UK Government to adopt Air Street’s spinout reforms
Introduction
Before I joined the venture capital industry in 2013, I’d planned to train as a physician-scientist, with a focus on translational medicine. During my undergraduate summers of 2006-10 that I spent working on breast cancer metastasis at MIT, I saw the power of the Boston biotech ecosystem. This engine translated research breakthroughs from the lab into spinouts that commercialized transformational products at a dizzying pace.
When I moved to the UK in 2010 to pursue my PhD at Cambridge, I met the same range of world-class science produced by highly gifted and motivated researchers. But something was markedly different.
Despite a small number of success stories (SwiftKey, Arm, Solexa), almost no one I met had commercialized their research. Few even tried, despite the growing tech ecosystem an hour down the road in London. Potential breakthroughs in materials science, drug discovery, and artificial intelligence remained locked in the vaults of the ivory tower because of culture and bureaucracy.
Today's big win for UK university spinouts
Ever since, fixing the formation of spinouts from breakthrough university research has been close to my heart. It’s a mission that matters.
That’s why I’m delighted to see the publication of the UK Government’s independent review of university spinouts and the Treasury's acceptance of its recommendations today, which includes many of my proposed reforms.
Back in 2021, I launched Spinout.fyi, an open dataset on spinout deal terms crowdsourced from hundreds of spinouts. It painted a bleak picture of predatory deal terms, slow timelines, and an inexplicably secretive process. Many of the worst offenders were among the UK’s richest and best known institutions.
Our work was met with significant pushback from the universities sector, government, funding bodies, and the small world of spinout investors. Many previous campaigners for reform told me I was wasting my time. It was denounced by senior administrators and the Russell Group in national newspapers, even as more founders and academics came forward to corroborate our claims. With UK universities central to the government’s science and technology narrative, only a handful of people were willing to comment publicly two years ago.
It was only the slow grind of essays, several op-eds, debunkings, data (V1) releases (V2), case studies, and contributions to others’ work that led to this report existing in the first place.
That’s why today is such a significant day for Air Street and the entire spinout community. Among other measures, the report recommends:
Significantly reduced and dilutable equity ownership by universities at inception;
The adoption of a simple agreement to spinout, available publicly;
Significantly faster deal times by moving away from ad hoc negotiations and committee-led decision making in which spinouts are powerless;
Fairer distribution of IP among founding teams, so that PhD supervisors don’t walk away with disproportionate allocations;
New transparency requirements around spinout deal terms, extending the spirit of spinout.fyi;
Proof of concept funds for putative spinouts before they make a go/no go decision to launch.
These recommendations tally heavily with our original spinout reform proposals, which we reiterated subsequently many times, including to the inquiry team.
During the review, it was heartening to hear that many institutions now agreed their policies weren’t working and volunteered to change them. We hope it marks the start of a more forward-thinking, founder-friendly era in UK universities.
We also believe that today marks a significant victory for openness. Change doesn’t come from grumbling behind closed doors or snark on private WhatsApp groups. It comes from people sharing their experiences openly with real data-driven evidence, and being loud when the status quo just isn’t good enough. That philosophy underlines our approach to every policy question.
While today’s recommendations mark a significant step forward, we will continue to monitor these issues closely. Universities will need to live up to both the spirit as well as the letter of reform. For example, we hope the number of technology transfer offices that push for a 25% stake in life sciences companies remains vanishingly small, even if they technically have this leeway for IP-rich spinouts with long gestation periods.
If universities get this right, it’ll mark real progress towards the government’s ambition of global science and technology leadership. A wave of UK research commercialisation will also serve as a magnet for talented researchers and entrepreneurs across Europe, who don’t want to contend with unreformed systems.
I’d like to thank the review team and the UK Government for their thorough and fair-minded work and for being prepared to recommend radical change. Most of all, I’d like to thank the entrepreneurs and researchers, who’ve helped push for change. Whether you went public about your story, shared your experience through the database, or in the case of one friend, sued your university - you all contributed to today’s victory.