Welsh University Spinouts Face Critical Funding Gap, New Research Reveals
A new report from UK Research and Innovation has exposed a significant funding crisis for Welsh spinout companies, with data showing these innovative firms are not receiving the growth capital needed to thrive in competitive markets.
Declining Formation and Investment Disparities
The research reveals that while Wales accounts for 3% of UK research income and produced 3.6% of university spinouts between 2013 and 2024, the formation rate has plummeted from approximately 19 per year in 2013-15 to just seven per year in 2022-24. This dramatic decline means fewer opportunities for economic growth and job creation within the Welsh private sector.
More alarmingly, the investment figures paint a stark picture of market failure. Wales captures only 1.4% of pre-seed and seed equity investment into spinouts and a mere 0.1% of early-stage venture capital equity investment. This represents a massive gap between innovation creation and financial support at the critical stage where companies transition from scientific research to commercial execution.
The Venture Capital Deficiency
The report identifies a fundamental constraint: Wales lacks sufficient experienced venture capital investors with both the capability and appetite to lead funding rounds repeatedly. Only 1.1% of venture capital firms maintain any office presence in Wales, including the Development Bank of Wales.
This deficiency creates weaker investment syndicates, smaller funding rounds, slower business progress, and increased risk that promising firms will relocate to stronger ecosystems once they demonstrate potential. When this occurs, Wales loses the long-term economic value that scaling businesses generate.
Performance Metrics and Sector-Specific Challenges
Of Welsh spinouts founded since 2013 that are at least three years old, the majority have failed to raise any investment at all—the worst performance recorded across the United Kingdom. Furthermore, only one in fifty has secured later-stage venture capital rounds exceeding £10 million.
The compound semiconductor sector in South Wales exemplifies this challenge. Despite receiving over £500 million in public and private funding, the region has produced no significant spin-offs. The Cardiff Capital Region's £50 million investment fund has made minimal impact in converting this investable innovation into scaling businesses, even while operating alongside one of the UK's most strategically important deep tech clusters.
Contrasting Success and Systemic Failure
Draig Therapeutics, a recent Cardiff University spinout that secured more than £100 million in venture investment, demonstrates the substantial potential within Welsh academic institutions. However, this success remains an outlier rather than indicative of systemic support.
The current funding system—encompassing the Development Bank of Wales, British Business Bank, and Cardiff Capital Region—proves inadequate for guiding companies from pre-seed to seed stages and onward to meaningful growth. At its worst, this system becomes a mechanism for producing failure, wasting talented founders' time, diminishing university credibility, and utilizing taxpayer subsidies without generating long-term value.
Pathway to Improvement
Economic development bodies must establish a coherent funding pathway that converts research-led potential into investable ventures and eventually into scaling businesses that remain and grow within Wales. This requires committed resources and strategic focus to create sustainable technology-based firms that generate wealth and well-paid employment opportunities.
Only through such dedicated efforts can Wales genuinely claim that its spinouts represent an economic strength and that university innovation serves as a genuine engine for economic growth.
