According to the annual Reuters ranking, the United Kingdom is home to some of Europe’s most innovative universities, from Imperial College London and the University of Manchester to King’s College London and the University of Edinburgh—each with expert commercialisation teams and innovation centres.
Universities are an essential part of any innovation ecosystem, nurturing the next generation of entrepreneurs in high-growth sectors such as healthcare, artificial intelligence and fintech. They can provide spinouts (companies created by university enterprise teams to develop innovations from academic research) with commercialisation strategies, physical space, access to equipment, talent and local business networks, and help with securing grants or equity funding.
Indeed, spinout companies need all kinds of support from universities to maximise their commercial potential. Take Ultraleap, for instance, which develops hardware to track the spatial movements of users to interact with digital content. The company was spun out from the University of Bristol in late 2013, after computer science PhD candidate Tom Carter (now CEO) won the University’s New Enterprise Competition, receiving £15k and support from the SETsquared Bristol incubator.
Since then, the extended reality (XR) firm has been awarded six innovation grants from Horizon 2020 and Innovate UK, secured £144m in equity investment, attended Tech Nation’s Future Fifty accelerator, reached 20% scaleup status, and been featured on five separate high-growth lists. It acquired US company Leap Motion in 2019 and now has over 150 employees, across its offices in Silicon Valley and Bristol, counting Intel, Qualcomm and LEGO as key clients.
The number of spinout companies active in the UK has been growing steadily over the last decade. Here, we explore some of the factors contributing to a spinout’s success, and hear from four top UK universities about the support they provide to new companies.
Which innovative universities did we speak to?
UCLB (University College London)
Part of UCL Innovation & Enterprise, UCLB works closely with academics to explore commercial markets for their ideas, develop the right organisational set-ups, and ensure that any unique and vital intellectual property (IP) is protected and can be defended: “Our services enable researchers to navigate the complexities of bringing new ideas to market for the first time[…]this can take years of funding and bespoke support to achieve.”
So far, University College London has spun out 88 companies, with 42% operating in the life sciences sector, including Quell Therapeutics, Autolus and Synthace. UCL spinouts have raised £1.37b in equity funding rounds over the past decade, with the average amount of investment secured by its spinouts (£15.6m) exceeding all other UK universities.
Cambridge Enterprise (University of Cambridge)
Cambridge Enterprise is a wholly-owned subsidiary of the University of Cambridge that works to translate university research into economic and social impact. Cambridge Enterprise provides entrepreneurs with expert advice in commercialisation, including help with academic consultancy services, the protection, development and licensing of IP, new company creation, and investment.
The University of Cambridge has spun out 138 companies to date, including digital security unicorn Darktrace and medtech company Gyroscope Therapeutics. Altogether, Cambridge spinouts secured £2.12b worth of equity investment between 2011 and 2021, and over £100m in grant funding from Innovate UK and EU programmes.
OUI (University of Oxford)
Oxford University Innovation, or OUI, is a subsidiary of the University of Oxford which manages its tech transfer and consulting services. It supports academics initially through business planning, pre-seed and seed funding, arranging introductions to investors, and protecting the underlying IP, and then through continued investment and guidance, post-formation.
The University of Oxford has the highest number of spinout companies in the UK, with 195 to its name. These include Oxford Nanopore Technologies, Vaccitech, cleantech company Oxford Photovoltaics and driverless vehicle software firm Oxbotica. Collectively, University of Oxford spinouts have secured more investment than spinouts from any other academic institution in the UK, and £3.02b worth of equity fundraisings between 2011 and 2021.
InnovationRCA (Royal College of Art)
InnovationRCA is the Royal College of Art’s centre for entrepreneurship, helping staff, students and alumni transform compelling ideas into successful businesses. Its services include IP advice and support, as well as incubation and acceleration, with expert coaching and business mentoring. InnovationRCA also provides companies with pre-seed investment, office space, and access to making and testing workshops.
RCA has spun out 58 ambitious businesses so far, including agritech startups Zelp and Loowatt, wearables company Charco Neurotech and VR company Gravity Sketch. RCA spinouts secured a total of £101m in equity funding between 2011 and 2021, and represent the highest proportion of female-founded spinouts of any educational institution in the country: “InnovationRCA is woman-led and has always presented positive female role models to its aspiring entrepreneurs through its activities and events.”
How do universities decide which ventures to commercialise?
Not all university-owned IP will be spun out into a new business. For Cambridge Enterprise, its team focuses on research-driven innovation opportunities from academics. With large investments, Cambridge Enterprise’s 15-member Investment Committee (made up of leading investors, entrepreneurs, angels, and academic founders) formally assess new business plans. Student founders and recent alumni of the University of Cambridge are also eligible for seed funding, in particular if they own their own IP or are applying knowledge gained during their university studies.
For the past seven years, Cambridge Enterprise has also run a Postdoc Business Plan Competition, which has produced a number of successful spinouts. The competition process includes workshops on business plan creation and pitching, as well as mentoring, with a first place prize of £20k in investment (£10k for second place and £5k for third). Since the start of the programme, semi-finalists and finalists that went on to develop spinout companies have collectively raised £26.3m worth of investment.
Similarly, alongside supporting researchers looking to commercialise their work, OUI runs its StEP Ignite programme, providing students at the University of Oxford with access to IP, mentoring and stipend for an intensive company creation course. OUI also operates a social ventures programme, which offers a route to company formation for ideas with a strong social mission (e.g. sustainability or COVID-19 response) that don’t fit the typical spinout model.
How do universities support their spinout companies?
Some of the key ways in which universities facilitate innovation in the UK is through providing academics and spinout companies with the funding, space and networks required to scale their ideas.
