A report by Antler, a venture capital firm, ranked the University of Oxford as the top university for producing technology unicorn founders. A unicorn is a start-up valued at over $1 billion.
EventBrite, LinkedIn and Funding Circle are among some of the world’s largest unicorns, and have come from University of Oxford graduates. Another report by analysts at Beauhurst, deemed the University of Oxford to be a leading UK institution for generating spinouts. But what are the reasons for Oxford’s seeming success at generating spinouts? Could certain policies be improved to encourage student entrepreneurs?
Another report by analysts at Beauhurst, deemed the University of Oxford to be a leading UK institution for generating spinouts.
A spinout refers to a start-up which is based on intellectual property (IP) from a university. This means spinouts are owned both by founders and a parent institution, usually a university, which is a minority shareholder. Typically, successful spinouts go through several rounds of investing in which venture capital firms provide funding in exchange for equity in the company. Equity is a term which means ownership of a company, expressed as a percentage of shares. This is necessary for a company to raise the capital it needs to grow the business. If a spinout is successful, it will expand until it is ready to go public through an Initial Public Offering (IPO) process, where public stock is issued on a stock exchange.
A spotlight on spinouts
To understand why University of Oxford has produced so many successful spinouts, it is first important to look at some of the most lucrative ones. Some of Oxford’s most notable spinouts include biomedical companies Nanopore, Vaccitech, and AdaptIummune.
Nanopore became a unicorn in 2015, and was the largest biotech listing for many years when it went public on the London Stock Exchange in 2021 for £3.4 billion. This spinout was founded in 2005 by Professor Hagan Bayley from Oxford’s Department of Biochemistry and, Dr Sanghera and Dr Willcocks. It made use of IP from Harvard University and involved many collaborating scientists from Boston University and the University of Santa Cruz. The spinout provides low-cost, rapid, and real-time sequencing for DNA and RNA based on detecting changes in electrical current as nucleic acids pass across a nanopore-sized hole in a synthetic membrane. This is the only technology that can provide real-time sequencing in a scalable, portable format.
Professor Hagan Bayley, founder, identified two important criteria for the success of Nanpore. Firstly, Bayley praises Oxford’s attitude towards researchers spending time exploring ideas which have potential for practical applications. Next, Bayley explains that the ecosystem around founders is crucial for the success of the company. This includes access to science parks, mentors, and young scientists to push the research forward. Bayley’s insights reveal some key benefits which make Oxford a spinout hub: its research facilities and access to top talent.
Another biomedical start-up, Vaccitech, focusing on T cell immunotherapies, spun out from Oxford’s Jenner Institute in 2016. The Jenner Institute is one of the world’s most renowned and established vaccine research centres. It has been researching the optimal CD8T induction and targeted response methods for over 20 years. Vaccitech was co-founded by Adrian Hill and Sarah Gilbert. It was backed by many investment firms including Sequoia, M&G, Liontrust, GV, and Oxford Science Enterprises. Here, Vaccitech was based on decades of extensive research, with researchers from the top of their fields.
Oxford’s spinout capacity extends beyond biotech. Quantum Dice is a notable spinout based on research from Oxford’s Physics Department. Quantum Dice is a data encryption company, making use of light to create truly random encryption keys. Randomness is an essential feature of encryption, ensuring it is secure to prevent hacking. However, it is extremely difficult to generate truly random numbers, as the generators themselves are not intrinsically random. The company was developed during Oxford’s StEP program, by student entrepreneurs using university IP. The idea won the StEP program, receiving £25,000 towards prototype development. This ultimately led to Quantum Dice receiving £2 million in seed investment in 2021. Founders from Quantum Dice stated that they were extremely grateful to the StEP program for its mentorship, which was crucial for developing the company. Quantum Dice also had support from the Saïd Business School, as MBA students joined to help with marketing strategy. MBA refers to a Master of Business Administration, which is a postgraduate degree providing training in business practices. According to Quantum Dice, this help from MBA students was invaluable, and provided them with a useful network. This identifies further reasons behind’s Oxford’s spinout success: programs to secure funding and mentorship, and entrepreneurial support.
Oxford’s secrets to success
Oxford encourages spinouts via its research commercialisation programs and initiatives. Oxford University Innovation (OUI) is a subsidiary of the University of Oxford, which manages and consults on university spinouts and commercialisation of university IP. It offers many services including an incubator program, investment, and consulting on subject matter, technology, and tools. OUI’s portfolio of spinouts has doubled in value from £68.2 million in 2015 to £155.1 million today.
Enterprising is familiar not only to the administration but also to the students. OX1 is a student-run incubator. They run similar 12-week programs which help develop teams and ideas, provide worships and mentorships, and end in a pitch to Oxford CEOs and investors. Very importantly, they offer equity-free grants. The winning prize is £15,000 to kickstart the start-up
, and does not require giving away equity, which is extremely attractive to entrepreneurs who want to keep as much equity as possible.
