University spinout equity stake to be capped

Currently, the UK average stake a university will have in a spinout is 22.8 per cent

Chancellor Jeremy Hunt has accepted recommendations to cap the amount of equity a universities can hold in spinouts.

For spinouts with limited intellectual property, this will be capped at 10 per cent or less. For IP-intensive spinouts, the cap will likely be 25 per cent.

Currently, the UK average stake a university will have in a spinout is 22.8 per cent. The University of Cambridge, for example, averages 11.8 per cent, while the University of Leeds holds an average stake of 42.3 per cent.

The recommendations from a review, conducted by Irene Tracey, vice-chancellor of the University of Oxford and Andew Williamson, managing partner of Cambridge Innovation Capital, was launched in March following complaints from tech founders and venture capital firms over the amount of equity universities were demanding. Cambridge Innovation Capital is the UK’s biggest investor in university spinouts.

The news comes as investment into university spinouts dropped for the second year in a row. In the first half of 2023, only £743 million was raised. For context, 2022 raised £2.3 billion and 2021 raised £2.7 billion in total.

However, levels of foreign investment into UK spinouts during 2022/23 reached a new peak, with over 10 per cent of total funding into UK spinouts coming from foreign investors for the first time on record. US-based funds are by far the most active non-UK investors.

“Innovative, globally competitive businesses like Oxford Nanopore are making a huge contribution to our economy,” Hunt was quoted as saying in The Times. “It’s critical we harness this potential and give universities the tools they need to translate cutting-edge research into exciting UK businesses that start and grow in the UK.”

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Dom Walbanke

Dom Walbanke

Dom is a feature writer for Growth Business and Small Business, focused on matters concerning start-ups and scale-ups. He has also been published in the Independent, FourFourTwo magazine and various lifestyle...

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