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Biotech VC Meltdown! š
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Anthony Ao
July 24, 2025
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Biotech VC Freeze Deepens: Q2 Seed Funding Nosedives 65%
What happened
HSBCāÆInnovationāÆBankingās midāyear report shows āfirst financingsā (seed/SeriesāÆA) for biotech startups collapsing to $900āÆmillion in Q2 2025, down from $2.6āÆbillion in Q1 ā the weakest showing in five quarters.
Total venture outlays likewise shrank to $4.8āÆbillion, matching the lowest quarterly tally in three years.
Investor caution is spreading upstream: āmegaroundsāāÆ(ā„āÆ$100āÆmillion) slipped from 21 to 16, while only two of the eight largest deals attracted new crossover investors, who remain weighed down by illāliquid private stakes and 2024 IPOs that are trading 70% below issue price.
Headwinds cited include tariff worries, tightening R&D budgets and leadership churn at publicāhealth agencies. These factors are pushing VCs to pool capital into fewer, laterāstage bets.
A lone bright spot: interest in Chinaāoriginated assets. Four Chinaādiscovered drug programs secured first rounds of ā„āÆ$50āÆmillion in H1 ā already outpacing each of the prior two full years.
M&A is holding up, with 2025ās takeāprivate pace mirroring 2024ās 17 acquisitions, giving investors an alternate path to exits.
Takeaways
Why It Matters
After a hopeful start to 2025, the sudden funding chill signals a tougher environment for earlyāstage biotechs. Startups may need to extend runways, pursue strategic partnerships, or orient pipelines toward hot therapeutic areas to stay attractive until capital loosens again.
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