Cushman & Wakefield has published new insights on Life Sciences Funding. Private capital funding has accelerated growth in the life sciences sector over the last decade. Record flows to the sector helped drive up valuations in preparation for initial public offerings (IPOs), which hit a record in 2020. While the frenzied pace of funding and IPOs slowed down in 2022, capital continued to flow, but at a more moderate level.
While funding levels fell across most markets, there were still pockets of growth. Among the major life sciences hub markets, VC funding grew YoY in the San Francisco Bay Area ($12.6 billion, up 32%) and Raleigh-Durham ($628 million, up 36%). Some emerging markets experienced YoY growth in funding in 2022, including Denver with $486.6 million, up 6% YoY. Drug discovery was the top-funded industry in six of the 11 emerging markets. In Denver, $166 million, or 34% of total funding, was focused on biotechnology.
“Denver’s life sciences sector, with a robust talent pool, leading research institutions and close to 600 life sciences companies, has attracted nearly $1.5 billion in VC funding over the last 3 years,” says Sandy Romero, Cushman and Wakefield’s research manager, Global Research.
Key Takeaways
- After a strong start to the year, 2022 venture capital (VC) funding ended the year down 28% from 2021.
- Funding continues to be heavily weighted toward the largest U.S. life sciences hub markets, with 66% of all VC funding in 2022 going to the San Francisco Bay Area, Boston and San Diego.
- Early-stage funding declined — to a lesser degree than later stage — but also saw pockets of growth as funding increased on a year-over-year (YoY) basis in nine of the 22 markets covered in this article.
- Drug discovery and biotechnology continue to be the hottest industries, accounting for 72% of 2022 funding.
- Although most of the funding is focused on the eight hub markets1 (76% of total funding), all but two saw a decline in YoY deal volume in 2022. Meanwhile, six of the 14 emerging markets saw an increase in deal volume in 2022, highlighting increased interest from investors.
- Dry powder levels remain high coming into 2023, but with a more conservative funding outlook companies seeking additional raises will need to show clinical trial successes and strong financials.
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