Record funding for university spin-outs Business

Start-ups born out of UK university research have secured record levels of funding after years of complaints that investors are failing to turn university breakthroughs into commercial success.

Spin-outs brought in £2.5bn of equity investment in 2021, up 69% from £1.5bn the previous year and a fivefold increase in investment in 2012, according to a report by investor Parkwalk Advisors.

A record 102 new ventures received funding, with scale-ups attracting one in ten pounds invested in private ventures. However, the improving numbers came with warnings that spin-offs remain “grossly underfunded”.

UK universities have long been seen as incapable of harnessing cutting-edge research to create big tech companies, but recent spin-offs have included gene-sequencing company Oxford Nanopore and semiconductor company Graphcore.

Oxford Nanopore raised £195m in a London IPO last year, while Graphcore raised £162m, among six university spin-outs to raise more than £100m from funding.

Investment has been stimulated by an increasing number of foreign investors. Foreign backers were involved in 40% of deals last year, up from 12% in 2015, with US backers being the most active.

Moray Wright, Chief Executive of Parkwalk, said: “This year’s report shows an increased appetite for early equity deals and a record level of overall funding for spin-off companies.

“While this is a positive step in the right direction for the sector, we still believe that despite the world-leading research being produced here in the UK, deeptech is still hugely underfunded at the development stage. scaling, especially from UK investors.”

Early-stage investors have often raised concerns that spin-outs struggle to find funding once they reach a certain size, with UK investors reluctant to invest in speculative technology which can take more than a decade to bear fruit.

Mr Wright said the government’s move to ease regulations on pension management could free up more funds for large-scale businesses.

The report, using figures provided by the Beauhurst Startup Database, showed that while startup “seed” funding had reached an all-time high, venture and growth capital funding, for spin-offs more established outs, has stagnated in recent years.