Do universities take too big a stake in spinouts?

Treasury announces review into university spinouts as founders say average 24% stake universities take in spinouts impedes growth

A Treasury review into university spinouts should question the amount of equity universities take at seed stage, say founders.

The Treasury has announced a review of the UK spinout landscape to identify best practice in turning university research into commercial success.

One question the review should be asking, according to founders, is whether the average 24 per cent stake universities take in spinouts at seed stage, according to consultancy Beauhurst, is too high and impedes growth, the Financial Times reported.

By comparison, Ivy League universities Stanford, MIT and Harvard hold between 7-10 per cent equity in their spinouts.

Some entrepreneurs also complain that universities also impose excessive bureaucratic demands, said the newspaper.

According to Beauhurst, equity investment in spinouts increased from £405m to £2.54bn in the decade to 2021, but they make up just 3 per cent of the UK’s high-growth companies.

>See also: Investment into university spinouts nearly doubled in 2021

The Government put the figure higher, saying £5bn was invested in 2021 alone.

Growth Business’s own research has found British investors have £1.4bn ready to deploy for investment for companies spun out from university research.

>See also: British investors ready to invest £1.4bn in university spinouts

Professor Irene Tracey CBE, University of Oxford vice-chancellor, and Dr Andrew Williamson of the venture capital committee at VC industry association the BVCA, will lead the review. Dr Williamson is also managing partner of tech VC investor Cambridge Innovation Capital.

Professor Tracey and Dr Williamson will report back to Chancellor Jeremy Hunt and science and technology secretary Michelle Donelan in the summer.

Further reading

University spinouts raise £11bn of equity investment over past decade