Universities have £1.4bn of British cash ready to be invested in their university spinouts right now, according to new research by GrowthBusiness.
The biggest single investor in university spinouts is Cambridge Innovation Capital (CIC), a venture capital fund focused on deep tech and life sciences, which last month closed a second £225m fund.
Combined with its original fund, CIC now has £500m ready to invest in start-ups spun out from the University of Cambridge, as well as other tech businesses in the so-called Silicon Fen.
>See also: First quarter investment in UK scale-ups hits £6.9bn
Hot on its heels is Northern Gritstone, the new funding vehicle for the universities of Leeds, Manchester and Sheffield, which launched last September and is chaired by former Goldman Sachs economist Lord Jim O’Neill, cheerleader for the Northern Powerhouse concept. Northern Gritstone has raised £300m from investors and is yet to make its first investment.
The third biggest investor is Oxford Sciences Enterprise, which invests in Oxford university spinouts and currently has £200m of “dry powder” ready to invest.
However, the most active investor across Britain is VC firm Parkwalk, which invests in spinouts – tech start-ups developed out of university research – from science powerhouse Imperial College London, as well as the University of Bristol and universities across Britain, and made 31 investments last year, according to Beauhurst.
Total UK investment available for British university spinouts 2022
| University seed spinout funds | £m available | £m committed | No. of investments | Ave % equity stake | Average initial commitment (£) | Universities aligned with | Example companies invested in | Manager | |
|---|---|---|---|---|---|---|---|---|---|
| University of Cambridge Enterprise Funds | £2m-4m per year | 5 to 10 | 5%-35% | £0.25 - £1m | Cambridge | CCMOS Sensors, Cytora, Nyobolt, Paragraf, Riverlane, VocalIQ, Xampla | Parkwalk | ||
| Imperial College Enterprise Funds | £2m-4m per year | 5 to 10 | 5%-35% | £0.25 - £1m | Imperial | Bonnet, Charco Neurotech, Cheesecake Energy, Freshcheck, GripAble | Parkwalk | ||
| University of Oxford Innovation Funds | £2m-4m per year | 5 to 10 | 5%-35% | £0.25 - £1m | Oxford | Animal Dynamics, Bibliu, Brainomix, Mind Foundry, Oxford Endovascular | Parkwalk | ||
| Old College Capital | £15m | 30 | 10%-30% | £150,000 | Edinburgh | Wobble Genomics, Blackford, Mocean Energy | |||
| UCL Technology Fund | £70m | £54m | 66 | UCL | Orchard Therapeutics; Quell Therapeutics; Bramble Energy | Albion | |||
| University of Bristol Enterprise Funds | £2m-4m per year | 5 to 10 | 5%-35% | £0.25 - £1m | Bristol | Ceryx, Exonate, Lettus Grow, Mogrify | Parkwalk | ||
| Subtotal | £101m | ||||||||
| External VC funds allied to universities or active in spinouts | £m | £m committed | No. of investments | Av % equity stake | Average initial commitment (£) | Universities aligned with | Example companies invested in invested in | ||
| Cambridge Innovation Capital | £500m | £275m | 36 | n/a | £5m | Cambridge | CMR Surgical, Bicycle Therepeutics, Centessa Pharmaceuticals, Riverlane, Pretzel Therapeutics, Epitopea | ||
| Northern Gritstone | £300m | n/a | n/a | tbc | Leeds, Manchester, Sheffield | ||||
| Oxford Sciences Enterprise | £200m | £447m | 100+ | 0.25 | £250,000 to £25m | Oxford | First Light Fusion: Achieved fusion, Vaccitech: Co-creators of the Oxford-AZN vaccine, PepGen, Osler Diagnostics, Oxford Quantum Circuits, Evolito, Wild BioScience | ||
| Parkwalk EIS funds | £50m-£60m per year | 10 to 15 | 5%-35% | £1m-£10m | Across UK | Brainomix, Bramble Energy, Cambridge Touch, CCMOSS, Cytora, Congenica, MoA, Mogrify, OQC, Oxbotica, Paragraf, Petmedix, Phoremost, YASA | |||
| BGF | £95m**** | n/a | 22 | 10%-15% approx | Cambridge, Oxford, Imperial, UCL, Bristol, Queen Mary, Southampton, Birmingham, Nottingham and Royal Holloway | Phoremost (Cambridge), Pathfinder Medical (Imperial), Bramble (UCL) | |||
| Subtotal | £1.115bn | ||||||||
| General seed investor | £m | £m committed | No. of investments | % equity stake | Average initial commitment (£) | Universities aligned with | Example companies invested in invested in | ||
