The number of deals in UK spinouts at the earliest stage of equity investing has been falling over the past few years, highlighting a potential bottleneck in early-stage funding.
The number of deals in UK spinouts at the very earliest stage of equity investment has been on the decline since the peak of 2021, falling to 67 deals in 2023 from 86 deals in 2022, according to a new report by VC investor Parkwalk Advisors and data provider Beauhurst.
The number of first-time equity investments in 2023 is hovering just above the number in 2014 when there were 66 deals at this stage.
“In the immediate future, there is the threat of lost opportunities for the UK with transformative ideas failing to leave the lab,” says Moray Wright, chief executive of Parkwalk Advisors, in a foreword to the report.
Overall, UK spinouts attracted £1.75bn ($2.3bn) of equity investment in 2023, down 26% from 2022. However, the number of deals each year has been consistent in the range of 420 to 426 since 2020, showing spinouts are still managing to attract funding.
So far, £1bn has been raised by UK spinouts in the first half of 2024, putting the annual total for this year on its way to surpassing that of 2023.
Spinouts from the University of Oxford secured the most equity investments in 2023 at 62. This was followed by the University of Cambridge with 45 deals and Imperial College London with 28.
In the past four years, there has been an uptick in international investors co-investing with UK investors in university spinouts. In 2023, 22.6% of spinout equity deals had UK and foreign co-investors. Foreign-only investors accounted for 14% of deals.
US investors are by far the largest portion of foreign investors in UK spinouts, having participated in 526 equity deals between 2014 and 2024. The Netherlands ranks second with 62 investments over the same period.
