UK universities seek government funding in the millions for innovative startups originating from academia

• UK universities are urging the new Labor government to increase funding for startups spun out of academia to £108 million per year
• Negotiations between universities and startups over term sheets have been lengthy, with technology transfer offices demanding large equity stakes
• The UK is moving towards a system where universities take smaller equity stakes in spinoff companies, depending on the technology being developed
• Lowering the amount of equity universities take and making deal terms clearer could lead to faster negotiations and support the fast-paced tech industry
• Increase in startups spinning out from academia has led to a £5 billion industry, but structural problems hinder their growth, requiring bold moves from the new government

UK Universities Push for Increased Funding for Startups

The tech industry is booming, and countries around the world are racing to capitalize on the AI revolution. In the UK, universities are at the forefront of creating new commercial technologies, with many startups emerging from academia. Top UK universities are now urging the newly elected Labor government to boost funding for these startups to £108 million per year. This move comes as the UK aims to strengthen its position in the global tech landscape, currently valued at over $1 trillion.

Challenges in Spinning out Companies from Academia

While UK universities are known for their research prowess, spinning out companies from academia has proven to be a challenging process. In a review conducted last year, it was found that negotiations between universities and startups over term sheets often dragged on for months. Technology transfer offices (TTOs) managing a school’s intellectual property demanded large equity stakes, with some asking for 50% or more. This, coupled with a lack of proof-of-concept funding, made it difficult for startups to attract early-stage investors.

Efforts to Overhaul the System

In response to these challenges, the UK government allocated £20 million over three years to help founders kickstart the commercialization of technologies. Ananay Aguilar, leading TenU, a collaboration of TTOs, emphasized the need for increased funding, citing examples from universities in the US and Belgium managing comparable amounts per year. Aguilar is optimistic that the new Labor government will be supportive, especially given their focus on innovation and economic revitalization.

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Changing Equity Stake Policies

In a move towards a more startup-friendly environment, UK universities are revising their equity stake policies in spinout companies. Institutions like the University of Bristol, University of Oxford, and University of Cambridge are lowering the percentages of equity they take, depending on the type of technologies developed. This shift aims to make deal terms clearer and facilitate faster negotiations, crucial in the fast-paced tech industry.

The push for increased funding, coupled with changes in equity stake policies, signals a positive shift towards a more conducive environment for startups spun out of UK universities. With the right support and resources, the UK has the potential to further strengthen its tech industry and foster innovation in academia.