University spinouts are vital to retain the UK’s innovation crown, writes Simon Bumfrey, tech chief at HSBC Innovation Banking UK
The UK’s innovation economy remains the envy of Europe with British startups securing $9.4bn (£7.3bn) of venture capital investment in the first six months of this year alone – more than the $8.6bn raised by second- and third-placed Germany and France combined. Such entrepreneurialism has a vital part to play in the government’s mission to deliver economic growth and unlock productivity.
Amongst these factors, the role of universities should not be overlooked. The contribution they make via research and talent development may seem obvious, but increasingly, we are seeing these world-class institutions contribute materially to the strength of the UK innovation economy through spinouts: startups directly based on intellectual property from academic research.
HSBC’s Q2 UK Innovation Update in partnership with Dealroom.co found that UK universities create more spinout value than anywhere else in Europe, more than double second-placed Germany. The UK is home to three of Europe’s five most prolific academic institutions, with Cambridge, Oxford and London universities combined ranking in 1st, 3rd, and 5th place respectively in regard to the value generated by their spinouts.
The most direct benefit of spinouts is ensuring that world-class research transitions to commercially viable domestic businesses. This creates skilled jobs, grows GDP and strengthens the pipeline of future unicorns. Notable spinouts to hit this billion-dollar milestone include Cambridge-founded cybersecurity company Darktrace and Oxford-based molecular sensing firm Oxford Nanopore.
With world-leading universities scattered around the UK, more can be done to empower academics across the nations and regions by bolstering the development of innovation clusters nationwide.
Loosening bottlenecks
Although the UK’s spinouts are healthy, challenges remain. Intellectual property rights can be complex to navigate, with ambiguity over who owns how much of a discovery. This legal complexity, dispersion outside of financial hubs and the inherently nascent nature of spinouts can make securing seed funding difficult. The spinout process can also be complex and time-consuming.
Another issue is cultural. Some academics may prefer to continue their research instead of striking out on their own. The skills that make a successful researcher do not always translate to entrepreneurship, so some may be hesitant to take the plunge.
While it’s clear that the UK’s academic sector is already doing an incredible job at producing high-potential spinouts, but we should not rest on our laurels.
We are interested to see if the new government will pick up the baton set down in November’s independent review of university spinouts and deliver on its recommendations to drive better commercialisation outcomes through the creation of more successful and sustainable spinouts.
These include standardised, transparent commercial terms that streamline IP rights between researcher, spinout and university to remove legal friction. On the cultural point, existing support programmes could be consolidated and expanded to facilitate training on entrepreneurship and commercialisation, helping give researchers the confidence to make the leap from the classroom to the boardroom.
The private sector also has a role to play, and HSBC Innovation Banking is no exception. We are keen to work with the government, research organisations, universities and investors to explore ways that the private sector can augment government efforts to connect universities with investors and corporates, building a runway for launching high-growth, high-potential tech and life sciences companies.
Spinouts are a critical part of the innovation economy and we shouldn’t lose sight of how we can support, celebrate and champion their successes to inspire other researchers to turn their academic breakthrough into the next great startup.