UK Government accepts all Spin-out Review recommendations
What lessons can be learned for Aotearoa New Zealand?
There has been a lot of discussion and debate about university spin-out companies in the UK and globally in recent times. The story at the centre of the Oxford Nanoimaging saga, in particular, generated a lot of activity and debate. And spinout.fyi has gathered a wealth of data on spin-outs and deals from across the UK and internationally to shed more light on practice across the system.
All this culminated in the UK Treasury launching an independent review of the spin-out ecosystem early last year to identify ways in which the system could be improved to encourage more commercialisation of academic research.
The final report was published in November (somehow slipping under my radar until after Christmas!) with some interesting findings. Even more interesting - the UK Government has accepted ALL of the recommendations.
Importantly, the review looked at international best-practice to inform recommendations for the UK. It recognised the need for strong ‘ecosystems’ within which university spin-outs can thrive - diverse and talented academic founders, anchor institutions, a range of service providers, accessible investment capital, large corporates with access to global markets and talent, a supply of talented employees and infrastructure to support spin-outs as they grow and scale.
The report noted that there are few places in the world where these stars align to create world-leading spin-out ecosystems.
The authors also noted how far UK universities had come in the past few years, with tech transfer offices (TTOs) becoming more sophisticated alongside an influx of investment that has helped spin-out investment increase five-fold from £1.06 billion in 2014 to £5.3 billion in 2021. But while spin-outs can occasionally derive revenue for a university when they defy the odds to become very valuable and exit, they should not be treated as a primary revenue source for commercialisation activities. This conundrum has meant that spin-out deal terms agreed between founders, investors and universities has prompted much debate, not just in the UK but internationally.
In offering their recommendations, the report authors envisage a desired end state for the UK spin-out ecosystem whereby universities partner with the local spin-out ecosystem to quickly create spin-outs on market competitive terms, academics are empowered to participate, universities develop an entrepreneurial culture through the entire institution, and founders have access to the right support to maximise chances of success.
The 11 recommendations are as follows:
Accelerate towards innovation-friendly university policies that all parties, including investors, should adhere to. The report cites the TenU University Spin-out Investment Terms (USIT) Guide as a starting point for good practice.
More data and transparency on spin-outs through a national register of spin-outs alongside universities publishing more info on their typical deal terms.
Government funding for TTOs to reduce the need for universities to cover TTO costs through spin-out income.
Creation of shared TTOs to help build scale and critical mass in the spin-out space for smaller research universities.
Increase funding for proof-of-concept funds for commercialisation work-up of opportunities prior to spin-out.
Link research funding incentives (through the UK Research Excellence Framework) to reinforce research commercialisation, spin-out and social ventures as a form of research impact.
Strengthen founder access to support from individuals and organisations with experience of operating successful high-tech start ups, regardless of their geographic location.
Ensure all PhD students have the option to attend high-quality entrepreneurship training and to undertake internships in local spin-outs, venture capital firms or TTOs.
Ensure universities have access to (and do access) a wide set of investors and encourage competition when agreeing deals.
Changes to pensions regulation (and other reforms) to support scale-up capital, to ensure that local capital markets are able to provide the financing to incentivise companies to stay onshore for longer.
Provide more funds to enable talent to move more easily between academia and industry.
A fairly comprehensive set of recommendations and a pretty good recipe for success one might say! Of course the obvious question for us in Aotearoa is where are the parallels with the New Zealand ecosystem and could we be applying any of these recommendations ourselves?
Every ecosystem is unique and we know that it’s not as simple as taking an intervention off the shelf from another country and dropping it in New Zealand. But I suspect that there is much that we could learn from this UK introspection to help NZ build our nascent spin-out scene into one that is truly world-leading.
Super interesting James. I am re-assured that many of the recommendations are already underway in Australia. I also note that the top recommendation recommends the TenU spinout guide which I also think is the best set of guidelines out there.
Cheers, Phil - and noting your nod to the TenU guidelines as something we should be picking up over here.