British universities have been advised to take no more than a 10% stake in startups founded within their walls, as part of the government’s review on spinouts.
Announced by the Treasury in March, the review of university spinouts was launched to support the UK’s wider goal of growing its science and technology sector to become the “next Silicon Valley”.
The review recommended that the lower limit of equity that should be owned by universities is 10%. This limit applies to firms which are less IP-intensive, which often applies to software-only spinouts.
The upper limit, which applies to more IP-intensive firms such as biotech and life sciences, is between 10% and 25%.
The review, led by University of Oxford vice-chancellor Irene Tracey and Cambridge Innovation Capital managing partner Andrew Williamson, examined the current state of spinouts to address complaints from founders and investors over the amount of equity and intellectual property (IP) control universities can have over spinouts.
Currently, universities on average own around 22.8% of startups founded by faculty and students at the time of spinning out, according to data from Beauhurst.
At Oxford, the UK’s most prolific generator of tech spinouts, the average stake owned by the university is 20%. At the University of Leeds, the average stake is 42.3%.
Critics have argued this has created a barrier to startup growth by deterring external investment. Founders and investors have both expressed frustration at the level of ownership universities sometimes take only to be inactive partners in the company later down the line.
Other recommendations in the report included more data and transparency through the development of a national register of spinouts, the creation of shared tech transfer offices between universities to encourage collaboration and greater government funding for proof-of-concept research.
The review has largely been welcomed by universities, including the University of Oxford, University College London (UCL), the University of Cambridge and the University of Edinburgh.
“The recommendations published in this review will help universities harmonise the creation of spinouts,” said Dr Anne Lane, CEO of UCL Business.
“We look forward to working even closer with fellow universities, government, and the investment community to ensure a healthy and sustained flow of investment back into academic research.”