Boost for businesses created at universities

• £20 million for university-created businesses to be granted by the Chancellor
• New rules will mean businesses get bigger share of capital to help them scale and grow

The Chancellor is to inject £20 million into universities to foster more ‘spin-out’ companies, firms created using research done in universities.

The cash – which was recommended by a wider independent review – will help create the next generation of university spinouts, like Oxford Nanopore, a biotech firm which was founded at Oxford University in 2005 and recently valued £3.4 billion.

Spin-out companies raised £5.3 billion in investment in 2021-22 alone. Today’s announcements are designed to increase investment for the future and help ensure researchers in our world-leading universities have the tools they need to start, scale, and grow innovative new businesses in the UK.

The independent review – led by a leading academic Professor Irene Tracey and venture capitalist Dr Andrew Williamson – recommends innovation-friendly policies that universities and investors should adopt to make the UK the best place in the world to start a spin out company.

In the past, many spin-outs deals were created from scratch, which is both inefficient and sometimes fails to learn the lessons from previous success stories. Today’s recommendations aim to speed up the process and build on TenU’s University Spin-out Investment Terms (USIT) Guide by recommending 10% or less university equity for less-IP-intensive deals, common in software.

The Chancellor has accepted all the recommendations and will set out his full response as part of the Autumn Statement tomorrow.

This move will help deliver the Prime Minister’s pledge to grow the economy by supporting our world-leading university research institutions, which generate around £10 billion a year for the economy.

It comes as the Chancellor is convening representatives from several universities and investors at University College London (UCL) East where they will endorse a new set of ‘best-practice policies’ that are recommended by the review.

Chancellor, Jeremy Hunt, said:

“Innovative, globally competitive businesses like Oxford Nanopore are making a huge contribution to our economy.

“It’s critical that we harness this potential and give universities the tools they need to translate cutting edge research into exciting UK businesses that start and grow in the UK.”

A full package of measures in tomorrow’s Autumn Statement will support these businesses to access the capital they need to start, scale and thrive. This will help produce the next generation of globally competitive science and technology companies based here in the UK.

The new measures include:

• At least £50m additional funding for the British Business Bank’s successful ‘Future Fund: Breakthrough’ programme – that will provide direct investment to support the UK’s promising pipeline of R&D firms
• A Venture Capital Fellowship scheme to support the next generation of world-leading investors in our renowned VC funds, similar to the successful US Kauffman Fellowship
• New vehicles tailored to the needs of pension funds to help them invest the capital unlocked through the Chancellor’s Mansion House reforms.
• This includes £250m to support successful bidders, subject to contract, under the Long-term Investment for Technology and Science (LIFTS) initiative, and a new Growth Fund within the British Business Bank to give pension funds access to investment opportunities in the UK’s most promising businesses, which has been welcomed as a valuable addition to the market by seven pension funds
• Publish analysis showing the advantages that very large pension schemes can bring for investment in things like private equity – and outlining next steps on the Government’s pro-consolidation Value for Money pensions programme