Universities’ spin-out stakes drop sharply after Tracey review

The average stake taken by UK universities in spin-out companies has dropped sharply after a review found that institutions holding large amounts of equity was stifling private investment.

Universities held a decade-low average share of 16 per cent in spin-outs in 2024, down from 22 per cent in 2023, according to the latest Spotlight on Spinouts report produced by the Royal Academy of Engineering and data company Beauhurst.

This comes after the government introduced guidelines recommending that universities take an equity share of between 10 per cent and 25 per cent, down from as high as 50 per cent in some cases previously.

This was one of the central recommendations of a 2023 review led by University of Oxford vice-chancellor Irene Tracey and Andrew Williamson, a managing partner of the University of Cambridge’s in-house venture capital fund.

A university holding high levels of equity was found to reduce the chance of the spin-out receiving venture capital investment because it was seen as a sign of over-control, and potentially limit returns. Allowing founders to retain a greater share of their inventions is seen as a way of helping companies grow more quickly. 

Paul Taylor, chair of the Royal Academy of Engineering’s enterprise committee, said the developments were “encouraging” and “aligned with much of what we have long called for as an independent advisory body”.

According to UK Research and Innovation (UKRI), more than 50 universities have signed up to the guidelines, which recommend that equity shares in some companies, such as software firms, be limited to as low as 10 per cent. Some universities have, however, resisted the move, arguing that shares in commercial activity are important sources of revenue.

Overall, the fifth edition of Spotlight on Spinouts, published on 24 March, identifies that companies secured more than £2.6 billion in funding in 2024, 38 per cent more than in 2023, despite a 16 per cent drop in the wider equity market for high-growth companies.

Just 10 universities account for more than half of the UK’s spin-outs, however, with the universities of Oxford and Cambridge boasting 400 between them.

Cambridge grew its activity by 17 per cent year-on-year, generating a further 26 companies, while the University of Manchester also saw a significant rise of 33 per cent.

Pharmaceuticals remained the top sector for spin-outs, followed by data provision, electronics hardware and research tools.

Between 2015 and 2024, 200 spin-out companies exited through an acquisition or an IPO, while 20 per cent are no longer operational.

Alongside the reductions in university equity stakes, further progress has been made against the recommendations of the independent review, according to a companion report, UK Spinouts – a Status Update, also published on 24 March.

The government is providing £40 million in proof-of-concept funding over the next five years, it highlights, after the review recommended that this was needed to increase confidence in ideas.

A register listing all spin-out companies across the UK is being developed by Research England and is expected to be published in spring 2025, it says.

tom.williams@timeshighereducation.com