in university spinouts and commercialization efforts over the past 7-8 years, with more companies being created, raising larger investments, and generating more economic impact.

What lessons can be learned?

The main recommendations from the independent review of UK university spin-out companies include:

  1. Accelerate towards innovation-friendly university policies, including: agreeing spin-out deals on market terms, avoiding unnecessary negotiations; using equity splits of 10-25% university equity for life sciences spin-outs as a starting point; developing guidance for software and hardware/engineering spin-outs, with lower equity stakes (10% or less) for software-only spin-outs; developing template term sheets to streamline negotiations; universities having clear timelines for the spin-out process; encouraging proportionate equity distribution among founders
  2. Increase data and transparency on spin-outs through a national register and universities publishing more information about typical deal terms.
  3. Use Higher Education Innovation Fund (HEIF) to reduce the need for universities to cover technology transfer office costs from spin-out income.
  4. Create shared technology transfer offices to help build scale for smaller research universities.
  5. Increase government funding for proof-of-concept and translational research funds.
  6. Emphasize research commercialization and spin-outs in the Research Excellence Framework (REF) impact criteria.
  7. Ensure founders have access to experienced support services across all regions and sectors.
  8. Provide entrepreneurship training and internship opportunities for PhD students funded by UK Research and Innovation (UKRI).
  9. Ensure university-affiliated investment funds still allow attracting wider investors.
  10. Continue reforms to support scale-up capital and UK capital markets.
  11. Improve funding to enable movement between academia and industry, including academic "buy-out" time and returner fellowships.

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom