Backing Innovation: University Spinouts Factsheet
The British Business Bank is the UK's economic development bank. Our mission is to drive sustainable growth and prosperity across the UK, and to enable the transition to a net zero economy, by supporting access to finance for smaller businesses. We deliver a wide range of finance programmes, each designed to address a market gap and support smaller businesses’ access to both debt and equity finance.
Backing innovation is a strategic objective for the Bank, ensuring innovative businesses can access the right capital to start and scale. We form an important part of the innovation funding landscape through our equity programmes, which invest in high-growth, innovative UK businesses, and in supporting UK debt markets, which help firms to innovate both their products and processes. Boosting business innovation is essential to the UK’s future prosperity, and key to the delivery of new jobs, better living standards and long-term economic growth.
Why are university spinouts important?
The creation of spinout companies is an important avenue through which founders and universities can commercialise cutting edge academic research. Beauhurst define an academic spinout as a company that was set up to exploit IP developed by a recognised UK university and then either licences the IP from the university, or the university owns or has the option to purchase shares in the company. It is important to note that staff or students can set up start-ups which would not meet this definition.
The British Business Bank's 'Small Business Equity Tracker' outlines how the value of equity deals involving university spinouts has increased in the UK:
Number and value of university spinout deals over time
Source: British Business Bank analysis of Beauhurst data
What is the British Business Bank doing?
The British Business Bank has a number of programmes that support university spinouts. British Patient Capital, the Regional Angels Programme and Managed Funds were the largest contributors, together making up 71% of the Bank's equity deals into university spinouts, between 2020-22.
British Business Bank (BBB), UK Research and Innovation (UKRI) and Innovate UK (IUK)
‘Backing innovation-led businesses: the role of public investment’ report, published by the British Business Bank and UK Research and Innovation, including Innovate UK found that university spinouts that receive funding from both the Bank and IUK are more likely to have better business and employment outcomes.
The research (published in February 2022), focused on a cohort of "research council spinouts" founded between 2010 and 2014, found that:
The 'Backing innovation-led businesses: the role of public investment' report also found that equity-backed spinouts are found across the UK, but those in the 'Golden Triangle' of London, Oxford and Cambridge secure the most investment. University and research institution spinouts are considered less London-centric compared to the wider UK venture capital market, but a lack of access to established finance ecosystems may be hindering investment outside of the Golden Triangle.
- Only 17% of spinout companies came from London, with a further 30% from the South East and East of England.
- Spinouts outside the Golden Triangle were less likely to access equity capital, with 40% raising at least one round of external equity, compared to 53% of those within the Golden Triangle.
- The value of capital raised differed even more substantially, with the median spinout in the Golden Triangle, having raised £5.7 million by year eight, compared to £1.4 million for the median spinout in the rest of the UK.
The Bank’s programmes are dedicated to helping smaller businesses wherever they are in the UK accessing the finance that is right for them. 16% of deals made by the Regional Angel’s Programme run by British Business Investment (BBI), one of the Bank’s commercial subsidiaries, went to university spinout companies. The Bank’s regional funds also made important contributions, with 27% of MEIF and 15% of NPIF equity deals supporting university spinout companies.
British Business Bank Backed Spinouts