UK university group calls for fund to finance spinouts outside Golden Triangle –

The Russell Group universities, an association of 24 UK research academic institutions, has recommended the country’s new government launch a so-called Spark Fund to invest in spinouts across the UK.

The group suggested the fund could release money to finance spinouts outside the Golden Triangle – university cities of Cambridge, London and Oxford in south east England – to fill a gap in venture capital investment.

VC investment in university spinouts is heavily concentrated in the south east of England, making it difficult for startups to raise capital outside of the area.

Spinouts from universities in London, the south east and east of England receive 74.5% of all spinout investment, according to a Russell Group briefing. Scotland receives 17%, while all other regions combined receive less than 10%.

The Russell Group said in its briefing on maximising the impact of university spinouts that the Spark Fund could be supported through either the new National Wealth Fund, a pot of money that the UK’s new Labour government plans to form to invest in decarbonising energy-intensive sectors, or the British Business Bank, a government lender to small UK businesses.

The Russell Group also recommended increasing money from the Higher Education Innovation Fund, a £260m ($333m) fund that gives money to universities to work with business on knowledge transfer.

A new UK Research and Innovation proof-of-concept spinout fund should be piloted and scaled to de-risk UK companies before they spin out of universities, the group recommended.

The Russell Group universities noted that UK spinouts raised £1.66bn in equity funding in 2023, second only to the US in total investment in spinouts.

The proportion of equity that UK universities take in spinouts has also fallen, the group says. High equity stakes are known to put off venture capital investors that prefer founders to own most of the equity in their companies.  

The average university equity share in the UK has decreased to 18% from 25% in the past 10 years. Many of the top 10 universities are doing deals at between 5% and 15% of equity, says the group.