Universities and Business: Growing Income and Enhancing Economic Impact
John McCrea, 15 March 2024
Universities are primarily known for being institutions of learning and knowledge sharing.
However, with funding pressures, due to a combination of inflation and changes to funding distribution, the tertiary education sector is leaning increasingly toward enterprise and commercialised activity.
London Economics produced a report on universities’ commercial value to the UK economy, using Cambridge University as their case study. This revealed that Cambridge delivered almost £30b to the UK economy across 2020-21, with £23.1b raised by the University’s research and knowledge exchange activities alone.
Our own Spotlight on Spinouts shows that Oxbridge dominates the spinout sphere, with 350 companies produced between the two universities since 2010. Meanwhile, the remaining 20 universities included in the survey produced 961 spinouts between them. This means that Oxford and Cambridge alone account for 37% of startups created in UK universities.
Universities without Oxbridge’s resources face a range of operational challenges in achieving scale of income and impact. Putting the right framework in place for universities to achieve income via KTPs (Knowledge Transfer Partnerships) is the first challenge.
How do universities generate income?
Historically, universities were the beneficiaries of larger grants from central government, which contributed towards both students’ education and universities’ R&D costs.
However, this all changed in 2012 when the coalition government of the day shook up the status quo, making some fairly seismic changes to university funding. The tuition fee cap was raised to £6,000 (and subsequently £9,250), but this was enacted in lockstep with significant cuts to grants, both for students and universities. Instead, funding is now administered increasingly through loans rather than grants.
The consequence is that the tertiary education sector now relies heavily on tuition fees, with 53.2% of total income coming from domestic and international fee-payers, according to the HESA (High Education Statistics Agency).
As a result, more universities are looking to diversify their income by commercialising research and demonstrating its application to industry. This is called Knowledge Exchange, which is mostly seen in the form of the following:
1) Knowledge Transfer Partnerships (KTPs)
KTPs are a formal agreement between a business and a university or research company where the business takes on a researcher or recent graduate.
2) IP Licensing
IP licensing is the process where academic institutions grant permission to companies or individuals to use their intellectual property, such as patents, trademarks, or copyrights. This raises revenue for universities and saves businesses significant time and money that would otherwise be spent on R&D.
3) Continuous Professional Development (CPDs)
CPD courses bridge the gap between academia and industry, with universities offering a range of study options to employees. What employees learn on CPD courses can then be brought back and implemented in the workplace.
4) Facility Sharing, Science Parks, and Innovation Centres
These types of knowledge exchange initiatives are reciprocal agreements whereby universities charge businesses a tenancy fee in exchange for the educational opportunities that come with having a business on site. Both academic institutions and the business community win with these types of arrangements.
Universities that spin out businesses also generate mass returns on the shareholdings they have within companies that are scaling their valuations.
For example, Exscientia, a Dundee University spinout that received a number of investments from the Bill and Melanie Gates Foundation, eventually raised around £226m at an IPO, ultimately making the University a shareholding worth £20.7m.
Learn more about how the University of Manchester uses Beauhurst to engage with some of the fastest-growing SMEs
How do universities create impact?
Impact can be measured in a number of ways, from social impact through education and job creation to economic impact and knowledge exchange. Let’s first address economic impact as a result of knowledge exchange.
This refers specifically to the commercial impact of knowledge exchange work, including the creation of entrepreneurs, licensing of IP (intellectual property), job creation, and of course, company spinouts.
Essentially — what is the impact, direct or indirect, of the initiatives designed to generate income for universities?
Many measure the impact they have by counting the number of companies started on campus, but they also look at how these companies go on to:
Survive
Taking ideas to fruition and establishing a team.
Innovate
Developing technologies or services that have a strong market fit.
With a strong market fit and the ability to scale quickly, universities stand to benefit significantly from both the reputation gains of innovative spinout companies and potential paydays via an IPO.
Thrive
Finally, universities will analyse data that demonstrates the value of their knowledge exchange activities.
They’ll analyse job creation statistics locally, nationally, and (in some cases), internationally. Universities are keen to see the cost/benefit analysis, because this provides crucial information on how to improve.
University of Cambridge has calculated its ROI to be £11.27 for every £1 spent, making Cambridge the most successful cluster and local ecosystem in the UK.
What challenges do universities face?
1) Creating proactive outbound strategies
Let’s face it — building a successful proactive outbound strategy from scratch is difficult.
Where do you start? And how do you reach the right businesses? Data cleanliness and reliability are paramount to build a culture of continuous engagement.
When data sources are out-of-date and hidden away in spreadsheets, it’s far harder for universities to nurture relationships with prospective knowledge exchange partners. In fact, poor-quality data costs organisations as much as $12.9m every year, according to research by Gartner.
2) Becoming an anchor institution
When it comes to gaining the reputation of being an anchor institution, universities have a number of challenges.
Notably, they must be able to showcase demonstrable impact in their local area and wider communities. Measuring this and presenting back quantifiable data on how their institution contributes to regional development, innovation, and social cohesion is vital.
Meanwhile, research and teaching excellence are also key criteria for a university to climb the higher education league tables and rankings — and cement its role as a placemaker.
The ability to present tangible data proving the direct (and indirect) impact a university has is a key challenge.
3) Due diligence
Is your university partnering with responsible, sustainable businesses?
