Biotech Startup Saturation Reaching Tipping Point

Since 2015, the rate of biotech startup formation has been steadily rising. In 2018, more than 200 companies were launched, compared to 177 in 2015. Though 2018 is the last year for which comprehensive data were made available on that front, a current glut of highly successful Series A rounds from relative no-names turned pandemic rising stars indicates that the sector is becoming increasingly crowded.

Overall biotech funding, which does have accessible metrics for recent years, is on the same path. In the five years leading to 2021, average funding totals ebbed and flowed; 2017 was a nadir with $67 million, while by 2020, companies raised a standard of $90 million. Last year’s average of $198 million, generated through a significant ramping up of investor interest, is proof of the current biotech explosion.

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In 2015, this latent trend began with the biotech industry’s improved facility for scientific innovation as well as attracting capital injections. The lower barrier to entry for company creation that encouraged new entrants then has ultimately come to a head in the modernized sector, begging the question: Is there a breaking point for biotech claustrophobia?

“We're still learning what the long-term implications are of having essentially doubled the biotech industry by value in number over the past five or six years,” said Josh Schimmer, M.D., Senior Managing Director for Evercore ISI’s biotech team. “We're in fairly uncharted territory.”

In what is evolving into a protracted game of musical chairs, a fair number of startups will inevitably fall by the wayside.