Jack Conway is a capital investment officer at the UK’s Department for Business and Trade in Boston

Long recognised as engines of economic development, universities are leaning into their roles as start-up factories, spinning out companies in dynamic sectors like biotechnology, materials science and advanced computing. 

As these ecosystems grow, they will need to attract international investors to scale. Thankfully, they have excellent tools for attracting international funds, but only if universities themselves, and policy-makers, let them play the role of investment attraction. 

A powerful toolkit 

University technology transfer offices, initially set up in the 1980s in the US to license technology to industry, are increasingly incubating new companies. Meanwhile, universities are partnering with or creating venture capital (VC) funds to back those companies. 

One of the first UK universities to pursue this strategy was the University of Oxford, which partnered with VC firm Oxford Science Enterprises (OSE) in 2015. It now launches more spin-outs than any other UK university. According to recent UK government reports, Oxford launched between five and 10 spin-outs per year before OSE was founded. Now, it launches around 20 per year, and annual VC investment into its spin-outs has risen tenfold since 2015.

Other regions have taken notice. In 2022, the Universities of Manchester, Leeds and Sheffield launched a joint VC fund called Northern Gritstone. Eight Midlands universities launched their own Midlands Mindforge VC fund last year. Funds like these can be powerful tools for fostering a start-up ecosystem. But companies in research-intensive sectors usually require much more funding to reach maturity. Thankfully, these university-founded funds can act as one-stop shops for deeper-pocketed international VCs. 

In my job at the UK’s Department for Business & Trade in Boston, I help US VC investors navigate opportunities in the UK. My first step is usually to connect them with universities and their VC funds. The university teams know the strongest start-ups better than anyone, and they have portfolios of high-potential, early-stage companies seeking later-stage funding. 

Companies that receive international investment gain significant benefits. They are better-placed to raise further funding internationally, and to enter international markets with help from their global shareholders. 

When the system works smoothly, it is an elegant machine for commercialising research: universities incubate a company, local VC firms get it off the ground, and international investors help it reach global scale. 

More on start-ups:

• Economic development links to university spin-out boom
• Piedmont's hopes for start-ups to future-proof its economy
• Opinion | Tech entrepreneurship still pays dividends

Overcoming roadblocks 

I have noticed two potential hindrances to the smooth functioning of this machine. First, not everyone believes that universities should embrace international investors, fearing they will demand companies relocate, draining the regional ecosystem of its most promising stars. This is a valid concern, particularly if international investors are involved before a company is founded. When US biotech VCs build companies from scratch, they sometimes partner with researchers outside the US but build the company in the US. But for companies that have already been founded, the benefits outweigh the risks. US investors are unlikely to uproot an existing scientific team, though they may hire US-based executives with specialised skills the company needs. What matters is that a company is rooted before it scales. 

A bigger potential bug is that the same centralisation that allows universities to act as one-stop shops also risks marginalising international investors. The tightly-knit investor communities around each university can be off-putting to international investors, who sometimes feel they are forced to come in later — when the potential upside is smaller — and on worse terms. 

These bugs risk creating a machine that launches companies, but struggles to secure follow-on investors, resulting in a lower share of companies reaching maturity.  

Catalysing commercialisation 

As countries and regions seek to promote their advanced technology sectors, they will continue to turn to their universities to build dynamic new companies. In doing so, they should not be afraid to partner with international investors. 

The UK offers a model for other countries with less-developed spin-out ecosystems, which should leverage technology transfer offices and set up university-anchored VC funds to catalyse company formation. 

While universities and local investors should be hands-on through the company formation process, they should involve international investors early enough to facilitate the follow-on investment their spin-outs need to scale. And investment promotion agencies have a role to play in helping universities court international investors, something universities may already be doing on their own.

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