It’s been a tough two decades for UK-listed firms. BP, Shell and HSBC have dropped out of the ranks of the world’s largest listed companies. Britain’s current largest firm, AstraZeneca, doesn’t even make the global top 40. At the same time, the reputation of British universities has gone in the opposite direction. “We now have more universities in the global top 10 than we had 20 years ago,” as Robin Bagchi, chairman of the London Technology Club, points out. UK universities “continue to punch well above their weight in terms of producing world-leading research”, which is an important economic asset, says James Witter, head of Sarasin Bread Street. More than 2,000 active start-ups have been spun out of UK universities. Little wonder that a sovereign-wealth investor has said that British academia is “our equivalent of Gulf oil”.
The cutting edge of the ‘golden triangle’ UK universities
(Image credit: Getty Images)
Such a concentration of elite academics can help create an environment that ends up being worth more than the sum of the individual academics involved. Having a “cosmopolitan and multinational” atmosphere “attracts other great minds” – and a lot of investors willing to put money into early stage enterprises stemming from Oxford research. This in turn creates a “virtuous circle” where the quality of research attracts capital, which in turns encourages more talented academics to move to Oxford.
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Andrew Williamson, managing partner of Cambridge Innovation Capital, emphasises Cambridge’s reputation and heritage as a major competitive advantage in attracting the best scientific talent. “We’ve existed for nearly 800 years, which means that we’ve been doing this for longer than almost anyone else in the entire world,” he says. It has leveraged its infrastructure and culture of “cutting-edge science” to create links between “the academic world, the start-up world and the biggest global technology companies”.
Oxford and Cambridge are not the only points of excellence in British academia. Commentators increasingly talk about the “golden triangle” of Oxford, Cambridge, and Imperial and UCL, rather than just “Oxbridge”. Indeed, as Bagchi notes, when it comes to science, technology, engineering and mathematics (STEM) subjects, “some recent rankings put Imperial College London near the very top of the global table, ahead of Oxford, Cambridge and Harvard”. University College London has also had a lot of success when it comes to creating interesting spin-outs – DeepMind is one example.
UK universities beyond the golden triangle
The golden triangle may be the most visible sign of British scientific excellence, but there is “some really great science coming out of the other UK universities” too, says Doug Quinn, partner at DSW Ventures. As Quinn’s colleague, Mira Androniciuc, notes, there are key specialised laboratories in other UK universities that outperform the general laboratories in the golden triangle institutions. “There are clearly opportunities out there.” But sadly, these are not yet producing a strong pipeline of new firms. There were around 600 early-stage investments in the golden triangle in 2024, but only 250 in other universities. The regions get around a fifth of the total investment that the golden triangle gets, says Quinn. But the gap is mainly due to inexperience and should narrow as the teams outside Oxbridge and London do more deals. Already, there have been more than 100 spin-outs from Manchester University, which now has a well-established technology transfer office.
Indeed, a “Northern arc” is starting to emerge as a serious challenge, led by the four universities of Liverpool, Leeds, Manchester and Sheffield, says Duncan Johnson, CEO of Northern Gritstone. Johnson notes that these four institutions alone employ around 16,500 researchers and have the UK’s largest research budget at around £770 million, which is bigger than those of Oxford, Cambridge and London. Northern Gritstone, which has first refusal on the commercial opportunities from research produced by the Northern arc, has been able to raise £362 million from individuals and institutions.
Henry Lane Fox, CEO of Founders Factory and chairman of the Creator Fund, singles out the University of Southampton as particularly strong when it comes to quantum and high-performance computing; the University of Glasgow as a leader in chemistry; and Edinburgh when it comes to robotics. Overall, around half of the deals that Lane Fox and his team evaluate, and around a third of those that they end up investing in, come from outside the golden triangle, “and both numbers are growing”.
