Is pharma losing out on venture funding?

The onward rise of technology and the Internet has been a focal point for the venture industry for more than a decade, yet the amount of funding these businesses receive have historically been dwarfed by pharmaceutical early-stage funding. However, in recent months the gap has closed.

As can be seen in the above chart, this has been largely driven by an overall reduction in the amount invested in pharmaceuticals and biotechnology, rather than a significant uptick in technology funding round sizes. Aside from the blip in Q1 this year, caused by the €85m funding round for Symphogen A/S (the largest ever in Europe), the amount received by pharmaceutical companies has been considerably lower in the past few quarters. The volume of pharmaceutical deals has also been lower, with a significant dip late last year, while software and technology has seen greater stability.

Since the lows of the post-dot.com boom era, software and technology has matured, particularly in the areas of online and mobile technologies. The result is that the platforms are now in place to create the kind of products that attract venture money. Social networking, app stores and open mobile platforms are creating opportunities for more early-stage companies to continue developing new products, with access to a potentially vast audience and distribution channel.

By contrast, pharmaceuticals have, from a business perspective, remained largely unchanged. Teams of scientists, usually spun out from universities, require vast sums of cash to conduct lengthy research. Investors back them in the hope that, once the product has been developed and approved by regulators, that they will be able to sell it to a large pharmaceutical company. In a time when investors are already thought to be risk-averse, putting large amounts of cash into a single risky venture may be too difficult to justify for many, particularly when technology firms tend to have far lower capital needs from investors.

It remains to be seen whether this trend for smaller pharmaceutical investments will continue. There are also suggestions from some areas of the venture market that many tech companies may also need more capital to meet the growing infrastructure needed to meet consumer demand, resulting in larger funding rounds in the coming years.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• UK / Ireland
• Southern Europe
• Benelux
• France
• DACH
• Nordics
• Healthcare
• Technology