Spinout investment
As Mairi Gibbs, Chief Operating Officer at OUI, tells us: “we’re particularly mindful of how many hurdles there are in turning an academic concept into a fully-fledged business, often known in tech transfer as the “valley of death”. Consequently, OUI and our partners offer a range of services to support their journey.” These include pre-seed and seed funds to help its spinouts to grow, as well as sector-specific funds, such as Oxford’s life science-focused LAB282 fund. OUI invests up to £4m per annum into its spinouts on behalf of the University of Oxford, often taking observer seats, offering guidance and support to new companies.
For UCLB, the UCL Technology Fund (managed by AlbionVC) provides funding for University College London spinouts, from lab to IPO. The fund can also directly support academics to progress their projects, to improve licensing outcomes with industry partners. Meanwhile, The Social Ventures POC Fund provides funding and support for UCL researchers who want to commercialise their research for societal benefit.
UCLB explains: “Spinouts can often be highly capital-intensive, so we want to ensure the best ideas have the finance they need to scale up and succeed[…]We seek to maintain relationships over the long term, including board and advisory representation, so we can maximise our impact. This is especially key when it comes to unleashing the potential of ‘slower burn’ spinouts that are effectively locked out of the well-trodden VC funding pathway for company growth.”
Likewise, Cambridge Enterprise offers numerous funding options to its spinouts, and advises on translational or early-stage investment to help scope the commercial potential of ideas. Translational funding is used by spinouts to bridge the gap between early tech development and its commercialisation. In most cases, a member of Cambridge Enterprise’s Seed Funds team will sit on the board of a spinout during the early stages of its development.
Cambridge Enterprise provides Pathfinder funding for market/IP assessments and building business strategies (up to £20k), Software Pathfinder funding to carry out minimal viable product development (up to £20k), and Fast 75 funding to gather additional data and initial customer feedback (up to £75k), in preparation for a company’s first external raise. It also provides initial seed investment of up to £1m, typically matched by Parkwalk (one of the most active investors in the UK private market in 2021) through its University of Cambridge Enterprise Fund.
Workspaces
Many universities across the country have developed state-of-the-art labs and workspaces for their spinouts. For instance, the University of St Andrews has its Eden Campus innovation centre, focused on sustainable science and tech, with specialist equipment and facilities, as well as a dedicated Entrepreneurship Centre for students, academics and staff. Cardiff University, meanwhile, provides space for biotech and medtech startups at its Cardiff Medicentre incubator, and is currently building a new innovation campus.
The OUI Incubator offers similar support to students and alumni of the University of Oxford, having launched 43 new startups since its creation 10 years ago, while the student-focused Oxford Foundry accelerator also provides entrepreneurial workspace in the city centre.
Recognising that space is a key limiting factor for high-growth businesses, and that “building a world-class innovation ecosystem on the back of a small medieval city is not without its challenges”, OUI is developing new innovation districts in and around Oxford. “We’re putting in new wet labs wherever we can find space[…]working with the local government and employers to find ways to improve Oxford’s infrastructure.”
InnovationRCA runs a high-growth startup incubator programme of its own, offering guidance on everything from human resources and team building to manufacturing and financing. Its purpose-built incubator provides spinouts with dedicated workspaces and access to RCA’s workshop facilities, as well as studios, technical expertise and staff.
Networks
According to UCLB, where the team “particularly excel in generating spinouts is through the ecosystems and networks that surround our university, which play an important role in actively sparking and fostering innovation. For example, UCL’s clinical innovation environment is grounded in a ‘bench to bedside’ approach that sees many leading researchers working closely and often holding joint appointments with UCL’s associated hospitals”.
Collaboration is crucial to the success of any innovation ecosystem, and partnerships between universities and the private sector can also help set up new companies for success, whether it’s through access to external investment or mentors. Cambridge Enterprise, for instance, matches its spinout companies with experienced experts, and assists with the syndication of seed funding rounds and links to later-stage investors.
It has strong relationships with angels and VCs, including its sister fund Cambridge Innovation Capital (CIC) and Cambridge Enterprise Venture Partners (a membership-only forum for investors interested in early opportunities arising from the University of Cambridge). It also operates an Entrepreneur-in-Residence programme that brings experienced founders into the University to offer advice and to support commercialisation.
Similarly, InnovationRCA is supported by visiting startup experts that have experience in investment, international commercial and product development. It also operates an angel investor network, AngelClubRCA, to connect founders and spinouts to early sources of capital, and which leverages its connections with industry and finance networks to help companies accelerate their growth. On top of this, InnovationRCA has a partnership with VC firm Venrex Investment Management, which raises funds to invest in RCA spinouts.
OUI has a network of professional advisers which mentor its spinouts, alongside its partnership with the non-profit accelerator Creative Destruction Lab, and offers further networking opportunities through Oxford ecosystem events. Meanwhile, OUI’s partnership with Oxford Science Enterprises (OxSciences) provides funding specifically for spinouts from the University of Oxford.
“University terms have evolved to be more investor-friendly which has been met with an ever-increasing amount of investment coming into Oxford. The University has a preferred investor relationship with OxSciences, and that partnership has seen our spinout creation numbers rocket in recent years[…]over half have been created following OxSciences opening for business in 2015. This has also been met with a wave of international venture funds, corporate venture capital units, global high-net-worth individuals and other institutional investors coming to Oxford to join OxSciences and others in backing our spinouts.”
Closing thoughts
UK universities are becoming increasingly important to the high-growth ecosystem, providing early-stage businesses with investment, workspace and valuable business networks. In recent years, COVID-19 has also strengthened government and investor attention towards knowledge-intensive industries, in particular biotechnology and the wider life sciences. Spinouts are central to this sector, so we expect 2022 to be another busy year for university commercialisation teams up and down the country.
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