The Royal Academy of Engineering publishes the fifth edition of its annual ‘Spotlight on Spin-outs‘ report, which this year shows a reduction in equity stakes taken by educational institutions in associated spin-out companies.
In 2024 the average university equity stake was 16%, down sharply from 22% in 2023. Lower university equity stakes have been identified as key to incentivising exceptional academic founders to launch and scale their spin-out companies, and this change is part of broader progress that has been made against a number of areas identified for improvement in the Independent Review of University Spin-out Companies (2023).
The report’s companion paper UK spin-outs – a status update shows that over 50 universities are aligning with best practice, but varied practices are still in place. The Academy recommends that a more equitable distribution of equity between key contributors, including the university, senior faculty and spin-out leadership, is needed to grow commercial success.
Capital investment and local network effects
2024 saw UK university spin-outs securing over £2.6 billion in funding, 38% more than in 2023. This compares favourably with the wider equity market for high-growth companies, which faced a near 19% decline in the same period.
This report reflects a similar trend to the Academy’s recent State of UK Deep Tech report, whereby the number of deals has fallen but the overall amount secured has held up, pointing to investor caution coupled with an increase in the average value of individual deals.
London has the highest regional concentration of the UK’s spin-outs, hosting 19% (384) of the spin-out population. Its status as a leading financial hub and access to funding networks continues make it an attractive spin-out base. The South East follows with 16% (321 spin-outs), then Scotland with 12% (243 spin-outs), and the East of England with 11% (218 spin-outs).
Parkwalk Advisors remains the top investor by value and number of deals, and most of the top five investors (in number of equity deals), tend to prioritise funding for spin-outs in their region: notably Scottish Enterprise, Cambridge Enterprise, and Oxford Science Enterprises.
Emerging tech and established industries
Life sciences remain a strong sector for the UK, with a world-class research base fuelling commercialisation. Some 399 life science spin-outs have been created as of January 2025, concentrated in the ‘Golden Triangle’. In the pharmaceutical sector for instance, the University of Oxford created 53 companies, the University of Cambridge, 38, and University College London, 31 spin-outs.
Data provision and analysis ranks second as a sector – this is the leading spin-out area for Manchester University – and electronics hardware ranks third. Artificial Intelligence remains dominant in the emerging tech sector, followed by cloud-based software and CleanTech.
As highlighted in the government’s Invest 2035 Industrial Strategy both established and emerging tech industries like life sciences, AI, and quantum computing are seen as drivers of economic growth, key technologies and of strategic importance.
Founders and leadership teams
The report finds that over 76% of active spin-outs have all-male founding teams, with 17% male and female founding teams and 7% solely female founders. Compared to 2024, there was 16% male and female founding teams and 8.6% all-female founders.
More gender diversity is seen at director level with male and female teams of spin-out directors at 43% and all-male directors at 54%. In 2024 that figure was 52% for all-male directors and 45% for male and female teams of directors.
Efforts to increase gender diversity in spin-outs are gaining some momentum and the report notes an initiative at the University of Oxford to boost the number of female founders. As of January 2025, 24% of Oxford spin-outs have female founders.
Royal Academy of Engineering Enterprise Committee Chair, Paul Taylor CBE FREng says: “It’s encouraging to note that average university equity stakes are now at a decade low of 16% and are moving towards the recent recommendations from the Independent Review of University Spin-out Companies. This aligned with much of what we have long called for as an independent advisory body.
“Tracking this progress will help us to understand how it will impact the founders we support, as well as how we will continue our independent contribution to the policy landscape. We hope our Entrepreneur’s Handbook will also help academics to navigate the spin-out process.”
Ana Avaliani, Director of the Royal Academy of Engineering’s Enterprise Hub, says: “Five years from our first report on spin-outs we are proud of the impact we have achieved. Our data has sparked debate and been used by founders, investors, technology transfer leaders and policy makers to understand the bigger picture and make informed decisions.
“We hope our analysis on spin-outs continues to bolster support for this crucial sector to drive impact and economic growth across the country.”
