University spinouts twice as likely to succeed when funded by UK funding agencies

Press release 14 July 2022

  • 97% of spinout companies that emerged from UKRI research and that received funding from the British Business Bank and Innovate UK are currently active
  • Spinouts with British Business Bank and Innovate UK funding exhibited stronger employment growth supporting a larger number of jobs
  • Equity-backed spinouts are found across the UK but those in the 'Golden Triangle' of London, Oxford, and Cambridge secure the most investment

University spinouts 3  ('spinouts') that emerged from research council investments and receive funding from both the British Business Bank and Innovate UK are more likely to have better business and employment outcomes according to a new report published today. The ‘Backing innovation-led businesses: the role of public investment’ report, published by the British Business Bank and UK Research and Innovation, including Innovate UK, explores the role of public funding and financing of innovation in the UK.

Better business outcomes 4

The report finds 97% of spinouts, companies that have been developed from a university’s research, that went on to receive funding from the British Business Bank and Innovate UK remain active, compared to 49% of those who did not. The median spinout with support from both the Bank and Innovate UK has 18 employees, compared to 4 for spinouts that had not had funding from either - a difference of more than four times. In fact, 91% of spinouts with funding from both report having employees, compared to only 43% of spinouts not funded by either.

Better external equity capital outcomes

Spinouts with additional funding support from both the British Business Bank and Innovate UK also raised more external equity capital. Eight years after incorporation, spinouts with support from both organisations had raised 4.6 external equity rounds on average, compared to 2.9 rounds for those that had not had funding from either. The median value of this equity investment was £7.3 million, compared to £1.6 million for those not funded by either. Spinouts with additional funding support also received higher levels of private ‘follow-on’ equity capital, with 55% raising at least five rounds of finance. This surpasses expectations from wider market data, which show that approximately 28% of companies who raise an initial funding round manage to raise at least five rounds of finance.

Geographic inequality in accessing financial market persists

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 located widely across the UK and are considerably less London-centric compared to the wider UK venture capital market. In fact, the report found that 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. As tested in the report, differences in the quality of the research base, effectiveness in creating spinouts, or industrial sectors, do not appear to explain this. Instead, a lack of access to established finance ecosystems may be hindering companies outside of the Golden Triangle.

  • 3

    ‘UKRI research council-backed spinouts’ (‘spinouts’) refers to companies backed by UKRI research council grant funding, which have emerged from UK research institutions, including (but not limited to) universities

  • 4

    Status and employment data is for companies founded between 2010 -2014 and are active as at 26/02/2022

Investing in innovation-led businesses, is an essential part of fostering an innovation economy, and central to strengthening the UK’s position as a global science superpower. The British Business Bank is committed to driving sustainable growth and prosperity across the UK, and our programmes will continue to fund R&D intensive businesses including spinouts from the UK’s universities and research institutes. By doing so, we will help lead the way in turning UK innovation ambition into a reality. Catherine Lewis La Torre CEO, British Business Bank
As the UK’s innovation agency, Innovate UK is focused on delivering products and services to support the innovation journey and to help to make innovative businesses more investable, robust, and able to access capital for growth. So, I welcome both this report and the strong collaboration with British Business Bank. The report’s findings reflect my strong personal commitment to a joined up offer to innovative businesses to better exploit the strengths of the UK’s excellent research base. Indro Mukerjee Chief Executive, Innovate UK
To drive an innovation-led UK economy, we must be able to form and scale R&D intensive innovative businesses. This report clearly demonstrates the added value of our organisations in supporting better business outcomes. In understanding how businesses access the support we each deliver and making this process smoother and better coordinated, we will support emerging businesses better and in turn play a key role in driving an R&D intensive economy and delivering better outcomes right across the UK. Professor Dame Ottoline Leyser DBE FRS CEO, UK Research and Innovation

An unpredictable innovation financing pattern

Businesses that have received funding from both the British Business Bank and Innovate UK demonstrate that there is no standard sequencing of funding events. This directly challenges the idea of a linear ‘funding escalator’ which is often seen as grants to research institutions, followed by business grant funding, then external equity finance and finally debt finance. Almost as many businesses (44%) received funding from the British Business Bank before securing any Innovate UK grant funding than they did afterwards (56%), across recipients of both the Bank’s debt and equity programmes.

