A statistical analysis of 650 UK spinouts between 2010 and 2021 shows that the university proportion of equity share has a limited effect on multiple fundraising factors including the probability of spinouts raising equity, the amount of funding raised, and the market valuation of a spinout after it has received funding.
The study, released last week by the Saïd Business School at the University of Oxford, provides a UK-wide analysis of UK spinouts where a university owns at least a 1% stake of founding equity.
The results speak for themselves, there are some specific effects but the broad-brush argument, that higher university stakes make spinouts unfundable, is not supported in the data.
The paper’s lead author, Thomas Hellmann, DP World Professor of Entrepreneurship and Innovation at the Oxford Saïd Business School, said, ‘This often-heated debate about a university’s stake in their spinouts happens in a data vacuum, based on opinion and anecdote. We are addressing this gap by analysing systematic data on the relationship between university stakes and subsequent fundraising outcomes. The results speak for themselves, there are some specific effects but the broad-brush argument, that higher university stakes make spinouts unfundable, is not supported in the data.’
The paper entitled ‘How does equity allocation in university spinouts affect fundraising success? Evidence from the UK’ highlights that the average university equity share is 31% and declining, with the University of Oxford’s equity share at 20%, well below the UK average reported. The finding also suggest that the more resources available to university technology transfer offices to spend on registering IP, the higher the number of spinouts are created.
Oxford University Innovation’s CEO, Matt Perkins, said: ‘We welcome this timely UK-wide study and the rigour of the analysis. University Technology Transfer Offices provide tremendous support to create spinout companies by assessing market potential, registering and covering the costs of intellectual property, advising on investment options, and supporting the creation of management teams. We want to see sustained success for the spinouts created and have supported our founders by reducing the University’ founding equity share to 20%, speeding up the creation of companies and reducing the burden of negotiation.'
We remain committed to foster innovation and entrepreneurship to maximise the global impact of the University’s research and expertise and have delivered this through recently reaching a milestone of 300 companies created.
Matt Perkins, Oxford University Innovation
The analysis highlights that less than five per cent of university spinouts in the UK ever raise more than £25 million. This data suggests the debate should focus less on equity share and more on creating more attractive investment opportunities for UK spin outs to scale up exponentially.
The study shows there is no statistically significant impact of a university’s share on venture capital investment in biomedical and engineering spinouts. It highlights a very minimal negative effect of university share on the probability of raising venture capital in less scientific spinout sectors such as IT.
Professor Chas Bountra, Pro-Vice-Chancellor for Innovation at the University of Oxford said: ‘Oxford remains at the forefront of the UK’s university innovation economy thanks to our researchers and the commercialisation potential of their work. We continue to contribute to the UK’s innovation economy by reinvesting our university returns into funding further research innovation and by aligning our commercialisation approaches with our founders and partners in industry, the investment community, government, and the wider ecosystem.'
Growth of University of Oxford spinouts, 1959 - 2022