Biotech’s 2024 Insane Megarounds: Rise of Giants or a Bubble in the Making?

There’s one thing biotech VC funding loves, it’s cycles—hype, bust, and everything in between. 2024, though? This year is bringing us something different, something big—Megarounds. And when I say big, I mean monumental. But before we get into the numbers, let’s talk about the journey that brought us here.

Remember when the synthetic biology space was touted as biotech’s golden goose? The promises were as grand as they come. But fast forward, and what do we have? A lot of busted companies and ideas that didn’t quite hit the mark. Take a look at this example—proof that hype alone doesn’t pay the bills.

Now, in 2024, biotech isn’t slowing down. We’re just changing how we fund it.

What

Gone are the days when startups used to survive on the “sane” small rounds. In fact, here’s a fun stat for you: 65% of biotech financings used to be small rounds (<$40M). That’s right! In 2024, that number has plummeted. Now, 58% of total VC dollars are flowing into just 25 companies, most of them through Megarounds worth more than $80M. Insane, right?

Let’s break it down even more:

• Megarounds (>$80M) used to make up only 14% of the market.
• But in 2024, they’ve taken over, accounting for more than half of the total funding pie!

This is a major shakeup, and it’s happening fast. Just look at the chart (above) comparing the “insane” megarounds to the “sane” small rounds—talk about a funding flip!

Impact

Here’s where things get fun—and tricky. These giant megarounds could mean a lot of things for biotech, and they’re not all rosy:

• Talent: If you want to recruit the best minds in the world, you need deep pockets. These megarounds make it easier for some companies to snap up top-tier drug development talent. However, the smaller companies struggle to retain talent and have to lure them with employee retaining tactics that other industries use – pizza parties, merchandize to increase land wastes, and unlimited PTOs that have limits.
• Maybe Good for Better Medicines: More money means more experiments, more shots on goal, and more potential breakthroughs. But let’s not forget that money doesn’t always equal innovation. Will these dollars turn into better medicines or just fuel existing ideas? We’ll see.
• Less Likely Good for Returns: When 60% of recent life science capital is controlled by just 20% of the funds, you have to wonder: Will these big bets pay off for investors, or are we building a house of cards? With so much concentrated power, it could either generate mega-wins or lead to mega-busts.

Why

It’s not just random, there are big reasons why we’re seeing these enormous rounds more frequently in biotech. Here’s why:

1. Big Funds, Big Checks: These massive venture funds aren’t built to write small checks. Deploying $5M doesn’t even make a dent when you’re managing billions. They have to write $80M+ checks just to stay relevant.
2. Clinical Proof of Concept (PoC): Big money is chasing big milestones. Funding until clinical PoC (that moment when a drug shows it might actually work) is a major value inflection point.
3. IPO Window is Tight: The IPO door has practically slammed shut, meaning companies need to raise bigger private rounds to keep the lights on and projects moving forward.
4. Multiple Shots on Goal: Companies are getting more funding upfront to try different approaches simultaneously—hedging their bets to increase the odds of success.