HSBC has officially published results from its annual HSBC Venture Healthcare Report: Look What You Made Me Do, revealing a rebound for venture funding within the healthcare industry.
Going by the available details, the year 2024 saw a 30% uptick in venture investments, as compared to the preceding year. Having said so, investors retained a cautious outlook, with larger syndications of investors raising early-stage mega rounds or shifting focus to later-stage, leading to fewer small Seed and Series A deals.
Talk about the given solution on a slightly deeper level, we begin from the biopharma space, where investment went up 33% overall in 2024, led by oncology and platform companies. The stated financings particularly increased in fields like autoimmune, metabolic, and dermatology. Markedly enough, first-financing dollars more than doubled during 2024, but deals were down as $100M+ mega-rounds accounted for 72% of all first-financing dollars.
More on the same would reveal how a larger chunk of these deals were actually venture-created, boasting an increased focus on big exits with blank checks and deals in-licensing China assets. Among other things, we must also mention that most of the mega-rounds in 2024 were joined by crossover investors at cycle-high valuations, setting the stage for large M&A or an active public market for IPOs. As for 2025, these investments trends are expected to continue to enjoy a strong sense of support, and therefore, hit the projected figure of $24 billion-$26 billion.
“In 2023 and 2024, many companies that raised insider extensions have not had the ‘rubber hitting the road’ moments as expected, so it’s likely that we see after-effects, including substantial consolidation and shut-downs as companies struggle to secure that next round of funding,” said Jonathan Norris, Lead Author and Managing Director, HSBC Innovation Banking, US. “We expect most new investment to focus on large rounds for the highest performing companies in 2025.”
Next up, we must dig into the field of medical devices, where we saw a surge in first-financing deals and dollars during 2Q 2024, but despite that being the case, overall first-financing investment was down for the year. This was marked by early investor fear of finding a new Series B lead and a longer time to exit in private M&A, as Series A insider-round extensions spiked. Here, the top 10% of all medical device deals attracted 60% of dollars, with an influx of large financings for both commercial scale-up and pivotal trials. According to certain reports, Neurology, NIM, and Orthopedic indications led overall investments. Moving forward, the medical devices field is expecting a first-financing comeback in dollars (larger rounds instead of more deals) and greater overall investment driven by pivotal trial funding and large commercial rounds.
Then, there is the Healthtech space, which saw early-stage investment in AI (artificial intelligence) applications steadily gaining momentum, particularly within the clinical workflow subsector. This trend was notably against a decline in overall investment, as compared to 2023. From that very holistic standpoint, Healthtech investment dollars grew from 2023 and have normalized to pre-2023 banking crisis levels, with continued investment in companies targeting underserved groups and in specialized care.
To expand further, investment dollars actually dipped in 4Q 2024, when pitted against earlier quarters. This downturn partially driven by investors waiting to see what happens with potential IPOs in 2025. Staying on the projections for 2025, market may continue to normalize for early to mid-stage companies amid further proliferation of AI solutions.
Finally, HSBC’s report covered the DX/Tools landscape, which did see an uptick in investment, but at the same time, it was all pretty top-heavy. You see, top 10% of deals secured 48% of all dollars. Furthermore, most of the larger deals were commercial-stage revenue-ramping companies, with the top deals at significant revenues and commanding large valuations. The first-financing slowdown would persist, hitting a four-year low in 2024, whereas on the other hand, corporate investment would go up first-financing as traditional VCs retreated.
HSBC’s report revealed that the largest funded deals focused on themes such as radiopharma, computational bio, and oncology-focused liquid biopsy. In 2025, AI-enabled deals may see a spike.
