Most new drug companies start small, with few staff members and little money. So in exchange for equity in their company, biotechs can raise much-needed cash from venture funds looking to invest in a technology early in order to earn a big pay-off down the road. Experienced individuals from the venture capital firms usually play a key role making decision and guiding the new company through the development process. 

Venture capital funds will, at various stages, provide fresh infusions of cash if a biotech's program shows promise and continues to move through the clinic without hitting any major speed bumps. Ideally, the drugmaker will exit when the it's in a position to demand a premium price. Promising Phase II or, better yet, Phase III data could tempt a larger company to make a pricy buyout offer. Alternately, some developers attempt to raise money by filing an IPO. This is a gamble at best. While some high-flying developers like Pacific Biosciences have had success on the open market in recent months, investors still lack an appetite for small developers with no drugs in the market and the risk of an FDA delay or rejection looming in the future.

In 2010 biotech venture capital investing began to recover from its 2009 low, growing three percent in the number of dollars raised and eight percent in the number of deals which were struck. That represents a significant bounce-back from 2009, which saw biotech investing plummet 19 percent during the worst of the economic crisis. The industry dropped to second place overall behind software, with $3.7 billion going into 460 deals.

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Biotech Venture Capital

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Latest Headlines

Atlas Venture unveils a $280M pure play biotech startup fund

Atlas Venture is unveiling a new $280 million fund today that will double down on its bet on cutting-edge drugs. Atlas relied on two close industry giants--Amgen and Novartis--and a mix of old and new investors to help raise a fund that easily broke through its $250 million cap.

UPDATED: Dominant VC NEA gathers $3B megafund, preps for a wave of biotech rounds

A wave of venture cash continues to flood into the biotech field. And New Enterprise Associates is now back at the crest of that wave. The venture group put out word this morning that it has raised $3.1 billion for two new funds, and if history is any guide, a major part of that money will be earmarked for a new blast of global biotech investments ranging from seed to clinical-stage backing.

Nabriva preps for PhIII antibiotic trial with a $120M VC commitment

A transatlantic group of venture investors crowded into a $120 million venture round for Vienna-based Nabriva Therapeutics, offering enough cash to get started with a Phase III study for a new antibiotic.

A big $76M round, undisclosed investors; is an IPO looming for aTyr?

A big venture round led by Sofinnova Ventures and backed by a lengthy string of biotech stalwarts and public investment firms is bound to get tongues wagging again about a possible IPO in the near future for San Diego-based aTyr.

Flagship banks $537M to back the next batch of biotechs

Biotech VC stalwart Flagship Ventures put together a $537 million new fund, its largest ever, with eyes on a new generation of life sciences upstarts.

Pfizer joins a powerhouse syndicate backing $43M round for Nimbus

After years of careful preclinical foundation work, Nimbus Therapeutics has added another marquee name to its Big Pharma-heavy list of backers and put together a $43 million B round that will put its computer-driven drug design technology to the clinical test in one of the hottest fields in biotech.

Mersana grabs a $35M round, posts ex-Millennium chief Protopapas at helm

For more than a year now, NEA general partner David Mott has helmed Mersana Therapeutics, a Cambridge, MA-based biotech that has been working on next-gen antibody-drug conjugates. But this morning he's handing the reins over to longtime biotech vet Anna Protopapas (while remaining chairman) after organizing a $35 million B round that will be announced later this morning.

Woodford readies a $300M wager on struggling U.K. biotech sector

LONDON-- High-profile British fund manager Neil Woodford rolled out plans to raise about $300 million for an investment trust that will bet heavily on the U.K.'s struggling biotech sector.

G1 banks $33M to cut in on a blockbuster oncology race

North Carolina's G1 Therapeutics hauled in $33 million to advance a headline-grabbing approach to cancer treatment, helping the biotech hit the gas in a space otherwise dominated by Big Pharma.

Biotech guru Gregory Verdine lands $18M round for new WaVe drug developer

A U.S./Japanese hybrid biotech chaired and co-founded by Gregory Verdine, the high-profile Harvard investigator now laboring as CEO of Warp Drive Bio, has gathered together $18 million in a transpacific venture round and set its sights on developing a "revolutionary" new class of nucleic acid drugs based on a potentially breakthrough approach to drug design.