Scotland is outpacing the rest of the UK in attracting investment in its university spin-out companies, new figures show.

The British Business Bank, the UK government’s economic development bank, says small businesses founded at Scottish universities were responsible for the largest number of UK spin-out equity investment deals last year.

Highest figures

Of the 211 equity deals in 2021 involving UK spin-outs, 44 – just over a fifth of the total – were from Scottish academic institutions. This is “the highest figure of any decentralised region or nation,” the British Business Bank said.

Scotland’s overall performance outperformed the South East of England in second place, with 39 subsidiaries funded. East England and London came in third and fourth, with 35 and 32 clubs respectively.

According to Barry McCulloch, Senior Director of Scotland with the UK Business Bank UK Network team: “Scotland is home to a number of world-class research institutions that are developing ground-breaking products and processes.”

Industries like life sciences and technology are particularly attractive to investors, McCulloch added. He added that access to finance helps entrepreneurs “turn the concept of research into business ideas”.

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The British Business Bank said that Scotland took the lead for the second consecutive year last year.

In 2020, 64 Scottish universities received funding in 41 transactions, facing the South East and East of England. Scottish companies will continue to raise funds until 2022.

The deal, announced earlier this year, includes a £ 8 million investment in Erasmogen, a biotech company that stems from the University of Aberdeen.

Well Fish Diagnostics, from University of the West of Scotland, also raised £ 1.2 million.

Research capability

The British Business Bank highlighted that Scotland is creating opportunities for many spin-offs due to its “world-leading research capability”.

On average, Scottish companies receive less money than the so-called “Golden Triangle” companies of London, Oxford and Cambridge.

The average investment in Scotland is £ 10 million. This is less than the average investment in the Golden Triangle of 17 million pounds, but still higher than that of any other region.

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An analysis of more than 2,300 startups related to UK research grants Research and Innovation (UKRI), the UK’s largest public research and innovation funder, shows further untapped potential in Scotland.

Only 14% of these spin-ups (331 out of 2,306 analysed) came from Scottish organisations.

“Even with the existing strength of the equity ecosystem for Scottish spinouts, this latest research shows there is room for further growth,” the British Business Bank shared.

These data were published in a UK Business Bank and UKRI study entitled “Innovation-Driven Business Support: The Role of Public Investment”.

The partners say their analysis shows that the university companies they funded are doing “better economic and employment results” with the UK’s innovation hub, Innovate UK.

The British Business Bank works with partners, including major banks, to make it easier for small businesses to access finance. By March 2021, its programs had helped nearly 95,000 small businesses access more than £8.5 billion of funding, the bank said. UKRI says it invests more than £8bn a year in research and innovation and Innovate UK has awarded £885m in grants between 2020 and 2021.

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The Backing Innovation-led Companies report analysed 75,890 businesses supported by the British Business Bank investments, 14,594 supported by the Innovate UK programs and 2,306 spin-outs supported by UKRI research councils.

Intensive economy

UKRI Chief Executive Professor Dame Ottoline Leyser said better support for emerging businesses would play a key role in “stimulating an R&D intensive economy” and delivering better results across the country.

According to the British Business Bank, 12 and 10 spin-outs have received investments in the British South West and West Midlands respectively. Yorkshire and the Humber have seen eight spin-outs receive funding.

Meanwhile, Northern Ireland and the north east of England both had seven spin-outs that received funding. The East Midlands and North West each had six spin-outs that received funding, while Wales had five.

One of the most recent beneficiaries of such sprint-off deals is Elasmogen, a spin-out from the University of Aberdeen, which aims to develop new drugs. One of its technologies is inspired by proteins found in the immune system of sharks, which, due to their unique small shape, can penetrate deeper into solid cancerous tumours.