Spinout Companies: What Are They and How Can You Find Them?

Innovation is everywhere in the UK. WIthin almost every sector, there’s a constant stream of high-growth companies rising through the ranks, all the result of different ideas, initiatives and fundings.

Spinout companies may only represent a tiny percentage of the UK’s overall company population, but what they lack in quantity, they more than make up for in success. In this article, we’re taking a deep dive into the world of spinouts and how they’ve affected the UK company landscape.

What is a spinout company?

Spinout companies are those that are formed based on academic research that has been generated within a university or other higher educational institution (HEI)—these are often known as ‘the parent’. The spinout comes about when the parent moves some of its assets (usually intellectual property) into the new company, which is then launched and run as a separate entity. This new company will often be founded by employees or students from the university or HEI, and the parent will be a shareholder.

What are the advantages of spinout companies?

Spinout companies offer various benefits to both the university where they were formed, as well as the industries that they work within and the broader business ecosystem. These include:

Dynamic and entrepreneurial culture

The innovative culture bred within spinout companies often leads to faster decision-making, greater agility and a higher appetite for risk-taking. This can be advantageous when it comes to pushing new ideas and opportunities and thinking outside of the box.

More investment into research

Spinout companies can help to channel millions of pounds back into university research, helping to benefit the local economy and creating new jobs within the region.

Technology commercialisation

Spinouts can also facilitate the commercialisation of innovative technologies or intellectual property that may have previously been underutilised or overshadowed. As an independent entity, the spinout can focus on leveraging these assets to create marketable products or services.

Talent attraction and retention

Another advantage is the opportunity to offer employees a unique opportunity to work in a startup environment, potentially with equity incentives. This can attract entrepreneurial-minded talent and encourage them to remain committed to the project’s success as the company grows and evolves.

Risk mitigation

In some cases, a spinout company can serve as a way to test or explore new markets or technologies without as much risk on the reputation or financial stability of the parent company. If the spinout fails, it will likely have a much more limited impact on the parent’s overall operations.

Market agility

Spinout companies can quickly respond to market trends and shifts, adjusting their strategies and offerings accordingly. This adaptability can be a valuable asset in fast-paced industries or rapidly changing markets.

The top 10 origin universities in the UK

The UK is fortunate to be the home to a number of prestigious and high-ranking universities, including Oxford University and Cambridge University. Within each of these universities, there are a number of spinout companies formed each year, receiving backing from grant initiatives to enable them to innovate and expand. A spinout’s growth trajectory can be understood by reviewing the number of grants they’ve received. We’ve ranked the top universities by the number of grants secured by spinouts since 2013.

Our latest Spotlight on Spinouts report (published in May 2023), highlights just how many new businesses are being introduced from each of these universities. While the University of Oxford and the University of Cambridge are in the top spots, with 205 and 145 spinouts respectively, Imperial College London isn’t too far behind with a total of 108 companies spinning out from their alumni.

While there have been increases in the overall number of spinouts for each university in the top ten, it should be noted that spinouts can also be reclassified as startups, so numbers may go down as well as up. As such, figures will continue to change to reflect new knowledge, such as changes in grants or fundraising rounds.

Top universities by value of grants secured by spinouts

When we look at the total value of grants secured by spinouts, we can see that the University of Oxford and the University of Cambridge are miles ahead of the others, both surpassing the £150m marker. The closest university behind them is University College London, which is now edging towards receiving £100m since 2011.

It’s interesting to see that while Queen’s University Belfast is in tenth position in terms of number of spinouts, they’re fifth when it comes to the value of grants that they’ve received, indicating that the businesses being started in this academic institution are being perceived as high value to investors.

The most dominant spinout sectors

Taking a look at the leading sectors for academic spinouts, pharmaceuticals are taking first position, with a huge 309 companies, next to research tools/reagents not far behind at 279. The popularity of these industries is due to the nature of the life sciences industry relying on a heavy amount of research and testing, lending itself well to the spinout model.

Artificial intelligence (AI) is leading the way with emerging trends, with an additional 31 spinouts using this descriptor since this was last reported on in our 2022 Spinouts Report. While precision medicine is still quite a way behind AI in the list, it has seen an additional 21 spinouts since 2022, so this may be one to watch in the future.

The top 10 investors in spinout companies

If we look at the number of equity deals into spinouts between 2013-2022, Parkwalk (combined funds) are leading the way, with 267 investments to date. This fund is closely followed in the ranks by Scottish Enterprise at 255 investments. These funders have a particular focus on driving innovation and economic development within Scotland and are funded by the Scottish government.

Taking a look at the value of equity deal participants into spinouts, Oxford Science Enterprises are in the top spot, with £1.45b invested to date. Their partnership with University of Oxford has helped to create a science-business ecosystem, aimed at increasing investment into university spinouts and attracting scientific talent from around the world.

In second position is IP Group with £1.16b investments into spinouts. Their focus tends to be on pharmaceuticals, again with a particular focus on Artificial Intelligence.

The future of spinout companies in the UK

While the golden triangle of universities in the UK (largely considered to be University of Cambridge, the University of Oxford, Imperial College London, King’s College London, the London School of Economics and University College London) still see the vast majority of spinouts and funding, we are starting to see the cities of Manchester and Bristol rising through the ranks, both showing the highest growth in spinout populations. Edinburgh is also one to watch, attracting spinout companies from across the UK.

There’s no doubt that University spinouts will continue to make an important contribution to the UK’s future prosperity, especially when it comes to emerging sectors and trends within the technology and manufacturing industries. With record investments from a wide range of funds, all indicators point to this ecosystem going from strength to strength in the coming years.

How to find spinout companies in the UK

Are you interested in finding out more about academic institution spinouts in the UK? The BeauhurstInvest platform can provide you with the up-to-date and precise information you need to find up and coming companies. Using a combination of artificial intelligence and machine learning, we can provide our clients with the most accurate picture of what’s happening in UK companies.

We are constantly adding to and updating our data, with a team of over 60 analysts and data experts dedicated to making it the most comprehensive source available in the UK.

If you’re interested in hearing more about our platform, please get in touch today, or book a demo to see how BeauhurstInvest could work for your business.