The UK’s Royal Academy of Engineering has published the fifth edition of its annual Spotlight on Spinouts report, which shows a reduction in equity stakes taken by educational institutions in associated spinout 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 spinout 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),” said the report.

“The report’s companion paper UK spinouts – 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 spinout leadership, is needed to grow commercial success.”

2024 saw UK university spinouts 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.

London has the highest regional concentration of the UK’s spinouts, hosting 19% (384) of the spinout population. The South East of England follows with 16% (321 spinouts), then Scotland with 12% (243 spinouts), and the East of England with 11% (218 spinouts).

“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 spinouts in their region: notably Scottish Enterprise, Cambridge Enterprise and Oxford Science Enterprises …” said the report.

“Life sciences remain a strong sector for the UK, with a world-class research base fuelling commercialisation.

“Some 399 life science spinouts 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 spinouts.

“Data provision and analysis ranks second as a sector – this is the leading spinout 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.”

Royal Academy of Engineering Enterprise Committee Chair Paul Taylor said: “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 Spinout 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 spinout process.”

Ana Avaliani, Director of the Royal Academy of Engineering’s Enterprise Hub, said: “Five years from our first report on spinouts we are proud of the impact we haveachieved. 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 spinouts continues to bolster support for this crucial sector to drive impact and economic growth across the country.”