University spinouts represent a major source of innovation but a recent report into the sector by the Royal Academy of Engineering Enterprise Hub and Beauhurst suggests all is not as healthy as it might be.

The researchers have tracked over 50,000 high-growth businesses across the UK since 2011, with 1,628 of these identified as spinouts. That spinouts represent just 3% of high-growth startups, and just 0.03% of the overall number of companies in the UK should not diminish the impact they can have.

For instance, the researchers explain that spinouts typically secured twice the level of investment as the average private company. What’s more, such firms were also far more likely to secure grant funding from bodies such as InnovateUK.

“And it’s also true in terms of the exit successes of these spinout businesses,” the authors explain. “10.4% of the UK’s spinouts have exited (i.e. been successfully acquired or completed an IPO), compared to 8.4% of the wider high-growth population.”

Regional distribution

Perhaps understandably, the University of Oxford was the leading university at producing spinouts, with 193 since 2011. They were followed by the University of Cambridge, with 137, and Imperial College London, with 106.

This has contributed to a record investment in spinouts, with 2021 seeing £2.54 billion in equity investment raised across 389 deals. This largely mirrors the general trend in startup investment more broadly, with low borrowing costs seeing investors looking to more risky outlets. The average investment was, however, relatively small, with just £6.7 million raised on average.

The most successful sector was pharmaceuticals, with aligned sectors such as research tools and analytics also performing strongly, as did precision medicine and eHealth.

The researchers believe that spinouts tend to be more robust than the average startup, as while just a half of startups make it past their 5th birthday, the average lifetime for a spinout company is nearly nine years.

Despite this apparent success, however, the authors also highlight the stark gender imbalance that exists among the founders of spinouts in the UK. Indeed, 86% of all spinouts have a male founder, with 92% having all-male directors.

“Some may argue that spinouts represent only a slither of commercial activity in the UK,” the authors conclude. “We counter such thoughts by noting that university spinouts are attracting some of the brightest academic minds and address significant.”