US spinout culture is the envy of the world, we should take notes

Venture capital originated in the US, so it’s no surprise that the market is far more mature than in the UK and Europe. Not only do US investors have deeper pockets, but its university spinout structure is inherently geared towards nurturing tech unicorns.

Look no further than MIT, where a machine is fuelling innovation and the infrastructure to support its pipeline of 175 new businesses a year. The system is holistically designed to transform top academic talent into profitable businesses by providing founders with the tools to succeed.

The US breeds risk takers who understand the potential rewards that spinouts offer. The private markets provide everything these businesses need to grow: access to capital with the benefits of specialised funds, talent and entrepreneurship networks, exclusive accelerators, and the flexibility to move research into commercialisation. So, what can the UK learn from its peers across the pond?

Commercialisation cultural shift

Historically, turning research into a business has not held the same priority or value within the UK academic community. There isn’t the same fluidity and interchangeability between commercialisation and academia. Many researchers don’t benefit from the same encouragement to pursue more profitable paths.

Not only that, but universities often expect academics to work full-time. It’s a ‘one or the other’ decision, which means that those who choose to experiment with commercialisation are either forced to leave academia or to pursue it in their free time. The flexibility and transference between the academic environment and commercial sector are missing. The result of this legacy culture clash is that we have very few role models of academics who have become successful spinout founders, particularly those who step away and continue to work with or invest in other spinouts.

These cultural hurdles simply don’t exist in US universities. In hubs such as Silicon Valley and Boston, commercialisation is viewed as the primary mission for both individual researchers and universities. Entrepreneurs and commercial experts are embedded into the university ecosystem. It is further up the commercialisation curve than the UK.

There is far more incentive among US founders to spin out, particularly given their historically lower equity stakes, which are generally 5% or less. In the past, UK universities have taken far higher stakes, sometimes up to 33%. However, following the 2023 Spinout Review, we have seen a significant decrease to around 10%, which has made a noticeable difference.

Although there have been positive changes within universities toward a more commercial mindset, this shift won’t happen overnight. There are early indications of movement. I hope to see a significant shift in attitude within the academic community over the next decade.

Specialised funds

With a more mature spinout market comes a greater number of specialised venture capital funds that support early-stage founders of research-intensive companies.

For many IP-dense deeptech or life science companies, the founders are often PhD students who have no prior experience in business. They are incredibly skilled and have a deep understanding of their field, but they don’t always have the commercial outlook and expertise to take the business from A to B.

To make these innovations commercial, the founders need teams and advisors with the skills to support them, along with financial backing. In the US, there is no shortage of early-stage and proof-of-concept funds that focus on spinouts. Not only do they provide the capital needed, but they also fill the gaps in knowledge that the founders have with highly skilled investment teams that understand the market backed up by former founders who have trodden this path before, who together have supported the creation of unicorns time and time again.

Although we are seeing more venture capital firms emerge in the UK with a focus on university spinouts, particularly in research-dense regions, there is still work to be done on building this strong track record. This is something that will come with time and, as such, increase institutional investor confidence to help unlock this flow of capital.

The role of the UK Government

Although the government doesn’t own universities, it can create a favourable environment to help them grow.

In the Autumn Budget 2025, Chancellor Rachel Reeves announced various funding programmes to help early-stage companies. The new Enterprise Fellowships is a £4 million pilot to support up to 100 researchers to spin out their research or take industry secondments. The idea behind the programme is welcome, but £4 million spread across 100 people equates to only £40,000, which for deeptech or life sciences researchers is a fraction of the capital needed to move the needle. We risk spreading the jam too thinly.

See Also

Academic excellence doesn’t guarantee spinout success

Earlier this year, the UKRI unveiled a new £9 million proof-of-concept fund following the 2023 Spinout Review. And in the Budget last year, the government pledged £40 million in proof-of-concept funding across the UK, equivalent to £8 million over their five-year term. This simply isn’t enough to get these businesses off the ground.

As much as we need more venture capital firms willing to take the risks required to fund these pre-seed companies, we need a government that understands the capital required to turn these businesses into international successes.

There are other changes that the government can implement, too. Whether that is a tax environment which is sympathetic to the traditionally riskier startup space, allowing easy access to international talent, or by providing the infrastructure to support innovation, the government has a key role to play in strengthening our spinout culture.

Making spinouts international success stories

We are very fortunate that the UK is home to some of the world’s top universities. We attract some of the brightest minds from across the globe to study at our world-renowned universities. Spinouts represent a significant opportunity in our economy that we too often miss.

Every year, Stanford generates over $1 billion in VC funding for its spinouts. As a country, we are sitting on a goldmine of opportunity that we are too often missing out on, simply because the UK fails them at the first hurdle. If we were to strengthen our funding infrastructure, build a government that is supportive and understands early-stage businesses, and a private market that can fully support this growth, we would see a stronger, more innovative economy.