Biotechnology startups are finding it harder to secure venture funding in mid-2025 compared to previous quarters, according to new data from HSBC Innovation Banking. The report adds further evidence that venture capital funding for private biotechnology companies has slid lower as the year has progressed, erasing what was a fast start to 2025. “First financings” for biotech startups fell from a total of $2.6 billion in the first quarter to $900 million over the following three months — the lowest total in five quarters.
Overall venture funding for biotechs fell from $7 billion to $4.8 billion, tied for the worst quarterly total in the last three years. The number of funding deals involving drug candidates from China continued to climb. Four companies formed around medicines discovered there raised first funding rounds of at least $50 million in the first half of 2025, more than the total number in each of the previous two years.
Even before HSBC’s report, there were signs of a biotech funding slowdown. Private rounds have gotten larger, but are fewer in number, as venture firms appear to be favoring surer bets. Jonathan Norris, a managing director at HSBC Innovation Banking, said a combination of worries over pharmaceutical tariffs, research funding cuts, and leadership changes at public health agencies has driven a slump leading to startups’ worst quarter in terms of seed or Series A funding rounds since 2023.
The uncertainty has made investors more conservative, prompting them to shy away from smaller deals and band together for larger fundings, such as “megarounds” of $100 million or more.
Biotech funding slump continues
These investments allow companies to “get almost three traditional rounds” through one financing, Norris said.
Yet even megarounds dipped from 21 in the first three months to 16 between April and June. Along with that decline, the so-called crossover investors that often support the rounds preceding an IPO retreated from biotech venture deals. Only two of the top eight rounds included new crossover investors, a decline from each of the last two years.
“Many crossover investors are at their own proverbial crossroads, with too many private investments that have yet to IPO and many public companies struggling with low market caps,” Norris wrote in the report. Their disappearance is, in part, due to the poor performance of companies that went public in 2024. The median stock price decline for last year’s class was 70% at the end of the first half, according to HSBC.
Despite the overall slump, there is a bright spot in deals for private companies, which give venture capital firms another chance at investment returns. Last year, 17 drug startups were acquired — the highest total since 2020 — and buyouts are proceeding at a similar pace in 2025. Norris said those deals prove “you can still get to an exit with early data in the right space.”