University spin outs in perspective

And what might Government do to create more of them?

Hello Rainmakers!

We’re taking a look at the potential for university spin outs today.

It’s a subject we’ll return to again, and we’re keen to sit down with a few investors to see whether the balance and tone is right.

Why, for instance, have so many more of the Northern Gritstone investments come from Leeds and Sheffield, than Manchester?

But let’s look at the evidence and what might Rachel Reeves be weighing up as worthwhile Government interventions to stimulate investment in ideas from academia.

SPIN OUT SUCCESS IN PERSPECTIVE

In every era of supposed economic renewal, someone will pop and say that the great success story of British history - the university, can be an economic engine for spin outs and ideas to change the world.

Initiatives and reports are commissioned, funds are launched.

There are successes, but such is the nature of academic research, not all great scientific ideas necessarily lend themselves to robust and profitable investment opportunities.

The report cites Beaufort research that calculates investment into university spin-outs as having  increased from £1.11 billion in the academic year 2015/16, to £5.29 billion in 2021/22, which they say reflects “a maturing UK equity investment ecosystem and funding environment” over the past decade.

In context, in 2022 private capital firms in the UK raised a record £70.2bn, which brings the stock of available capital managed from the UK to £145bn.

The previous government had an ambition for the UK to be “a science and technology superpower”, with thriving partnerships between universities and high-tech spin-out companies contributing to economic growth and productivity. 

There’s no reason to suppose that the Labour government has dampened its ambitions, and with a funding crisis facing the UK's university sector, the need to encourage income development from other sources than tuition fees from students, is to be expected.

A Government commissioned independent report in 2023 called Independent Review of University Spin-out Companies noted that there were actually very few areas where businesses have come together to create world-leading spin-out ecosystems.