Gateways to Growth

Introduction

Since 2008, Octopus Ventures has been committed to supporting the businesses setting out to solve society’s biggest challenges. This means finding and backing founders with the vision to change the world.  

We face unprecedented challenges – and deep tech has an outsize role to play in helping us solve them. Deep tech businesses focus on significant innovation and scientific breakthroughs, and they’re born in universities. 

The UK’s universities punch above their weight. The US, Germany, South Korea, Israel and Japan invest more than 3% of their GDP into research and development. The UK invests 2.4%. But for every £1 invested in research, the government sees around £3.60 in economic benefit. 

Universities train and nurture the next generation of visionary founders. Their departments and labs are where world-changing solutions are imagined, researched and realised. Our new report, Gateways to Growth, sets out to highlight the essential role the UK’s universities stand to play in building the next generation of deep tech businesses. 

For the first time since 2020, we’ve conducted our Entrepreneurial Impact Ranking, highlighting the universities having the most success spinning their world-changing research out into world-changing companies. We also explore some of the key challenges facing the university ecosystem and ask what it takes to build the environment these institutions need for spin out success. 

University ranking

The results of our Entrepreneurial Impact Ranking are in. Calculated according to crucial indicators including disclosures, patents, spin outs created and financial transactions associated with exits, it emphasises long-term performance as it seeks to understand which of the UK’s universities are making the biggest impact with their spin outs.  

Bigger exits and a new leader

In the three years under analysis (2019/20, 2020/21 and 2021/22), sales of shares from university spin out companies have broken the historic record. We found that this peaked in 2020/21, at the height of the pandemic, when sales in spin out shares totalled £87 million. 

Private and public sector research funding are reaching record highs, while a new, clear leader has risen to the top of the Ranking. The Golden Triangle of Oxford, Cambridge and London is being challenged by universities from elsewhere in the UK: proof that the academic excellence needed for deep tech success stories is distributed across the country. 

According to the most recent data available, Universities in the UK contributed £95 billion to the economy and supported more than 815,000 jobs in 2018-19¹.

Resources

¹ The economic contribution of the higher education sector in England, Frontier Economics, September 2021

Hurdles and uncertainty 

Although the UK’s universities make an undisputable, and major, contribution to the UK’s economy, and may hold the key to unlocking solutions to the great challenges of our time, the current environment has never felt more complex for the university ecosystem.

Brexit has negatively impacted UK universities’ access to European research grants; frustration with working conditions is seeing some higher education talent leave the workforce; funding opportunities for European talent are drying up.

Opportunities await

In Gateways to Growth we explore how to tackle these obstacles, and ask how the path to entrepreneurship stands to open new possibilities for PhD and postgraduate students facing limited opportunities in academia.  

We also highlight the role private sector funding can play in alleviating pain-points such as the shortage of available lab space, and exciting developments pointing towards better funding for spin outs across the country. 

An environment for spin out success

Deep tech is technology with the potential to change the world. If it’s going to do so, it needs the right support structure in place. Our report concludes with guidance on the multi-stakeholder alignment necessary to ensure the UK’s universities can fulfil their world-changing and economy-boosting potential.  

There’s no knowing which of the many outstanding institutions featured in the Entrepreneurial Impact Ranking will give birth to the next breakthrough, which is why we call for broad and consistent support. Investors and government both have their part to play.