Evaluating corporate structures, including the history of founders and directors, is how universities can perform due diligence. Meanwhile, it’s important to get a clearer picture of a company’s existing ownership, as well as press mentions.
4) Reliable impact reporting
Impact reporting is crucial to presenting a demonstrable ROI (return-on-investment) and therefore securing future funding.
Unfortunately, important insights are often missed due to a combination of bad data and human error caused by a lack of time, meaning that impact is not always fully evidenced.
How does BeauhurstImpact solve such problems?
Ultimately, commercialisation teams within universities want to broker relationships with industry. They want to diversify income streams to help their institutions balance the books — and create impact as a result of these commercial decisions.
Here’s how we help innovation teams in universities to grow their income and measure economic impact.
Data tracked by BeauhurstImpact
- Company financials
- Company employee count
- Equity investment & valuations
- SME status
- Patents
- InnovateUK, H2020, & FP7 grants
- Commodity trade data (Imports & Exports)
- Companies House status (active/dormant/dissolved)
- Company classifiers (sectors, technologies)
- Company key people (founders, C-suite, directors)
- Company ownership & shareholders
and much more
Finding and evaluating key companies
Finding the right companies for knowledge exchange is essential — but it also takes time. As the old adage goes, time is money, so it’s therefore a key ROI factor. Instead of endlessly searching for those key organisations manually, try an advanced search on BeauhurstImpact.
From geolocational data to information on the impact investment landscape, many of our higher education subscribers are saving swathes of time and money as a result.
Innovation and growth signals
Signals are your superpower — these are taxonomy-based criteria that act as a lightning rod for key events and criteria that happen every day across the UK’s business landscape.
From finding spinouts with successful IPOs, to companies with a strong ESG (environmental, social and governance) strategy, signals are a powerful means of finding companies.
Leadership and key people with connections
In order to approach the right businesses, you need the right contacts.
BeauhurstImpact connects you with a business’s decision-makers and their key connections at a glance, simplifying the outreach process and saving hours of trawling on LinkedIn.
Academic spinouts and accelerator attendance
Track spinouts from your university (and rival institutions) with the collections feature. This builds a living list of spinouts that is automatically added to every time a company is spun out from an academic institution.
Likewise, you can track spinouts that attend accelerator events with the click of a button — and get notified every time it happens.
Implementing rigorous due diligence checks
Becoming an anchor institution for the private sector is a long-term goal for university innovation teams, but they also have a significant responsibility to ensure that they’re partnering with the right companies.
This includes ensuring that businesses are in good financial health, that there is strategic value in placements, and that organisations are investing sufficiently in innovation and R&D.
BeauhurstImpact empowers universities to mitigate risk, and ensure that any knowledge exchange partnership will benefit all parties involved.
Impact reporting
Measuring impact is a tricky task at the best of times, but with BeauhurstImpact, commercialisation teams can set alerts to monitor key events for target companies.
For example, you may want to monitor growth and job creation to track how many opportunities your equity investment has raised. Elsewhere, monitoring the rise and fall of spinouts from your institution, including grant/fund activity and IPOs (and sometimes liquidations) will deliver a clearer picture of your ROI.
It’s also now mandatory for institutions to return HEBCI (Higher Education Business and Community Interaction) return forms to the Higher Education Statistics Agency (HESA). These returns require complete, data-rich information on a university’s impact on the wider economy.
Between the data sourced from BeauhurstImpact, and an institution’s own data, HEBCI returns are less resource intensive and ensure a higher standard of data quality and consistency.
Wider insight into the ecosystem
From insights into key funds and accelerators, to gathering all the information you need on angel investors and high net worth individuals (HNWI), BeauhurstImpact is your gateway to the equity investment landscape.
Access to data on key funds and accelerators enables business development managers to identify potential funding sources and support mechanisms for university spinouts and startups.
Angel investors and HNWIs are also crucial for providing not just financial backing but also mentorship and networks to emerging companies. BeauhurstImpact’s insights into these individuals can help universities’ commercial teams strategically target and engage with potential investors who have a history of supporting projects in relevant sectors or technologies.
Meanwhile, VCs, family offices, and private equity funds represent significant sources of investment for more mature projects with growth potential. Understanding the investment focus, portfolio, and track record of these entities through Beauhurst can help technology transfer officers align their projects with the right investors.
Explore the Evolving Trends in the UK’s Academic Spinout Population
In the third edition of the Spotlight on Spinouts report, we explore the demographics of the academic spinout population, including their top-origin academic institutions, their funding sources and their survival and exit figures.
Summary: Embracing knowledge exchange
With universities diversifying their income streams due to funding pressures and a shift towards commercialisation, the importance of measuring the impact of these activities is essential to ensure sustainable growth.
The success of Oxbridge in the spinout sphere highlights the potential for universities to contribute significantly to the startup ecosystem, nurturing innovation and entrepreneurship.
However, the journey is not without its challenges, and commercialisation teams within universities play a pivotal role in helping universities make the most of their knowledge exchange programmes, while ensuring impactful outcomes.
Our higher education and research subscribers benefit from rapid access to reliable data on key people and company-based signals. By harnessing such resources, universities are engaging with the private sector more effectively, securing investments and measuring the economic impact of their initiatives.
By embracing commercialisation and knowledge exchange, you can not only secure your financial footing but also amplify your impact on society and both local and national economies.
Want insights into the impact investment economy?
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