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.


Biotech Venture Capital

Latest Headlines

Latest Headlines

UPDATED: Third Rock Ventures expands roster with Alnylam's CEO and Genzyme/Sanofi vet

Alnylam Pharmaceuticals CEO John Maraganore has joined Third Rock in the advisory role of venture partner, reunited in a way with his former Millennium Pharmaceuticals colleagues who launched the venture firm 6 years ago.

Startup biotech charges into PhII with $23M bankroll for rare disease drugs

A little more than a year ago, the startup crew at Lumena Pharmaceuticals was based in North Carolina and working on a new drug for diabetics. But things have changed. The company moved to San Diego, refocused its lead program on a rare liver disease and today announced that it had rounded up $23 million in Series A cash from a trio of venture groups.

Astellas, VCs stake virtual biotech spinout with $15M and a PhII program

Astellas and a pair of venture companies have joined forces to launch a spinout virtual biotech which will pick up mid-stage research work on an experimental therapy for nocturia.

E&Y: Biotech budget hawks rule the roost in year of mixed performance

Public biotech companies around the world stayed on a healthy pace last year, boosting top and bottom-line revenue together and extending a solid improvement in the industry's financial performance into its third year, according to Ernst & Young's annual checkup on the numbers.

UPDATED: The Top 15 Biotech VC firms

Ask any biotech exec in the business of drug and device development about the funding environment these days, and you'll most likely hear the word "tough" inside of three seconds. The...

Syros Pharma snags $30M funding deal to target master switches of cancer genes

With licenses to breaking discoveries from labs affiliated with MIT and Harvard, Syros Pharmaceuticals has raised $30 million in a Series A round of financing from top venture firms.

NEA provides $10M to help fuel next-gen cancer R&D at Cleave

Closing in on the selection of its lead cancer program, San Francisco-based Cleave Biosciences has welcomed the deep-pocketed player New Enterprise Associates to its list of venture backers and topped up its Series A with a $10 million investment in its early-stage drug research work.

UPDATED: Third Rock Ventures adds $516M fund to back new portfolio of biotechs

Third Rock Ventures has established its third biotech fund in 6 years, bringing in a haul of $516 million for one of the most active groups of early-stage biotech investors in the world. The new fund, which brings the total it's raised to a whopping $1.3 billion-plus, will be used to launch another 16 or so drug developers.

Will biotech grow in China and India without much VC help?

We've seen plenty of acrimony from the biotech communities in the U.S. and Europe over the insufficient venture capital dollars for young drug developers. Read more >>

Astellas dumps $390M pact with Ambit on eve of IPO

Talk about bad timing. Just days after San Diego-based Ambit Biosciences stepped up to confidently announce its second try at an IPO, its partner Astellas unceremoniously dumped its $390 million partnership on a portfolio that includes the biotech's lead development program.