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Infographic – 2022 Biotech Venture Funding Weakens

Chart: Venture investments total by year for biotech and pharma companies

(National Venture Capital Association and Pitchbook)

14 Jan. 2022. Venture funds for new U.S. biotechnology and pharmaceutical companies declined from historical highs in 2022, but a closer look reveals even more signs of financial tightening. Data on the fourth quarter and full-year venture capital financing in the U.S. were reported this week by National Venture Capital Association or NVCA and investment market research company Pitchbook (registration required).

NVCA and Pitchbook found total year investments for U.S. biotech and pharma start-ups totaled $30.7 billion in 2022, down from the $39 billion invested in 2021, but still higher than the $29.6 billion total for 2020, and previous years going back to 2012. Likewise the number of venture investment transactions for this sector declined to 1,054 in 2022, from 1,415 in 2021, another historical high mark, and roughly in line with deal totals in 2020 and 2019.

Investment dollars for U.S. angel and seed-stage biotech and pharma start-ups, those in the earliest stages, remained at about 25 percent during 2022, about the same as the previous two years. Since 2019, the proportion of venture investing in this sector for late-stage start-ups, third rounds called series C or later, grew to 40 percent of all investment dollars. Caught in the squeeze are companies raising series A and B venture rounds, which now make up about a third of all investment dollars, down from about 40 percent in 2021. In addition, the median deal size in this sector barely rose to $9.8 billion in 2022, from $9.7 billion in 2021, after rising steadily each year since 2019.

As we noted last week in our review of global trends, annual totals for venture investing in U.S. companies indicates 2021 may be an anomaly of loosening credit from responses by governments to the Covid-19 pandemic, according to NVCA and Pitchbook analysts. As inflation took hold in 2022, say the analysts, credit tightened making money less available for venture investors and others. As a result, according to the new data, total venture funding and deals for U.S. tech start-ups declined in each quarter of 2022. These progressive declines suggest the tight financial environment will continue into 2023.

A bright spot in the U.S. investment world is the continued increase in new venture capital for investing. Venture capital companies in the U.S. report raising $162.6 billion in 2022, a record total and a gain from the $154.1 billion raised in 2021. However, the number of U.S. venture investors declined in 2022 to 769 from 1,270 in 2021 and 869 in 2020.

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