The life sciences fundraising landscape: What founders need to know right now

As we reach the midpoint of 2025, life science founders face a fundraising landscape that's both challenging and selective. Recent market analysis reveals critical trends that are reshaping how biotech, medtech, and health tech companies should approach fundraising.

The Current Market Reality: Concentration and Caution

Bottom Line Up Front: The venture market has stabilized around mega-deals and later-stage investments, creating a challenging environment for early and mid-stage companies seeking capital.

After the euphoric highs of 2020-2022 and the sharp correction of 2023, the life sciences venture market has settled into a pattern of concentrated investing. While total funding increased 30% in 2024 to $56 billion, the number of deals remained flat—meaning investors are writing fewer, but much larger checks.

The top-performing deals in each sector are capturing disproportionate amounts of available capital, leaving significantly less funding available for early-stage companies.

The Series B Squeeze: Why Middle-Stage Rounds Remain Challenging

One of the most persistent challenges in today's market is what industry observers call the "Series B squeeze." Companies that successfully raised Series A rounds and hit their milestones are finding it difficult to secure follow-on funding.

Why Series B is so tough right now:

• Higher bar for entry: New investors have become increasingly selective, often requiring companies to hit milestones far beyond what was originally planned
• Limited new money: VCs prefer to join large syndicated rounds rather than lead smaller, riskier Series B deals
• Risk concentration: Investors would rather be one of ten investors in a mega-round than take concentrated risk in a smaller deal

Strategic advice for founders: Focus on building relationships with potential Series B investors early, and consider diversifying your cap table during Series A to create multiple potential sources of follow-on funding.

Sector-Specific Trends: Where the Money is Going

BioPharma: The Era of Mega-Rounds

Biopharma continues to see the largest deals, including billion-dollar early-stage rounds. This trend is driven by several factors:

• Larger fund sizes: VCs raised larger funds during the 2020-2022 boom and need to deploy more capital per deal
• Risk mitigation: Mega-rounds allow companies to combine seed, Series A, and Series B funding, reducing financing risk
• Bigger markets: Companies are targeting larger addressable markets in areas like metabolic disorders and autoimmune diseases

However, this concentration in mega-deals may be more reflective of current market conditions than a permanent shift in venture investing patterns.

Diagnostics and Tools: Corporate Investors Step In

With traditional VCs largely exiting the diagnostics space, corporate investors are filling the gap. Companies like Labcorp are stepping into Series A and B rounds, similar to how big pharma created venture arms to outsource early-stage research.

Key insight: Engage with corporate investors earlier in your fundraising journey. They're interested in technologies that could benefit their core business and may become acquisition candidates.

Healthtech: Revenue is King

Healthtech has shown resilience, with strong activity in:

• Provider operations and workflow optimization
• AI-powered clinical tools
• Mental and behavioral health platforms
• Specialty care (women's health, senior care)

Critical requirement: Demonstrating repeatable revenue has become essential for Series B and beyond. Companies must prove their revenue model is sustainable and scalable.

Medical Devices: Steady Performance

Med devices have maintained steady performance, with significant late-stage investment focused on companies either funding pivotal trials or commercializing already-cleared devices. The sector benefits from experienced, resilient entrepreneurs who understand market cycles.

Market Performance Analysis: 2025 Predictions Review

Several key predictions were made for the 2025 market. Here's how they're tracking:

✅ Sustained difficulty securing Series B rounds - Unfortunately accurate, with many companies struggling to find new lead investors

✅ Weak exit landscape - IPO markets remain largely closed, though some M&A activity has picked up in biopharma

✅ Larger and later rounds dominating - The top tier of companies are capturing the majority of available capital

⚠️ Lower first financing rounds (except biopharma) - Mixed results: health tech actually up, devices and diagnostics down

✅ Significant consolidation and shutdowns - Unfortunately materializing as insider rounds dry up and follow-on funding becomes scarce

Strategies for Success in Today's Market

1. Diversify Your Funding Sources

Don't limit yourself to traditional VCs. Consider:

• Corporate investors (especially for diagnostics and tools)
• Family offices (increasingly active in smaller rounds)
• Angel groups (even for companies that have already raised institutional rounds)
• Growth equity and private equity (for later-stage companies)

2. Focus on Capital Efficiency

With longer funding cycles and higher bars for investment, cash management becomes critical. Prioritize the most essential value inflection points and be prepared to operate leaner.

3. Build Relationships Early

Start building relationships with potential investors well before you need capital. In today's market, investors want to see track records of execution before committing to new investments.

4. Consider Alternative Deal Structures

Be open to creative deal structures, including:

• Insider-led rounds with new money
• Bridge financing from existing investors
• Down rounds if necessary to keep the company moving forward

In challenging markets, maintaining company momentum often takes priority over valuation optimization.

Looking Ahead: What to Expect in Late 2025

The reality check: Don't expect significant improvement in the second half of 2025. Geopolitical uncertainty and economic instability are likely to persist, keeping the IPO markets largely closed and maintaining investor caution.

The opportunity: Companies that can navigate this challenging environment and continue executing will be well-positioned when markets eventually recover, likely in 2026.

Key trend to watch: Market stabilization. Once the broader public markets find stability, it should help reopen IPO markets and increase investor confidence in private markets.

Final Thoughts: Survival and Preparation

The current market requires a combination of realism and resilience. While the fundraising environment is undoubtedly challenging, capital is available for companies that can demonstrate strong execution, market traction, and clear paths to value creation.

For life science founders, the key is to be opportunistic when capital is available while maintaining focus on the fundamental business of advancing breakthrough technologies that can improve human health. Those who navigate this period successfully will emerge stronger and better positioned for the eventual market recovery.

The current environment demands flexibility and creativity in fundraising approaches. Companies should explore all available funding sources and be prepared to adapt their strategies based on market conditions.