Boost for businesses created at universities

• £20 million for university-created businesses to be granted by the Chancellor
• New rules will mean businesses get bigger share of capital to help them scale and grow

The Chancellor is to inject £20 million into universities to foster more ‘spin-out’ companies, firms created using research done in universities.

The cash – which was recommended by a wider independent review – will help create the next generation of university spinouts, like Oxford Nanopore, a biotech firm which was founded at Oxford University in 2005 and recently valued £3.4 billion.

Spin-out companies raised £5.3 billion in investment in 2021-22 alone. Today’s announcements are designed to increase investment for the future and help ensure researchers in our world-leading universities have the tools they need to start, scale, and grow innovative new businesses in the UK.

The independent review – led by a leading academic Professor Irene Tracey and venture capitalist Dr Andrew Williamson – recommends innovation-friendly policies that universities and investors should adopt to make the UK the best place in the world to start a spin out company.

In the past, many spin-outs deals were created from scratch, which is both inefficient and sometimes fails to learn the lessons from previous success stories. Today’s recommendations aim to speed up the process and build on TenU’s University Spin-out Investment Terms (USIT) Guide by recommending 10% or less university equity for less-IP-intensive deals, common in software.

The Chancellor has accepted all the recommendations and will set out his full response as part of the Autumn Statement tomorrow.

This move will help deliver the Prime Minister’s pledge to grow the economy by supporting our world-leading university research institutions, which generate around £10 billion a year for the economy.

It comes as the Chancellor is convening representatives from several universities and investors at University College London (UCL) East where they will endorse a new set of ‘best-practice policies’ that are recommended by the review.

Chancellor, Jeremy Hunt, said:

“Innovative, globally competitive businesses like Oxford Nanopore are making a huge contribution to our economy.

“It’s critical that we harness this potential and give universities the tools they need to translate cutting edge research into exciting UK businesses that start and grow in the UK.”

A full package of measures in tomorrow’s Autumn Statement will support these businesses to access the capital they need to start, scale and thrive. This will help produce the next generation of globally competitive science and technology companies based here in the UK.

The new measures include:

• At least £50m additional funding for the British Business Bank’s successful ‘Future Fund: Breakthrough’ programme – that will provide direct investment to support the UK’s promising pipeline of R&D firms
• A Venture Capital Fellowship scheme to support the next generation of world-leading investors in our renowned VC funds, similar to the successful US Kauffman Fellowship
• New vehicles tailored to the needs of pension funds to help them invest the capital unlocked through the Chancellor’s Mansion House reforms.
• This includes £250m to support successful bidders, subject to contract, under the Long-term Investment for Technology and Science (LIFTS) initiative, and a new Growth Fund within the British Business Bank to give pension funds access to investment opportunities in the UK’s most promising businesses, which has been welcomed as a valuable addition to the market by seven pension funds
• Publish analysis showing the advantages that very large pension schemes can bring for investment in things like private equity – and outlining next steps on the Government’s pro-consolidation Value for Money pensions programme

Contact Information

Daniel Mulloy
Head of Financial Services & Climate
HM Treasury
daniel.mulloy@hmtreasury.gov.uk

Notes to editors

Supportive statements for the Spin-outs review specifically

• Science and Technology Secretary, Michelle Donelan, said:

“Turning new ideas and innovations into blossoming businesses is the bedrock of a vibrant economy and our £20m investment will drive more successful UK spinout companies like Oxford Nanopore and Darktrace, ensuring world-class research translates into world-leading industries.

“At the same time, we need clear rules on the stakes held by universities which offer world class facilities and expertise to get those companies off the ground, so we can back future generations of innovators, in turn creating more local jobs and growing our economy.”

• Co-leads for the independent review Professor Irene Tracey CBE, FRS, FMedSci, Vice-Chancellor of the University of Oxford, and Dr Andrew Williamson, Chair of the Venture Capital Committee at the British Private Equity & Venture Capital Association (BVCA) and Managing Partner of Cambridge Innovation Capital, said: “The UK's world-class university sector is a crucial driver of economic growth and innovation. Over the past eight months, we have engaged extensively with the major stakeholders in the UK's university spin-out ecosystem. Today's publication of our review and its recommendations are the culmination of this extensive work. We propose a set of spin-out terms and practices designed to foster a more collaborative and sharing environment among academia, entrepreneurship, and investment. Our hope is that this will increase the number of spin-outs, reduce the time to negotiate licenses, and increase the spin-out’s success rate. It was a privilege to contribute to this report and we are extremely grateful to our colleagues for their willingness to engage in the review, and especially the advisory board. Across diverse sectors, including AI, quantum computing, advanced therapeutics, diagnostics, and climate tech, university spin-outs across the UK are rapidly generating economic growth, societal impact, and fulfilling career opportunities for the next generation”.
• Responding to the recommendations set out in the Independent Review of Spin-outs Anne Lane, CEO of UCL Business (UCLB), said:

