Despite being an internationally renowned centre of academic excellence, the UK is struggling to commercialise the innovations its research creates. Andrew Tingey discusses why the UK’s spinout sector is faltering, and whether recent guidance and recommendations are enough to save it.
For several UK businesses that trace their roots back to university research, 2024 was a good year. An Imperial College London spinout formed in 2019 raised £90 million in July. November saw a former spinout from the University of Oxford secure a US$250,000 grant from the US Food and Drug Administration (FDA), while, in December, a former University College London spinout announced its merger with a Seattle-based company to commercialise its innovations in the US.
Given the calibre of research generated by the UK’s universities, three of which are in the top ten for the Times Higher Education World University Rankings 2025, one would think that success stories within its spinout sector would be in abundance.
The sector as a whole, however, tells a rather bleaker story, one in which the technology transfer offices (TTOs) that incubate and support spinouts from research to commercialisation are running out of money.
A question of capital
Historically, sources of much-needed capital have come in the form of both government funding and private investment. Both of these are drying up.
Private investors, for example, are diverting capital away from early stage, seed portfolios into safer, lower risk asset classes. Support from the universities themselves is also dwindling, with many universities currently in a state of cash flow crisis.
According to Beauhurst’s 2024 Spotlight on Spinouts report, investment in spinouts declined significantly in 2023, with equity investment falling from a total value of £2.36 billion to £1.66 billion between 2022 and 2023.
The problem is even more acute for spinouts and TTOs located outside of the Golden Triangle of Oxford, London and Cambridge, which receive just a quarter of all spinout investment.
Given the calibre of research generated by the UK’s universities, three of which are in the top ten for the Times Higher Education World University Rankings 2025, one would think that success stories within its spinout sector would be in abundance
Economic impact
When spinouts are properly supported, however, their impact on the UK’s economy is significant.
According to data from London Economics, businesses that were spun out of 24 Russell Group universities supported 80,000 jobs and generated £17.8bn in economic impact between 2021 and 2022 (the earliest period for which such data is available).
This research, if brought to market, also has a demonstrable impact on society given that it frequently encompasses advances in fields such as life sciences, pharmaceuticals and software.
Proof of concept
The new Labour Government has already pledged to tackle the funding crisis that is plaguing the UK’s spinout sector. In its Autumn 2024 Budget, Labour promised to increase the Department for Science, Innovation and Technology’s budget to £13.9bn, while also committing £520m to the Life Sciences Innovative Manufacturing Fund.
One of its key proposals, however, is a £40m investment in a ‘Proof of Concept’ fund. This is important, as it will potentially help very early-stage businesses to cross the so-called ‘Valley of Death’ after research grants have been exhausted but before the research becomes viable and attractive to venture capital investment.
Increasing the spinouts sector’s attractiveness to private investment is also on the agenda, with numerous guides, reports and recommendations published in both 2023 and 2024 identifying the best ways in which to do this.
TenU, an international collaboration of TTOs, has published its University Spin-out Investment Terms (USIT) guides to establish the optimal amount of equity universities should take in any given spinout during its commercialisation. In most cases, these guides suggested that universities needed to reduce their equity down to 10 to 25% for life sciences spinouts and to less than 10% for software.
The response to this guidance has been mixed. In a recent survey of our contacts in TTOs across the UK, most respondents were sceptical of just how effective the suggestions within the USIT guides would be, given that the spinout sector’s systemic challenges go beyond a simple issue of equity.
“Access to investment funding is more important than university equity,” one respondent commented. “We have never had a spinout investment fail because of a university equity stake.”
It is hardly surprising, then, that more than half of our respondents would not change any policies or practices regarding equity, despite almost all being aware of, and reading, the USIT guidance.
Thinking outside the triangle
Regional disparities also extend beyond access to investment and funding. TTOs located outside of the Golden Triangle have less immediate access to muchneeded guidance and support that would help their researchers make the transition from academic to entrepreneur.
The need to consolidate and provide targeted expansion of “the existing landscape of support services” is one of many recommendations put forward by 2023’s Independent Review of University Spin-Out Companies, although it is not yet clear how even distribution of resource and support would be guaranteed outside of the south east.
We are already seeing one possible solution in the creation of ‘clusters’, in which TTOs pool their resources, funding and staff to develop an enhanced research commercialisation capability.
This approach is further incentivised by the launch of the CCF-RED: Shared Technology Transfer Office Functions Pilot. Again, many of our respondents were doubtful that the formation of clusters could be universally replicated. Universities are, after all, “collaborative, but also competitive”, as one respondent remarked.
No one size fits all
The success of the UK’s spinout sector is often exemplified with reference to the Golden Triangle, but there is also a significant amount of untapped potential outside of the south east. Indeed, the Golden Triangle demonstrates the positive impact of a spinout ecosystem that is self-sustaining, well-funded and properly supported.
That is not to say, however, that practices within the Golden Triangle can and should be replicated elsewhere. The UK’s spinout system is highly diverse, with needs and capabilities varying greatly from region to region, and even TTO to TTO.
It is therefore better to increase the availability of funding and support for regions outside of the south east, allowing them to apply it in whichever way will best help them to achieve their full potential, both for the innovative research that takes place within their walls, and for the UK’s economy as a whole.
Andrew Tingey is director of Licensing & IP Transactions at Symbiosis IP
