UK Worries About Where University Tech Spinouts Begin, and Where They End Up

Much of the world’s wastewater is still treated using a century-old, energy-intensive process of pumping oxygen through tanks of sewage. Thames Water, the UK’s largest water company, is now trialing an alternative developed at Newcastle University that uses microbes and electrodes to break down waste. It both uses less energy and gives off ammonia that can be recovered and sold as fertilizer.

Elizabeth Heidrich came up with the idea in 2012, and when environmental engineer Pavlina Theodosiou joined her lab eight years later they began trying to turn the research into a business. Their company, METzero, spun out of Newcastle in 2024 and has since raised about £750,000 ($1 million) in grants.

Over 2,000 university spinouts have formed in the UK since 2010, with a combined value of about £49 billion — most of them in so-called deep-tech, which originates novel breakthroughs in science and engineering. Successes include Oxford Nanopore, which went public at a £3.4 billion valuation, and Oxford Ionics and OrganOx, which were acquired for more than $1 billion each last year.

Theodosiou said support from government-funded Northern Accelerator, founded in 2016 to help researchers commercialize their work, was vital in the early stages of her endeavor. It allowed her to hire someone to develop METzero’s business plan, while a Royal Academy of Engineering fellowship bought her out of her university contract for a year. “That helped me to make the full transition from lecturer to CEO,” Theodosiou said.

Despite these successes, Britain is increasingly fretting about two key questions of geography: where university spinouts are formed, and where they end up. The concern is that, beyond the so-called Golden Triangle of Oxford, Cambridge and London, innovative research can struggle to make it out of the lab. Worse still, the economic benefits of successful spinouts often go on to leave the country.

“The north east does not lack innovation or founders’ ambitions,” said Theodosiou. “It just lacks that same density of specialist capital.”

The UK is home to three of the world’s top 10 universities and, according to the Royal Academy of Engineering, leads Europe in the creation, funding and value of deep-tech spinouts.

Across the universities in Northern Accelerator’s umbrella, the number of spinouts rose from two in 2018 to 10 in 2025. But that remains well behind the 70-odd coming out of the so-called Golden Triangle of Oxford, Cambridge and London each year.

The Golden Triangle accounted for almost half of UK university spinouts founded between 2013 and 2024, and attracted two-thirds of the venture capital, according to a February report by Tony Hickson, whose career was based in university technology transfer, investment and startups.

Data compiled by Indeed for Bloomberg also show it made over half of the sector’s hiring. That’s despite new ideas germinating across the country, according to the UK’s latest national assessment of university research.

“The UK really cannot maximize its spinout potential if world-class research outside the Golden Triangle lacks the same access to networks, capital and commercialization support,” said Ana Avaliani of the Royal Academy of Engineering.

A second concern is that mature spinouts are, increasingly, leaving Britain altogether. Just 36% of spinouts founded between 2013 and 2024 that went public did so in the UK, down from 79% of those founded before 2013.

PsiQuantum, a quantum-computing spinout from the University of Bristol, moved to the US and was valued at $7 billion in a fundraising round last year. Exscientia, an AI drug-discovery company spun out of the University of Dundee, listed on the Nasdaq in 2021 before merging with US biotech Recursion Pharmaceuticals three years later.

The main reason is the lack of scale-up capital. There’s almost four times more private funding for startups in the US than the UK, but the gap widens to nine times for investments above £100 million, according to figures from the government’s Council for Science and Technology.

There’s also a “persistent technical literacy gap” among British financiers, said Hickson. That’s “most acute among later-stage investors, many of whom lack the scientific expertise needed to assess complex scale-up ventures.”

Deep-tech companies often need to spend heavily developing technology before they can generate revenue, according to Nigel Toon, who co-founded Bristol University spinout Graphcore and is launching a specialist spinout fund.

“That needs investors who can really have very high conviction around the technology and have a deep understanding of the market so that they can see the potential,” Toon said.

The government was reportedly considering an exit tax for university spinouts moving abroad, but quickly ruled out the idea, according to the Financial Times. Critics argued it would penalize successful businesses, without fixing the underlying factors that push them abroad.

“If the government wants more spinouts to remain and grow in Britain, the strongest response is to make the UK the best place for them to raise capital, win customers and scale, not simply to make leaving more expensive,” said METzero’s Theodosiou.

The government said it wants the country “to be one of the best places in the world to start and scale a business,” but declined to comment on policy speculation.

Duncan Ivison, vice chancellor of the University of Manchester, said it’s not always a bad thing when spinouts moves abroad. “If we spin out a billion-pound company from Manchester and they set up in Silicon Valley or in San Francisco, I’m like hallelujah,” he said. “That is fantastic.”

“Of course, we’d love it if they stayed in Manchester and employed people in Manchester, contributed to the UK’s GDP,” Ivison added. “But over time, if you are spinning out billion-pound companies that American, European, Chinese, or Australian investors want to invest in, you must be doing something right. And eventually, good things will come on the back of that.”

Turn the tide

The number of UK spinouts has fallen from its pandemic peak, according to the Higher Education Statistics Agency, but there are other signs of improvement.

Founders and investors have long complained that institutions demanded too big a slice, but the average university stake fell to 16% in 2024 from 28% in 2017 following a government review, according to the Royal Academy of Engineering.

And there’s been a proliferation of specialist university finance firms that offer support as well as capital, including Oxford Science Enterprises, which has raised over £800 million from investors, and Northern Gritstone, a cluster of universities in Manchester, Sheffield, Liverpool and Leeds.

“A lot of good work was done under the previous Conservative government that’s been continued under the Labour government, and things have improved a lot,” said James Wise, a partner at Balderton Capital. He said the firm has invested in far more spinouts recently than when he started 15 years ago.

“It’s a very common criticism to say that the UK is lousy at commercializing its high-quality university IP but that story is starting to sound a bit old,” said Ivison, referring to intellectual property by its acronym. “I think we’re beginning to really turn the tide on that.”

After a successful pilot in England’s Northumbria, METzero’s Theodosiou is hoping to raise £1.5 million by the end of the year, to move METzero into its own premises.

But to get the funding, Theodosiou is planning three trips to London in September. “That’s where the money is,” she said.