Intelligent Investment

Venture Capital Targets Early-Stage Life Sciences Companies; IPOs Increase for Late-Stage Enterprises

October 3, 2023 2 Minute Read

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While annual venture capital (VC) funding for life sciences companies has tapered off since reaching a record high in 2021, early-stage enterprises are receiving their biggest share ever. Similarly, while the number of initial public offerings (IPOs) by life sciences companies has declined, the proportion by late-stage companies increased in 2022 and 2023. Life sciences building owners should take note of these trends since funding levels are an indicator of future demand for lab/R&D space.

Figure 1: Venture Capital Funding by Stage


Note: 2023 through Sept. 15.
Source: CB Insights, CBRE Research, September 2023.

Annual VC funding for the life sciences industry is returning to pre-pandemic levels since peaking at $33 billion in 2021. Twenty years ago, the biggest share of VC funding was distributed in Series B or mid-stage rounds. More recently, funding has been allocated primarily to early startups, while funding for later-stage companies has been decreasing. The share of Series A and earlier funding increased to 39.5% in 2022 and 41% so far this year—far above the 11% share in 2004.

Figure 2: Average VC-Funding Deal Size


Note: 2023 through Sept. 15.
Source: CB Insights, CBRE Research, September 2023.

While 2023 is on track to have fewer VC funding rounds than in any of the past six years, the average size of all funding rounds increased by 110% between 2004 and 2023. (Figure 2). However, the average VC-funding deal size in Angel/Seed/Pre-Seed rounds had the biggest increase of more than 600% over the same period. Since the start of the pandemic in 2020, the average Angel/Seed/Pre-Seed VC funding deal size has increased by 70%, while more moderate increases have been seen in average deal size for every funding round except Series B, which decreased by 10%.

Figure 3: Last VC-Funding Stage Before IPOs of Life Science Companies


Note: 2023 through Sept. 15.
Source: CB Insights, CBRE Research, September 2023.

Though VC funding is more concentrated among early-stage companies, late-stage companies are completing more IPOs. This year has seen fewer IPOs by companies whose last funding round was Series A or earlier and more by companies whose last round was Series D or later. While IPOs have been down for the past two years, they are expected to rebound in 2024. Approximately one-quarter of the 108 IPOs so far this year have been by life sciences companies.

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