“For 30 years, UCLB has created successful spinout businesses from UCL’s ground-breaking research, which have raised £2.75 billion investment in the last 5 years alone.  As well as creating jobs and economic impact, these spinouts scale up solutions to complex societal challenges, from reducing carbon emissions to therapies for rare hereditary diseases.

“The recommendations published in this review will help universities harmonise the creation of spinouts. We look forward to working even closer with fellow universities, government, and the investment community to ensure a healthy and sustained flow of investment back into academic research whilst supporting the emerging world-changing businesses of the next 30 years.” 

• Professor Sir Anton Muscatelli, Principal and Vice-Chancellor of the University of Glasgow, said:

“I very much welcome the findings and recommendations of this Review and believe wholeheartedly in the untapped potential for innovation and entrepreneurship within our universities across the UK. Our institutions are at the forefront of the groundbreaking R&D which can drive productivity and economic growth across the country, and to be globally competitive we must ensure we are creating a framework which is investor-friendly, founder-friendly, nurtures university spinouts and unleashes this untapped potential.

Universities like mine are developing the technologies needed to fuel the UK’s economy and tackle the greatest challenges facing the world, so it is very welcome to see the UK Government recognise the integral role our institutions can play in facilitating the creation of new ventures to bring new ideas and breakthrough innovations to market. As a sector we look forward to working together with the Government in the months ahead to deliver the ambitions set out in the Review.”

• Michael Moore, Chief Executive, British Private Equity and Venture Capital Association said: “The independent university spin-out review is a hugely welcome statement of intent. Private capital has as important role to play by bringing both investment and expertise to transform the world class research in UK universities into world class businesses. The recommendations in this review can help to generate ways to get more capital working together with the best ideas to achieve that.”
• Julia Hawkins, Partner at LocalGlobe said: "Turning the UK’s world-leading science and innovation into viable global businesses takes so much more than just IP and investment. We applaud the recognition in this review that founders benefit from the support of experienced investors, who are also seasoned company builders. At Phoenix Court we co-founded the Newton Fellows program to help train the next generation of investors and entrepreneurs, and we especially welcome spinout founders and investors. We are also working with interns from PhD/Postdoc programs who are looking to gain experience of the investment and entrepreneurship worlds, and we want to do more in this area. And we have long argued that founders should not give up too much equity in their businesses and are delighted to have joined the TenU working group to recommend appropriate terms to help spinouts achieve market competitive terms that both incentivise and reward."

• Steve Bates OBE, CEO of the UK BioIndustry Association (BIA), said:

“Spin-outs are the lifeblood of life science innovation ecosystem. This report shows that the UK university spin-out process is getting simpler, faster, and more repeatable. This is creating a virtuous circle of increased deal flow, more life science companies and investor confidence in the UK.

“People moving easily both ways between academia and industry is key to successful research translation. This report demonstrates practically just how highly-connected the UK’s unique life science innovation ecosystem is.  It’s because of this collaboration that I’m confident the report’s recommendations will be delivered.” 

• Tim Bradshaw, CEO of the Russell Group, said:

“We're pleased this review highlights the enormous value spin-outs have added to the UK economy and demonstrates the vital role universities play in commercialising research and enabling new enterprises across a range of industries to flourish.

“These businesses simply would not exist without the resource, skills, and investment of our world-leading universities as well as support from the investor community and Government.

“In turn, university spin outs have created thousands of high value jobs right across the country, and we are eager to do even more. 

“We look forward to working closely with the Government and investors to build on the momentum from this review to ensure we can not only sustain but hopefully grow the already thriving UK spin-out eco-system.”

• Vivienne Stern, CEO of Universities UK, said:

“We welcome this review’s recognition of the positive impact and important role that university spin outs have on driving growth and supporting the national and local economy. We support the ambitions of the review for universities, investors and Government to come together and work collaboratively to maximise opportunities for university spinout activity. University spin outs create thousands of jobs across the UK and will play an important role in driving the economic growth and local regeneration that the country needs.”