| Scottish Enterprise | £78m* | £20m** | 340 overall, including 177 in 2020/21*** | Abertay University, Edinburgh Napier University, Glasgow school of Art , Glasgow Caledonian University, Heriot-Watt University, James Hutton Institute,/Scottish Crop Research Institute, Moredun Research Institute, Queen Margaret University (Edinburgh), Robert Gordon University, Scotland's Rural College/SRUC, Scottish Association for Marine Science, The University of the Highlands and Islands, University of Aberdeen, University of Dundee, University of Edinburgh, University of St Andrews, University of Strathclyde, University of the West of Scotland, University of Stirling, University of Glasgow | RAB Microfluidics, ENOUGH, Dxcover, | ||||
| Midven (Midlands Engine Investment Fund) | £16m | £2.323m | 3 | n/a | Nottingham Trent and Cranfield Universities, University of Birmingham, Aston University | Halo X Ray Technologies, Linear Diagnostics, Eyoto Group | |||
| UKI2S (UK Science and Innovation Fund 2) | £47m | £4.8m | 22 | 10-15% at formation but diluted to 1-10% over time | University of East Anglia, University of Glasgow | Cellcentric, Spectral Edge, Vector Photonics | |||
| Subtotal | £141m | ||||||||
| Total | £1.357bn |
* Total amount Scottish Enterprise invested in companies in 2020/21, including spinouts and non-spinouts, through Scottish Co-Investment Fund (SCG) and Scottish Venture Fund (SVF)
** Total invested via High Growth Spinout Programme (HGSP) over past 10 years, which has led to the creation of 28 companies
*** Total number of companies invested in, including 177 deals made in 2020/21 in, covering all equity investments, not just university spinouts
**** In 2021 BGF invested £50m into 18 new early-stage businesses of which 11 were either spin-outs or had very close coupling to research previously undertaken in university. It also did a further c.£45m in follow-on investments into existing early-stage portfolio companies, many of which are university spin-outs. BGF expects to maintain the current level of investment in this area
***** Parkwalk currently has £420m of assets under management and has made £100m worth of exits to date.
The actual potential university spinout UK investment figure may be even higher, as Queens University Belfast and the University of Warwick were unable to provide figures to GrowthBusiness.
That £1.4bn investment pot is significant given that the geographical spread of universities across Britain plays to the government’s levelling-up agenda, plus the Labour Party pledge to spend £28bn a year combating climate change.
Many university spinouts are focused on green technology, such as the Oxford Sciences Enterprise-backed First Light Fusion, which hopes to create abundant, clean fusion energy.
Other university spinouts that have hit the headlines include Cambridge University’s Paragraf, which develops graphene electronics; Bristol-based microprocessor developer Graphcore; and, of course, Vaccitech, which co-created the Oxford Covid-19 vaccine.
>See also: Investors have £20bn to invest in much-needed lab spaces
UK investment in university spinouts falls into three categories.
First, there are the universities own seed investment funds, such as Old College Capital, which has £15m to invest in tranches of around £150,000 in each start-up, or the UCL Technology Fund, which has £70m of capital ready to deploy. Together, these inhouse seed funds have potentially £101m to invest between them.
Then there are external funds allied with Britain’s prestigious universities such as BGF, which last year invested £95m into early-stage companies, many of which are spinouts from academic institutions including Birmingham, Nottingham and Queen Mary in London. These external VC funds have a potential £1.2bn between them ready to invest.
Last, there are general seed investors such as Scottish Enterprise, Midlands-based Midven and the UKI25 fund, which between them could invest £141m between them.
Spinout activity is concentrated in a few academic institutions. The top four – Oxford, Cambridge, Imperial and UCL – account for around one third of all university spinouts.
Pharmaceuticals and medtech are the largest sectors, with the UK showing a rapidly developing AI sector.
Of course, the actual amount of cash invested in UK university spinouts is much higher, with foreign investors – especially America – investing in 40 per cent of all equity deals involving spinouts last year, according to Beauhurst.
Indeed, investment into university spinout companies almost doubled in 2021 with a record £2.54bn raised across 389 deals, according to research.
There are currently 1,130 active university spinouts in the UK as of January 2022, with last year’s spinouts receiving an average equity investment of £6.7m.
Over £11bn has been pumped into UK university spinouts over the last decade.
