A new report from Pitchbook suggests we’re in for a period of more sustainable investing, with VC firms continuing to create and invest in companies, just more carefully.
Biotech venture capital has successfully completed a full ecosystem cycle from 2012 to 2024. With the boom and bust officially over, what happens next?
A new report from Pitchbook suggests we’re in for a period of more sustainable investing, as funding levels have fallen close to their 2012 baseline.
“Historical patterns suggest that periods of capital constraint often precede cycles of disciplined, high-quality company formation and subsequent market expansion,” Pitchbook analysts wrote. “While current metrics indicate continued investor caution, this recalibration may be establishing a more sustainable foundation for the next phase of biotech innovation and investment.”
In this environment, biotech specialist VC firms like Flagship Pioneering are continuing to do what they do best—company creation—but they are displaying more measured capital deployment, according to Pitchbook. After fueling up with a $1.12 billion fund in 2023, Canaan Partners is focusing on early-stage opportunities with capital-efficient development paths. And F-Prime Capital’s $500 million fund, also raised in 2023, has tipped toward platform technologies with multiple therapeutics options.
“Biotech VC funds have demonstrated steady structural growth, increasing both absolutely and as a percentage of all VC funds while consistently outperforming non-biotech VC across vintage years,” Pitchbook said. Specialists such as RA Capital, Foresite Capital and Perceptive Advisors have been particularly successful, routinely delivering “top-quartile returns.”
More generalist investors such as Dimensions Capital II, which raised $500 million in 2024, and Lux Capital VIII, which collected $1.15 billion in 2023, may thrive in this environment with less competition and better valuations, Pitchbook noted.
To be successful, VCs focusing on the biotech sector must have deep scientific expertise to guide decision-making, according to Pitchbook. Atlas Venture, 5AM Ventures and Flagship have exemplified this scientific diligence, the report said.
Examples of companies that garnered investments based on leaner structures and capital-efficient models include Maze Therapeutics and Artbio. Maze raised $115 million in December 2024, co-led by Frazier Life Sciences and Deep Track Capital. Artbio, a member of BioSpace’s NextGen Class of 2025, collected $90 million in a December 2023 series A that included Third Rock Ventures and an undisclosed fund as co-leaders.
With IPOs out of the question and M&A still lagging (despite a flurry of deals just this week), VCs have to prepare to hang on for longer, Pitchbook said. Examples include Altos Lab, the longevity behemoth that has raised billions in its short life but has yet to release details on its pipeline. Jefferies analysts said Altos, and fellow longevity biotech NewLimit, “are adopting longer development timelines with substantial initial funding for ambitious therapeutic goals.”
The Complete Cycle
Pitchbook defines the three-act biotech VC boom, bust and reset as the period from 2012 to 2024. In 2012, biotech VC fundraising was $12.1 billion, rising steadily to $44.7 billion in 2017. During this time, OrbiMed, Sofinnova Venture Partners and Deerfield Healthcare Innovations raised nice-sized funds.
Between 2018 and 2021, there was an explosive expansion, according to Pitchbook. Fundraising boomed, peaking at $152.3 billion in 2018. Then came the pandemic.
“This period saw unprecedented fundraising,” Pitchbook noted. A $1.46 billion raise by ARCH Venture in 2020 was among the highlights. Others followed suit, with Third Rock Ventures and Flagship also raising increasingly massive funds.
But then reality hit. In 2022, the market rationalized and the number of funds plummeted from a peak of 309 in 2021 to just 46 by 2024. Just four closed in the first quarter of 2025. Last year wrapped up with just $12 billion in fundraising, and by all accounts, 2025 is off to a slow start so far, too.
Pitchbook attributes the forces behind the correction to the rising cost of capital, elevated interest rates, selectivity among VC firms, a pandemic reset and exit market constraints, among other issues.
