University spinout numbers on the up after universities “drop” stakes

University spinout numbers are on the increase, prompted by universities lowering their stakes in startups, according to the co-founder of a deeptech startup spun out of a UK university.

Many in the startup ecoysysem argue that universities should cut the stake they take in university spinouts, which, they argue, would encourage more startups to be founded as well as increase their chances of bagging VC and other external investment.

Research published earlier this year by Beauhurst and the Royal Academy of Engineering found the average stake taken by UK universities in spinout companies increased over the last year from 19.1% to 22%.

Doctor Peter Garraghan, co-founder and CEO, Mindgard, a deeptech cybersecurity startup, which was spun out of the UK’s Lancaster University in 2022, told the Tech.eu podcast:

“Many of the universities are dropping it down to anywhere between 10% up to 20%, sometimes lower, depends on the state of the company.

"And that has allowed a lot of these companies to start forming in the last few years as opposed to 10 years ago, when universities really liked licencing the technology but they realised that that was only getting them so far.”

Garraghan said that Lancaster University had around just a three per cent stake in Mindgard.

A recent report from Parkwalk, the UK's most active investor in university spinouts, asserts that spinouts will increasingly define much of the UK’s economic standing in the world, our levels of productivity, advancements in public services and the innovation that can help curb climate change.

Garraghan was speaking on the podcast along with Kevin Berghoff, the co-founder of Quantum Diamonds, which develops quantum sensors and which was spun out from the Technical University of Munich in 2022.

The pair discussed the virtues and challenges of university spinouts and their own experiences.