Oxford’s entrepreneurial success is aided by its societies. Enspire is a University of Oxford initiative which promotes entrepreneurship among students, staff, and alumni. The organisation provides information and training, which is available for everyone to use. Their expertise ranges from developing ideas to growing a company.
An entrepreneurship program, StEP, is run both by the OUI and Enspire. It is a 4-week program where student groups meet to develop business ideas either using University IP or their own ideas. At the end of the program, groups pitch to judges who select the winning team who recieve £25,
Arguably one of the most important catalysts for spinouts at Oxford University is the availability of funding. The largest university-affiliated investment firm, Oxford Science Enterprise (OSE), backs academic founders from the university’s science departments in their ventures by providing funding from seed and pre-seed stages all the way to exit. OSE was created by an Oxford alumnus who wanted to improve spinout success using Oxford’s IP. The firm has a portfolio of 40 companies spanning across their 3 investment areas: life sciences, health tech, and deep tech. They have backed the success spinouts Vaccitech, OMass, Caristo Diagnostics, and more. Their ticket sizes range from £50,000-£25 million. OSE not only provides funding, but also provides founders with a network of talent, other investors, and other peers in industry. They advise on personal relations strategy and act as mentors. OSE also provides 12-month sabbaticals for academics to work with the OSE team to help develop their ideas. This policy is paramount in the development of a viable spinout. OSE has been extremely successful in boosting Oxford’s annual number of spinouts from a couple to over 20 in a matter of years.
Arguably one of the most important catalysts for spinouts at Oxford University is the availability of funding.
Oxford’s controversial equity policy
In 2021, Oxford changed its equity policy to encourage innovation and entrepreneurship. For spinouts, 80% belongs to the founders while the remaining 20% belongs to the university. These shares are dilutive, meaning as new investors come in and invest, the university’s ownership percentage will decrease. This makes spinout negotiations quicker and more straightforward, further encouraging entrepreneurship.
Nevertheless, some believe that Oxford’s equity policy is stifling spinouts rather than encouraging them. Oxford’s large equity stake makes these companies less attractive to investors earlier on and can be demoralising to founders. This is a real phenomenon shown by a survey by Air Street Capital, a venture fund, which found that founders at Oxford were the least satisfied with their spinout experience compared to other UK universities. A deep tech founder from Oxford tells Sitfed that this equity policy is one of the worst among top universities.
Anecdotally, the equity offering at Oxford is referred to as ‘expensive money’, with some considering starting a spin-out to be economically unviable. Comparatively, in the US, MIT and Stanford typically take 5% non-dilutive equity. A spinout database found that UK universities require on average three times the equity share at parental institutions in the US or Europe. Some founders feel that universities in general, including Oxford, are being too greedy which is hindering spinout growth. Critics often point to the difference in equity share, royalty, and licensing policies as sources for the superior spinout culture in the US versus the UK. However, Oxford argues that ‘professor’s privilege’ policies and lower equity stakes would reduce the quantity of spinouts as the companies would get less institutional support and expertise from the university.
What more can Oxford do?
To encourage spinouts, Oxford should create a template from successful spinouts to both reduce the time necessary for, and increase the clarity around, commercialisation. An example can be made of successful US universities such as MIT, which has spun-out over 26,000 active companies brining in an annual revenue of $2 trillion, equivalent to the 11th highest economy in the world. According to the USIT Guide, created by leading investors and universities, investors are keen to invest when the university equity stakes are around 10-25%, with royalties of 5%.
Imperial, part of the ‘golden triangle’ of UK universities along with Cambridge and Oxford, implemented a ‘founder-driven route’ in 2017 to encourage spinouts. In this case founders have 95% equity and Imperial takes 5%, which is similar to US universities. In 2023, they updated their spinout policy specifying all groups have access to a dedicated Spinout Project Manager. Founders may also pick between a dilutive and non-dilutive equity option. Although recent, these policies are something Oxford should investigate to make commercialisation more appealing to founders.
Another area for improvement is making IP more widely available and more enticing to pursue. The IP presented should be more mature, with less risk involved in pursing it. If the idea is medical, IP should include research proving it is translational to humans. This will give the idea a better chance of being developed by entrepreneurs.
The stigma around commercialisation, especially among academics, is a barrier to spinout creation. The academics behind the research often do not want to take time off their research to commercialise the idea and lack the entrepreneurial skills to do so. Commercialisation and entry into industry are surrounded by a stigma that needs to be changed for brilliant new spinouts to be developed. Instead, commercialisation should be thought of as making ground-breaking innovation accessible to the world.
Despite the University of Oxford’s current success in creating spinouts, there is still untapped entrepreneurial potential in its ecosystem. The University can greatly boost its commercialisation rate by altering some of its IP policies and streamlining the commercialisation process to compete with US universities. There needs to be a big culture shift around spinouts involving the University, researchers and students, if the University of Oxford is going to reach its fullest spinout potential.