UK spinouts hit record £3.35bn – IP Group CEO on growth and opportunities

We should be very proud that our businesses in the UK attract a significant amount of foreign direct investment, and it's something that is absolutely to be applauded and we definitely want more of it. You know, having businesses that are attractive on an international stage is clearly a very good endorsement and provides capital for them to scale up.

Thank you Stephen. Yeah great report. This is one of a report that we do every year with our specialist EIS manager subsidiary Parkwalk. Who really are the sort of the sourcing engine for IP Group, managing a pool of about half a billion of EIS tax advantage capital and investing into brand new spinouts from some of the leading universities here in the UK. We partner with, you know, Oxford, Cambridge and Bristol and some of the London universities and also some of the northern universities around Sheffield and Liverpool and Manchester and Leeds. And yeah, you're right. What's driving the interest. I think there has been more interest in sort of deep tech investing generally, given this huge digital transformation that we are going through. And everyone will be aware from reading the papers that there's this sort of huge surge in investment in AI, and that gives rise to a very big need for, lots of things that we have traditionally been very good at researching in UK universities. And the IP Group and Parkwalk have been creating spin out companies around for the best part of 20 years. So that's things like new forms of computing, new forms of memory, new connections between machines, but also, of course, the energy requirements that are needed to fuel data centers are very significant. And so we need more efficient sources of energy. And through IP Group, we are the most active investor into that space in the UK. And the majority of that is done through our specialist manager Parkwalk. So we see, you know, very significant economic and real world impact opportunity. And I think it's good news to see record levels of investment into the space, and certainly the highest level that we've seen since 2021.

Yeah, the risk here a little bit is the you know, the UK is seen as sort of an incubator economy for the rest of the world where the winners that we create from our world leading research are snapped up by investors from outside of the UK, or indeed acquired part way along the journey when there's still a lot more value creation to come. I think the three areas that we have been focused on at IP Group and in helping to shape the ecosystem here in the UK are three fold. So, capital, conditions and consumers. On the capital front, it's very much around other long term pools of capital investing in businesses as they scale. You know, IP is one of the few in an ecosystem, but it's very encouraging that there is quite a lot of interest from long term pools of capital, pension funds, that can invest into the space and create much bigger scaled winners of the future.

The second round conditions is certainly something where we're working closely with, trying to steer some government policy around things like as basic as planning reform, but ensuring that the tax environment for the UK, and for spin out companies and indeed for scaling businesses continues to be attractive, but also things like the pensions bill and the way that it is possible to make investing from, you know, an appropriate amount of capital from long term pools into this sector can be done appropriately safely, but also deliver and give access to pension savers some of the returns that are available by investing in venture.

And then the third is consumers. And I think the reason we talk about consumers particularly is because often when a company is going on its initial scale journey, capital is very important. But first, customers are also very important. And so us as domestic consumers of our growing early science and technology businesses, for example, by adopting new forms of health technology into the NHS, has a mutual benefit. It benefits the cost. It benefits the company because the company's getting its early traction, improving its business model. But it also benefits from a productivity and efficiency point of view, in our public services. So yeah, those three areas capital conditions and consumers.