Lane Fox is so enthusiastic about the quality of academic research in the UK as a whole that, in an attempt to grab the most interesting idea at an earlier stage than his competitors, his Creator Fund is now targeting doctoral students at universities across the UK. Similarly, Chris Wiles, a partner at Foresight Group, has set up a network of regional offices, including in Edinburgh, Leeds, Manchester, Cardiff and Exeter. Another source of world-leading research comes from the various research institutes that are funded by the UK government, but not affiliated with any specific university – the nuclear research facility at Culham Campus, for example, run by the UK Atomic Energy Authority (UKAEA), as well as the Harwell Science and Innovation Campus in Oxfordshire.
Rethinking commercialisation in UK universities
As well as producing some of the best research in the world, British universities are generally much better at turning their research into companies and products than they were even a few decades ago. “Every university around the world is on a journey when it comes to commercialisation,” says Williamson. Over the last 20 years, the UK government has made a particular effort to encourage universities to make commercialisation and “knowledge transfer” key to their mission. This began with universities setting up knowledge-transfer offices, principally focused on the licensing of technology. Over the past 10 to 20 years, that model has evolved and is now creating spin-out companies based on the technologies that the academics have created. Academics and students have become more entrepreneurial and “want to set up their own firms to commercialise their tech, rather than stay as academics and simply license it to third parties”.
Arnab Basu, founder and CEO of Kromek, which specialises in radiation-detection technology, agrees that things have changed for the better. When he set up Kromek two decades ago from research he pioneered at Durham University, “spin-outs were not the flavour of the day, and we had to do everything ourselves, from agreeing a licensing agreement with the university, to finding investors and then raising additional funds”. Today, the support system for entrepreneurs, in terms of both money and advice, is much more developed. Many smaller universities have also realised that forming partnerships with similar institutions is a good way to gain experience quickly.
There has been a change in attitude within academia over the past 15 years, says David Grimm, a partner at AlbionVC. Launching start-ups was previously seen as “a bit grubby and commercial”, but now founding a start-up has almost become a precondition for becoming a professor. The latest report into spin-outs, produced in conjunction with analytics firm Beauhurst, reveals that investment in UK spin-outs reached the record level of £3.35 billion in 2024. This compares with £1.16 billion in 2019, as Moray Wright of Parkwalk Advisors points out.
Lowering the “university tax”
But just because UK universities have upped their game doesn’t mean that there isn’t plenty of room for further improvement. MoneyWeek spoke to several venture capitalists, and nearly all of them pointed to universities’ desire to cling on to as much of the company spun out as possible as a big problem. It is, of course, reasonable for institutions to try to get the best return for what is, after all, their intellectual property, says James Paton-Philip, partner in the corporate team at law firm Hill Dickinson, but too often this “university tax” can make investing unattractive for investors and for those founding the company in the first place, especially given that the founders’ stake will end up being diluted further as they raise more cash.
Universities do have a tendency to be too aggressive in negotiations, agrees Grimm, and to take too long to reach an agreement, which can be a major problem in the fast-moving world of technology, where multiple firms are trying to bring similar products to market first. “I’ve known of several major cases where ideas for start-ups have failed on the launch pad because the negotiations got so involved that by the time they were settled the opportunity had passed.”
The good news is that this is becoming much less of an issue thanks to pressure from the government to reduce the share institutions demand and to standardise terms. The 2023 Independent Review of University Spin-outs has helped speed up the process, says Grimm. AlbionVC has, for example, an agreement with UCL where the university agreed to take just a flat 5% stake in any software start-up spun out of it. The first company AlbionVC spun out under the new conditions took much less time to set up. UCL isn’t the only university to do this, says Bagchi. Imperial now takes a flat 10% share from its spin-outs, and Oxford has reduced its share by more than half from 50% to 20%.
The British Microsoft is coming
The UK may be “world class at research, and very good at creating early stage companies, but there is still room for improvement when it comes to scaling up”, says Greg Smith, CEO of IP Group. Northern Gritstone’s Johnson agrees that our tech sector still “struggles” when it comes to raising large sums for expansion. From his own experience, he’s found that raising amounts in the region of £200 million is still a big ask for British tech firms, whereas those in Silicon Valley can raise such sums with a single phone call.
