A report published by intellectual property specialists and R&D tax credit consultants GovGrant highlight university spinouts as a potential prospective investment. The University Spinout Report analysed 1000 UK companies that started as university projects and found that the average return on investment was 230% for companies from the 10 universities with the highest value spinouts.
The university that produced the spinouts that provided the best returns was the University of Bristol. Its spinouts reached values worth £2.85 for ever £1 invested in them. Other British universities to make the top 10 were Oxford, Cambridge, UCL, Imperial College London, Southampton and the University of Dundee.
The report looked at data from between the years 1998 and 2021 and the sample covered 4,489 deals involving 1907 investors that raised £19.08 billion of investment capital.
By sector, the most successful university spinout investments over the past ten years were most concentrated in pharmaceuticals and biotech. One example of such a spinout is Vaccitech, which was heavily involved in the development of the AstraZenica/Oxford Covid-19 vaccine and was spun out of the University of Oxford’s Jenner Institute in 2016.
According to PitchBook data, a record £1.5 billion was invested in the UK’s biotech sector across 165 deals in 2021, almost doubling the amount in 2020.
Simon Bond, innovation director at SETsquared, a startup and spinout incubator, commented:
“In the early stages of the spinout, access to patient risk capital is critical. The growing appetite for deep-tech, science-based ventures (greatly encouraged by the UK tax regime’s S/EIS programmes and R&D tax credits) is really helping. The tremendous work of the UK Business Angels Association is also raising awareness, increasing expertise and organising syndicate investing among angels and angel networks.”
“However, early stage risk capital is still in great demand, and is underserved by angel and series A investment sources.”
“For growth and commercial success, follow-on investment is also critical, as is access to executive talent that has experience in globalising deep-tech, science-based ventures.”
By far the biggest investor in spinouts from UK universities is the government-funded Innovate UK, which has taken stakes in 277. The venture capital firms Parkwalk Advisors and IP Group are the next biggest backers of university spinouts with interests in 67 and 72 respectively.
GoveGrant investment research analyst Adam Simmonds said:
“This report highlights the huge value to the economy of UK universities, as well as their incredible depth of creativity and talent.”
“It’s no surprise to see pharmaceutical and biotech spinouts feature prominently: the UK is particularly renowned for innovation in these areas. You only need to look at the recent development of Covid-19 vaccines in the UK to see how accomplished we are in pharmaceutical innovation.”
“The fact that the top investor in spinouts is a government agency – Innovate UK – shows you the immense faith placed in university research and development. But with 5 out of the top 10 investor groups being venture capital firms, you can also see that the private sector realises just how profitable spinouts can be.”
Some of the most successful spinouts from UK universities, other than the previously mentioned Vaccitech include:
- Sage, the UK’s second largest technology company was spun out of the University of Newcastle in the early 1980s.
- Ziylo, spun out of the University of Bristol in 2014 develops new applications to assist the treatment of diabetes. It designed synthetic glucose-binding molecules that react and adapt to glucose levels in the blood preventing dangerously low blood-sugar levels and was acquired for £623 million in 2018 by the Danish pharmaceuticals company Novo Nordisk.
- Natural Motion, spun out of the University of Oxford, where it was seed funded by the university in 2001, and produces video games. Its titles include CSR Racing and Dawn of Titans and it was acquired by the U.S. mobile games specialist Zynga in 2017 for $527 million. Zynga was itself recently acquired by U.S. gaming giants Take-Two Interactive for $12.7 billion.