Notes to editors

About the report

The Backing innovation-led businesses: the role of public investment report is built from merging business datasets held by UKRI (including Research Councils and Innovate UK) and the British Business Bank, then examining where crossover is naturally occurring, and finally highlighting any interesting dynamics and outcomes.

The total combined dataset comprised 75,890 companies backed through British Business Bank investments, 14,594 backed through Innovate UK programmes, and 2,306 ‘research council spinouts’ who’d received support from UKRI research councils.

The natural crossover in this combined dataset showed that:

  • 37% of research council spinouts either received funding for R&D projects from Innovate UK (33%), investment through one of the Bank’s programmes (10%), or both (6%).
  • Substantial crossover also exists between the Bank and Innovate UK in companies that have not been identified as research council spinouts – 1,317 businesses received R&D project funding from Innovate UK and investment from the Bank, without being linked to research council funding to universities.

About the British Business Bank

The British Business Bank is the UK government’s economic development bank. Established in November 2014, its mission is to drive sustainable growth and prosperity across the UK, and to enable the transition to a net zero economy, by improving access to finance for smaller businesses. Its remit is to design, deliver and efficiently manage UK-wide smaller business access to finance programmes for the UK government.

The British Business Bank’s core programmes support over £8.5 billion1  of finance to almost 95,000 smaller businesses2 . The British Business Bank is responsible for running the government’s Coronavirus business loan schemes and Future Fund, together responsible for delivering £80.4 billion of finance to 1.67 million businesses. The schemes are now closed to new applications.

As well as increasing both supply and diversity of finance for UK smaller businesses through its programmes, the Bank works to raise awareness of the finance options available to smaller businesses.

The British Business Bank Finance Hub provides independent and impartial information to businesses about their finance options, featuring short films, expert guides, checklists and articles from finance providers to help make their application a success. In light of the coronavirus pandemic and EU Exit, the Finance Hub has expanded and it now targets a wider business audience. It continues to provide information and support for scale-up, high growth and potential high growth businesses, but now provides increased content, information and products for businesses in survival and recovery mindsets. The Finance Hub has been redesigned and repositioned to reflect this, during this period of economic uncertainty.

British Business Bank plc is a public limited company registered in England and Wales, registration number 08616013, registered office at Steel City House, West Street, Sheffield, S1 2GQ. It is a development bank wholly owned by HM Government. British Business Bank plc and its subsidiaries are not banking institutions and do not operate as such. They are not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). A complete legal structure chart for the group can be found at

About UKRI

UKRI is the UK’s largest public funder of research and innovation. We invest more than £8 billion annually to advance our understanding of society and the world around us and deliver benefits for society, the economy and the environment.

Our organisation comprises nine councils. In summary, they are:

  • Research England, which is responsible for supporting research and knowledge exchange at higher education institutions in England, working closely with the equivalent body in the devolved administrations– seven disciplinary research councils, which fund specific disciplines in the research base, such as arts and humanities, or engineering and physical sciences
  • the UK’s innovation agency, Innovate UK, which drives productivity and economic growth by supporting businesses to develop and realise the potential of new ideas

As a UK-wide organisation we work across the four UK nations and with the devolved funding bodies and governments to understand and support different priorities that span research and innovation in different parts of the UK.

Through our Councils and the critical national capabilities provided by our centres, units and institutes, we deliver, support and champion the creativity and vibrancy of research and innovation in the UK, for the benefit of society, creating opportunities for all. UKRI is a non-departmental public body sponsored by the Department for Business, Energy and Industrial Strategy (BEIS).

  • 1

    Figures as at 31 March 2021

  • 2

    Figures as at 31 March 2021