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​​Life Sciences Funding in View​

Sandy Romero • 2/1/2023


Private capital funding has accelerated growth in the life sciences sector over the last decade. Billion-dollar raises were not unheard of, even in the more difficult funding environment of 2022. Two marquee deals include $3.3 billion raised by Redwood City, Calif.-based Altos Labs and $1.3 billion raised by San Diego-based Resilience. 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.

Funding in Focus

After reaching a historic peak in 2021—totaling nearly $50 billion—funding for the life sciences sector in 2022 was mixed due to a general market slowdown. The year started off strong with first quarter 2022 VC funding flows to the sector totaling $13.9 billion, a 5% increase over first quarter 2021 volume. Volatility, including geopolitical and economic concerns, impacted the overall equity markets and VC funding in the second quarter of the year. Funding to the sector in 2022 totaled $35.8 billion, down 28% from 2021, but check sizes grew in 2022. The average deal size totaled $20.1 million in 2022, up 12% from 2021. In fourth quarter 2022, the average deal size ($22.2 million) was up 53% quarter-over-quarter (QoQ) and 12% higher than fourth quarter 2021.


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 also experienced YoY growth in funding, including Denver ($486.6 million, up 6%), Austin ($345 million, up 80%), Minneapolis ($275 million, up 26%) and Atlanta ($86 million, up 2%). The markets that saw the lion’s share of funding continue to be the largest U.S. life sciences markets: the San Francisco Bay Area, with $12.6 billion (35% of total U.S. funding), Boston at $8.5 billion (24% funding) and San Diego with $2.5 billion (7% funding). Read more in our Life Sciences Update Report.

Funding by Deal Type

Funding decreased across all deal types in 2022. The drop in volume was less pronounced in seed funding ( down 14% YoY) and early stage VC ( down 20% YoY), indicating a sustained affinity for startups and newer companies. Later-stage VC funding saw a 31% drop YoY, illustrating the challenges more mature companies faced in attracting capital in 2022 than in 2021. As a percent of total funding, early-stage companies attracted the most funding in 2022, at $16.7 billion or 46.9% of total funding, followed closely by later-stage companies at $16.6 billion or 46.7%. This was a change from 2021, when later-stage funding garnered the most investment at $24.2 billion, and early-stage funding came in second place at $20.9 billion.

Capital flows to the top 10 deals were primarily focused on California, with seven deals allocated to California-based companies in 2022. The top 10 was also dominated by biotechnology and drug discovery companies, aligning with the overall venture capital strategy in 2022. Six out of the top 10 companies generated revenue, a drop from 2021 when eight of the 10 generated revenue.


Early-stage funding was more common in the top two largest life sciences markets—the San Francisco Bay Area and Boston—while later-stage investments accounted for approximately 60% of funding in the rest of the top five: San Diego, New York and the greater Los Angeles area. The largest YoY increases were in Los Angeles’ later-stage funding (up 92% from 2021) and San Francisco’s early-stage funding (up 77%). Across the top 10 markets, early-stage funding accounted for 48% of total funding, which is a greater share than 2021 by 400 basis points (bps).

Funding by Industry Type

Of the 75 life sciences industries tracked by Pitchbook, the top 10 received nearly 92% of total funding in 2022 and include:

  • Biotechnology
  • Decision/Risk Analysis
  • Diagnostic Equipment
  • Discovery Tools
  • Drug Delivery 
  •  Drug Discovery
  • Laboratory Services (Healthcare)
  • Other Healthcare Technology Systems
  • Pharmaceuticals
  • Therapeutic Devices 


Drug discovery and biotechnology funding alone accounted for a combined 72% of total funding. Investment flows in 2022 fell across many of these industries, including some of the top 10. However, four saw increases: laboratory services ($584 million, up 46% YoY), pharmaceuticals ($931 million, up 9%), drug delivery ($1.1 billion, up 3% YoY) and biotechnology ($10.3 billion, up 1% YoY). The drug discovery industry garnered the greatest flow of funds in 2022 at $15.3 billion, but this was down 39% from $25 billion in 2021.

The drug discovery industry received the greatest amount of funding in seven of the top 10 markets. In the San Francisco Bay Area, the biotechnology industry received the greatest amount of funding—$5.8 billion—followed by drug discovery with $4.1 billion. In Seattle, biotechnology funding of $384 million outpaced drug discovery at $250 million, and in Raleigh-Durham, biotechnology funding of $109 million outpaced drug discovery with $67 million.

Industry funding in emerging markets was a little more varied. 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. In Minneapolis, nearly 45% of funding—$123 million—was on diagnostic equipment. The industry focus in Houston was decision/risk analysis with $50 million, or 36% of total funding. In the much smaller market of Phoenix, 70% of funding ($36 million) was focused on laboratory services (healthcare).

Top Deals of 2022

Funding for the top 30 deals was higher in 2022 than in 2021, totaling $10.4 billion and capturing 29% of total funding — 2% higher than the $10.2 billion focused on the top 30 in 2021. At an average deal size of $347 million, the checks were larger in 2022 than the $338 million average deal size in 2021. The record-breaking $3.0 billion second-round funding to Altos Labs contributed to the larger deal-size average of 2022. The next four deals that round out the top five totaled $2.1 billion, making the top five deals, at $5.1 billion, nearly 50% of top 30 deal funding.


Capital flows to the top 10 deals were primarily focused on California, with seven deals allocated to California-based companies in 2022. The top 10 was also dominated by biotechnology and drug

discovery companies, aligning with the overall venture capital strategy in 2022. Six out of the top 10 companies generated revenue, a drop from 2021 when eight of the 10 generated revenue.

Initial Public Offerings

The volatility, which greatly impacted the general equities market, also brought the life sciences initial public offering (IPO) pipeline to a standstill in 2022. At a total of $1.4 billion, 2022 IPO activity was 90% below the $14.5 billion of 2021 and a fraction of the record-setting $15.8 billion of 2020. Though IPO activity didn't completely shut down, it slowed dramatically in fourth quarter 2021.


Only 21 IPOs launched in 2022, significantly lower than the 111 IPOs from 2021. The deal size also dropped significantly to $68 million per deal, nearly half the $130 million average deal size of 2021 and one-third the $208 million average deal size of 2020. While IPOs in 2020 and 2021 routinely crossed the $500 million mark—with some deals totaling over $1 billion—the largest IPO of 2022 raised $230 million. The top five IPO raises in 2022 totaled $938 million, with three of those five closing in the first quarter of 2022.

Outlook for 2023

Despite the downturn in equities markets, U.S. VC dry powder increased to $290.1 billion at the end of third quarter 2022, up 24% from 2021, in part due to the strong fundraising activity from the first half of the year. While we don’t know how much dry powder will focus on the life sciences sector, we can estimate the potential allocation based on funding over the last 10 years, an average of 16% of total market VC capital. This indicates that a potential $46.4 billion—of the $290.1 billion in total dry powder—could be earmarked for life sciences investment. Investors typically don’t exhaust their dry powder—and even with additional raises due to take place this year, life sciences funding in 2023 may look a lot like 2022.

Facing the potential of a global economic slowdown, life sciences VC capital will most likely become more conservative in 2023. Additional uncertainty has impacted the equities market, muddying the outlook for IPO activity. Without much needed clarity, the market is likely to remain muted in 2023. Opportunistic plays continue to exist across all industry types; however, capital will also be chasing stability and looking more closely at financials. In the current environment, the life sciences sector is expected to be a relatively attractive industry for investment.

Get the latest in Cushman & Wakefield Life Sciences research and commentary.


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