Lack of capital is strangling most of our spinouts

THE NEW UK Research and Innovation report has revealed what too many Welsh founders already know - we create technology firms but struggle to finance them through the critical early stages.

- DYLAN JONES EVANS

John Atack and Simon Ward of Draig Therapeutics, a business success story

Too few are supported through to serious scale and this is especially true of those spinout businesses that are founded to take university research into the marketplace.

On initial reading, the report shows some good news, with Wales accounting for 3% of UK research income and producing 3.6% of UK university spinouts founded between 2013 and 2024, suggesting we may be punching above our weight in creating companies.

However, the bad news is that Welsh spinout formation has fallen from around 19 per year in 2013-15 to around seven per year in 2022-24, which means fewer bets, fewer shots on goal, and fewer companies reaching the stage where external capital can realistically back them.

This should worry anyone who cares about productivity, private sector job creation, or building homegrown firms. Indeed, here is where we should all pay attention, because the report's figures are genuinely alarming.

While Wales generates 3.6% of UK spinouts, it captures only 1.4% of pre-seed and seed equity investment into spinouts, and an astonishing 0.1% of early-stage VC equity investment.

In other words, while we create innovative businesses, they just don’t get the finance necessary to scale.

This is not a small gap but a massive market failure at the exact stage where spinouts transition from “clever science” to commercial execution i.e. building a product, hiring commercial leadership and pricing a serious seed round.

This is the phase where companies either become investable businesses or remain permanently “nearly ready,” and where momentum is either built or lost.