Spinouts UK survey 2013

The Spinouts UK Survey 2013 was published at the PraxisUnico event which took place in Nottingham a couple of weeks back, and provided a mixed bag of news for the UK commercialisation sector.

Most noticeably, a downward trend in spin-outs formed in the UK, which has been observed by other reports in recent years, continued to persist in the latest survey. According to the report, despite a couple of rises in 2006 and then between 2008 and 2011, the amount of new spin-outs that have been created have continued to drop. Levels have dropped from a height of 110 in 2003, and steadily fallen over the past decade to less than a third of 2003’s output. Around 32 were created in 2012, and just over 20 created in 2013 so far, putting it on par with levels of new spin-out inactivity last seen in 1996.

It shouldn’t be assumed that the drop is because of a lack of wanting to spin-out new companies, however. The UK commercialisation sector instead seems to have gone for a policy of quality over quantity. To that end, UK spin-outs have attracted over £1bn ($1.53bn) in external investment in the past couple of years, matching Cambridge Enterprise’s total over its 18 year history.

Out of the 1,780 companies in Spinouts UK’s database, only 800 are active spin-outs in the UK (from a total of 1,225 followed spin-outs). 43% of the spin-outs are in the life sciences area, with the next biggest section, ICT, making up 25% of the UK’s spin-outs – figures roughly consistent with the sector breakdown in the US. The remaining 32%, categorised as physical sciences, energy, and other, make up 16%, 9% and 7%, respectively.

The survey also cast light on UK spin-out exits. Over the past 10 years, only 30 spin-outs have successfully exited in a floatation, with a further 105 achieving an exit through a trade sale. In addition, the number of exits has noticeably dropped in recent years, with 2010 outperforming both 2011 and 2012 combined, and the length of time it takes for a spin-out to generally make an exit is hanging around the ten year mark.

However, this is not a direct indication of a lack in quality of the spin-outs. Rather, other factors must be taken into account, such as 2008 financial crash and the continuing stagnancy of the British economy. Also, the way many spin-outs are approaching funding has changed since 2008, with traditional venture capital making way for proof-of-concept grants clearing the way for corporate, angel and university investors who are less stringent about when a firm has to make an exit by, allowing companies to be more flexible about when they want to exit.

The survey also showed a robust longevity for the majority of UK spin-outs. Out of all those formed between 2000 and 2002, 61% are still active with a further 12% having achieved a successful exit. Only 27% of the spin-outs launched in that time have gone on to fail.

Scotland was named as the most active region for spin-outs, recently bolstered by a £50m life sciences fund, and the east of England (ie. Cambridge) was named as the most successful.