The lack of domestic capital willing to back tech firms means that too often UK start-ups are either forced to rely on overseas investors, or sell themselves to larger US tech companies, says Wright. He emphasises that such investment represents a vote of confidence in the capabilities of the UK research base, but such external investors and larger tech companies also “have their own agendas, which don’t necessarily align with the interests of the UK”. He points to DeepMind, the AI company spun out from UCL that was acquired by Google in 2014 for £400 million, and which “would now be worth more than £10 billion – maybe even more than £100 billion – if it had remained private”.
Google’s purchase of DeepMind may have deprived Britain of its very own OpenAI. Yet the fact that it, and others, such as OrganOx and Oxford Ionics, have fetched “significant sums” will “undoubtedly draw more interest into this area, and encourage more university researchers to launch commercial enterprises”, says Sarasin’s James Witter.
Such successes are also helping to build the necessary environment in the UK “of investors, lawyers and financial services intermediaries”. So, provided pension funds and institutions are willing to invest more, “there’s no reason” why we can’t build a British tech company on the scale of Microsoft, says Paton-Philip. Smith believes “unequivocally” that several large British tech firms will emerge within the next decade. We look at some of the most promising places to put your money below.
Spin-outs from UK universities: where to invest
Companies such as Oxford Capital, Parkwalk Advisors, Foresight Group and AlbionVC all offer investors with deep pockets access to venture-capital trusts. Those of more modest means might like to consider IP Group (LSE: IPO), a listed FTSE 250 company that has been investing in spin-outs from UK universities for the last 25 years. Over this time, it has supported around 500 companies, creating an estimated 10,000 jobs. At the moment, the group has 62 firms in its portfolio, spanning “deep technology”, life sciences and clean-energy technology (cleantech). The stock trades at only seven times estimated 2026 earnings and at a sharp discount to the book value of its assets.
One of IP Group’s most successful clean-technology investments was in fuel-cell and hydrogen-power technology company Ceres Power (LSE: CWR). Originally spun out of Imperial College London, IP Group stepped in to rescue the company after a failed trial, taking an active role in its management before eventually selling its stake for a large profit in 2020. Ceres Power is not currently making any money, but it continues to grow, with sales tripling between 2019 and 2024, and it is expected to be a big winner from the spike in demand for clean energy created by the data-centre boom.
One of Cambridge Innovation Capital’s many success stories is Bicycle Therapeutics (Nasdaq: BCYC). It was founded in 2009 by Cambridge Enterprises (Cambridge’s commercialisation body) and uses technology developed by Greg Winter, winner of the Nobel Prize for chemistry in 2018, to develop drugs that can target and treat solid tumours that cannot be reached by conventional drugs. It is not making any money yet, but has several promising drugs in development. The most advanced of these is zelenectide, which is in advanced trials as a treatment for metastatic urothelial cancer (the hope is that it will also prove effective in treating other cancers).
Autolus (Nasdaq: AUTL) was founded by Martin Pule, who leads the “CAR-T” research programme at UCL’s Cancer Institute, with the help of UCLB (UCL’s commercialisation arm). Its products modify white blood cells to help the body’s immune system fight cancer. The company is not making any money, but its therapy Aucatzyl has recently been approved for use in the UK, US and EU for treating acute lymphoblastic leukaemia, with the hope that this can pave the way for similar treatments being approved for a wider range of cancers in the near future.
As noted in the main story above, Kromek Group (Aim: KMK) was originally spun out of Durham University by Arnab Basu. The company specialises in making radiation detectors that use cadmium zinc telluride (CZT) semiconductors for use in medicine and security. The company has already secured contracts with GE, Siemens, Philips and Canon, and with the help of funding from the US and UK governments, it is developing devices to detect biological pathogens. The stock trades at 18 times expected 2026 earnings. With revenue more than doubling between 2020 and 2025, that looks like good value.
Investors with an extremely high tolerance for risk might want to consider micro-cap Quantum Base Holdings (Aim: QUBE). It was founded by Robert Young of Lancaster University and uses quantum technology to produce product codes that are virtually impossible to counterfeit. With counterfeiting being a significant problem for global brands, the commercial potential seems huge, although the company is currently losing money.
This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
