University spinouts target medical innovation using increased grants

Spotlight on spinouts: UK academic spinout trends examines where and how effectively innovations developed in universities are being turned into real-world products, processes and commercial successes. Gathering evidence together in one place for the first time on the current state of the UK spinout landscape, the report identifies a potential trend towards spinouts attracting less new investment but more follow-on funding.

The data compiled includes which universities are successfully generating spinouts, their geographic spread, top sectors, investments and who is making them, survival and growth rates and exits, Innovate UK grants, and gender and nationality of leadership. The IP policies and stakes taken by universities are also examined. 

Findings in the report include:

• Spinout companies raised a record £1.30bn equity investment in 2018. The number of deals secured remained similar in 2019, but the amount invested decreased by 18%. While the data for 2020 remains incomplete and the full impact of the COVID-19 pandemic on spinout success and investment trends remains to be fully understood, the significantly increased average investment size could suggest a trend of more follow-on funding and less new investment.
• Grants are becoming increasingly important as sources of funds for spinouts.
• On average it takes a spinout almost ten years to exit by IPO or acquisition, and 41% of spinouts ceased activity between five and ten years of age.
• Only 20% of founding teams included a female member and only 12% of spinouts have at least one female director.
• Ethnicity data on spinout founders and directors presents a clear gap, limiting our ability to understand and improve D&I.
• A surprisingly small number of investors account for the bulk of activity, the largest of which collapsed earlier this year.
• Over half of spinouts incorporated since 2015 saw a university take an equity stake. Where this was the case, the average stake taken by a UK university in the year of spinning out is 22% - but this varies greatly by institution and by type of spinout.

Building on its own work to boost innovation through its Enterprise Hub, the Royal Academy of Engineering intends to use the evidence to inform the wider debate about UK innovation and enterprise. The data will be updated annually to track progress, identify the impact of any changes and draw firmer conclusions on the state of UK spinouts.

Science Minister, Amanda Solloway said: “Accelerating the time between concept and commercial application is critical to the UK’s productivity, growth and social benefits. I’m delighted that this report will help shine a light on what is required to build successful university spinouts, including how we increase diversity and maximise the commercial opportunities presented by the UK’s exceptional academic institutions.”

David Cleevely CBE FREng, Chair of the Enterprise Committee at the Royal Academy of Engineering, said: “Spinouts are a key vehicle for getting the incredible ideas and innovations developed in our UK universities into real world products and processes. As a national academy for engineering and technology, we want to understand how that is being achieved across the country, where learning could be shared, and what best practice might look like. This report aims to provide a baseline understanding of UK spinouts - how many, how much, who and where - and provides food for thought as to where we go from here. I look forward to future work from the Academy as we work with others to develop our understanding - through what I hope will become an annual report.”

Maria Dramalioti-Taylor, Partner at Beacon Capital LLP and project steering group member, said: “For investors, spinout companies represent cutting edge technology and innovation. These companies also represent a particularly interesting intersection of people and skills - people with incredible science and engineering know-how who are also entrepreneurially-minded and driven to transform the industries they are working in and monetise their innovations.”

Since the Royal Academy of Engineering’s Enterprise Hub was established in 2013, it has supported over 230 researchers, recent graduates and SME leaders to startup and scaleup their businesses. As an organisation without a stake in the companies it supports, it is uniquely placed to provide an independent voice whose understanding is rooted in the experiences of both academia and industry.

This report forms the first part of a project on IP and commercialisation for university spinouts being undertaken by the Academy.  A practical guide for entrepreneurs wishing to spin out from their universities will be published in autumn 2021, based on the experiences of Enterprise Hub members. A series of workshops, masterclasses and blogs on related topics will accompany the guide.