Amid one of the toughest biotech markets in years, seed funding for young companies has fallen to its lowest level in a decade. According to Atlas Venture’s Bruce Booth, only about 55 biotech startups in the U.S. raised initial funding in the first quarter of 2025 — a nearly 70% drop compared to the peak in early 2021.
“It is getting tougher. When there’s no IPO market, there’s no B rounds, and then there’s no A rounds, and there’s no seed rounds. It all trickles down,” said Søren Møller, managing partner of seed investments at Novo Holdings. Søren also conveyed that due to the market confusion caused by tariffs and the shifting positions thereof, his $160B fund would slow investment until there is more certainty. With regards to IPOs, the CEO of the same fund advised that now is “probably” not a good time to IPO, unless you have to do so, due to the view on interest rates being unclear. Søren’s sentiments were echoed by both Roche and Merck & Co. on the deal-making front.
To add insult to injury, BioCentury’s biotech risk sentiment survey found “Biotech is reeling, fearful and furious about the fallout of tariffs, FDA and NIH policies.” BioCentury reported that the perfect storm, including market downturn, regulatory uncertainty, negative perception of scientific research, and the possible loss of the US as the leader in global biomedical innovation, could signal one of the worst times for the industry “in decades.”
But not everyone sees this contraction as a negative. As Booth wrote in his blog on biotech venture creation, “it’s a great time to start new biotech companies” precisely because of the scarcity. With fewer startups competing for capital, talent, and patients, the few companies that do form today could become tomorrow’s market leaders.
The “supply-demand” dynamics favor the brave: when new company creation slows, venture firms creating startups have a clearer runway. As Booth put it, “With scarce startup supply, when investor demand returns — which it will — founding and early equity holders will be rewarded.” He pointed to past examples like Alnylam (founded in 2002) and Nimbus (founded during the 2009 downturn) as proof that tough times can seed future giants.
Beyond the U.S., global funding opportunities could offer a lifeline for biotech founders. As domestic venture firms tighten their wallets, international investors — including Asian corporates, and Middle Eastern sovereign wealth groups — are increasingly active in scouting early-stage innovation. Seeking funding globally not only diversifies a startup’s investor base but also opens doors to broader partnership and commercialization strategies.
As Booth reminds early-stage entrepreneurs, “big doses of discipline are important medicine” — with startups needing to sharpen plans, tighten budgets, and be open to strategic partnerships. But for those who endure, today’s brutal market could create the “emerging stars of the 2030s.” At Life Science Nation, we’ve tracked hundreds of companies that have attended RESI, used our investor database, and attended our entrepreneurial education courses, and know one thing for sure: It is ultimately a numbers game. The more investors you meet, the higher your chances of getting funded or additional funding are. That’s why the RESI conferences feature hundreds of investors funding pre-seed to B rounds – to help life science companies in times like these fast-track their fundraise.
Sources:
- Biotech seed rounds sink to lowest level in years as industry slump drags on by Kyle LaHucik, Endpoints News
- Biotech Venture Creation: The Benefits of Scarcity by Bruce Booth, LifeSciVC blog
- Biotech sees a new, hard era ahead, survey finds: BioCentury’s Risk Sentiment survey, BioCentury
- Novo Holdings dials back investment as Trump stymies economic forecasters, Bloomberg, as reported by Fierce Biotech
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