As the world's biggest biotech hub, funding for early-stage startups has long been the lifeblood of Boston's life sciences industry. But the latest figures make for concerning reading—with average seed funding secured by a preclinical start-up plunging 40% over the past year.
In fact, the average seed round for a Massachusetts-based biotech in the first six months of 2026 was just $4.65 million, down from $7.65 million for the same period in 2025, according to the most recent industry snapshot from trade group MassBio.
It's not a problem unique to the Greater Boston area. J.P. Morgan’s 2026 first-half report (PDF) of global biopharma tracked 114 seed and series A investments collectively worth $4.8 billion, the lowest amount raised over the past five years and less than half of the $11.1 billion seen across 242 deals in the first half of 2025.
“Investors continue to favor companies with established data packages, derisked development paths and clearer near-term value inflection points,” JPM analysts noted in the report.
Back in Massachusetts, MassBio’s midyear snapshots suggest that seed funding for the state's biotechs has been in decline for years. In fact, the average seed round so far in 2026 is just a third of the 2022 level of $11.1 million.
The money is bleeding out of seed-stage investments and into more mature assets with clearer commercial potential. MassBio found that overall venture funding rose 25% year-over-year to $3.45 billion in the first half of the year, the strongest start to a year since 2023. The funds were concentrated in fewer, bigger bets: the top 10 deals took 47% of all dollars allocated to Massachusetts companies, according to the report.
While average seed funding decreased, the number of early-stage investments actually rose from 15 seed rounds in the first half of 2025 to 21 in 2026. One of the companies was Lowell-based DNA sequencing library company Canal Biosciences, which secured $2.3 million.
Canal co-CEO Chris Benoit told Fierce that his company's seed round was unique because he led the group of investors himself. Benoit explained that he had made that call after speaking with some angel investor groups who advised that the biotech's science remained at too early a stage for them to commit any money.
“Good technologies are still getting funded, but it's certainly not easy,” the CEO said in an interview. “If you have someone who's willing to stick their neck out and say, ‘It looks like a solid technology and the scientific risk doesn't seem to be insurmountable,’ then mom and pop investors will follow along.”
Biotech investing has been deflated because the glut of small companies that were overfunded and overvalued during the COVID pandemic have now burned through cash and are available for cheap, Benoit suggested.
Michael Luther took over one such company in 2024, when he became CEO of gene therapy startup STRM.BIO. Founded in 2021, the biotech exhausted its cash reserves too quickly and was “running on fumes” when Luther was hired for a reset, he told Fierce. The Boston-based company went on to land an $8 million seed round in January.
With nearly four decades in the industry and having previously overseen business development efforts for Astellas in North America, Luther knows the industry is cyclical.
As he sees it, biotechs are now reliant on a more conservative, educated investor base than during the boom times of the pandemic, meaning potential funding sources now want to know how close an asset is to the clinic. “It's still a difficult environment,” he said.
But both Luther and Benoit said they feel the wind shifting.
“It's got to come back,” Benoit said. “The hangover from the COVID days in the investment community has been characterized as dumpster diving. We've cleared the deck of that. The narrative seems to be that there is now capacity in the investor base and interest in moving the whole industry forward.”
Smaller seed rounds have a disproportionate impact on Greater Boston, which has established itself as an innovation engine and a place to launch new companies coming out of the region’s academic and startup ecosystem.
“Massachusetts companies fill the nation’s drug pipeline with candidates in advanced modalities,” MassBio noted in its report. “And Massachusetts hospitals and research centers run the early-stage trials that turn candidates into medicines, for sponsors headquartered here, across the country and around the world.”
While the size of the average seed round has dropped, the science keeps progressing, which means there is more competition for those early dollars. This is changing the dynamic of what is getting funded in Boston and beyond.
“In the past, science stories got funded. CEOs said, ‘Hey, we don't know where this is going, but it's cool and interesting.’ Those days are behind us,” Boston-based Brian Goodman, Ph.D., a managing director at life sciences investment firm Vida Ventures, told Fierce in an interview.
“When we're looking at early-stage companies and platforms, from day one we're asking, ‘How does this apply to making a medicine? How do we build that medicine? How quickly can we get it into patients and prove the thesis?’” Goodman explained.
“We're waiting longer to take it out of academia,” he added. “We’re asking companies to write a grant, do more work, prove things and then maybe next year we’ll talk.”
While fiscally responsible in the short term, this more conservative investing approach could have consequences down the line, especially for Big Pharmas facing patent cliffs that need to recharge their pipelines.
“If there's less capital being allocated to a broader number of companies, I wonder what that means three to five years later,” Abraham Kwon, life sciences partner at law firm Lowenstein Sandler, told Fierce. “There is going to be a smaller pipeline of acquisition targets down the road.”
While funding has remained focused on more mature companies via funding rounds and IPOs, Kwon suggested early-stage biotechs could see growing opportunities to access the public markets or get bought out.
He pointed to examples of Massachusetts companies that were acquired or went public with little or no clinical data. Boston-based Aktis Oncology kicked off the year with a $318 million IPO despite only having very early-stage data, while Eli Lilly bought Watertown-based preclinical in vivo CAR-T company Orna Therapeutics in a $2.4 billion deal in February.
Despite some positive signals, Goodman said he’d like to see more risk return to the market, which would benefit Boston in particular.
“Taking more risk will make us more competitive, because navigating that risk takes more sophistication,” he explained.
“We have a mature talent pool that is sophisticated from earliest discovery through commercial, and getting people who have that range of experience is rare—but that's Boston’s talent,” he said. “If the markets are rewarding a little bit more risk, it'll continue to make us more competitive because that's going to be hard to replicate.”
While the appetite for seed-stage investments may be smaller and more dispersed these days, the smaller cash injections could pay dividends to the industry in the long run.
“If it’s more challenging to fundraise, the companies that are going to survive are the ones that are more capital efficient or have more promising science,” Lowenstein Sandler's Kwon suggested. “You're going to see more of that efficiency come through, and the management teams that can do it more efficiently are the ones that are going to be rewarded.”
Omar Khalil, managing partner at Santé Ventures who manages the VC firm's Boston office, agreed that leaner, more efficient biotechs that are forced by financial realities to get to proof-of-concept quicker and more cheaply could help return the Boston biotech market to normalcy.
“We've got to work through an evolution of the market to get to the point where we get back to that healthier ecosystem,” Khalil said.
Despite the downward trends in seed-stage funding, Khalil suggested that the region is still better off than many other places.
“Within Massachusetts in particular, companies that are successful in generating compelling clinical data will be the ones that will be able to grow and attract more capital going forward,” he said.
The silver lining, Khalil argued, is that even as individual rounds have shrunk, the number of Massachusetts biotechs being funded grew. “This is a healthy sign to the ecosystem,” he insisted. “At the end of the day, given the nature of biotech, we need more shots on goal.”
For Khalil, it’s about finding a balance in a market that saw a massive investment spike during the pandemic and a drop-off in the years that followed.
“Having more companies getting started, even if they're not taking in as much capital, is the right balance,” he added. “Overall, it’s healthy from a market standpoint.”
But if the trend of smaller seed rounds flowing into early-stage companies continues, it could become a threat to the success of the industry—especially if the number of investments also drops.
“If both the dollars and the number of investments are going down, that's a concern for the future pipeline,” Khalil said.
The state of biotech funding is one of the hot topics being discussed at Fierce Biotech's high-impact event in London next month. Find out more information and register by clicking on the banner below:
