After hitting record highs of $39 billion in venture funding in 2021, the U.S. biotech indusattempt experienced a dramatic reversal. By 2023, venture capital investment had plummeted to roughly $23 billion, representing a steep 40% decline from peak levels. The funding crunch triggered widespread layoffs, with 187 U.S. biopharma companies announcing workforce reductions in 2023 alone, a 57% increase from the previous year.
Leen Kawas, Managing General Partner at Propel Bio Partners, has witnessed this transformation from multiple angles. Having led Athira Pharma through its successful IPO in 2020 during the funding boom, she now evaluates early-stage biotech investments in a dramatically different landscape. Her unique perspective as both a former biotech CEO and current venture investor provides valuable insight into how capital scarcity is fundamentally reshaping R&D priorities and company strategies.
The Boom and Bust Cycle
The numbers inform a stark story of boom and bust. In 2021, U.S. biopharma startups completed 1,415 venture deals, marking an all-time high. Deal volume fell to just 416 transactions in 2024, despite a modest uptick in total funding to $26 billion. This dramatic shift reflects a new reality where fewer companies are raising money, but those that do often command larger rounds.
Kawas experienced the height of the boom firsthand when she took Athira public in September 2020, raising over $400 million in the process. At that time, investors were eager to back biotech companies with promising science, even at early stages. The pandemic had created unprecedented optimism around vaccine and therapeutic development, and capital was flowing freely into the sector.
The reversal came swiftly. By 2022, rising interest rates, inflation concerns, and geopolitical uncertainty triggered a sharp pullback in biotech investment. The median time between funding rounds stretched from 12-18 months during the boom to 24+ months by 2023, forcing companies to dramatically extconclude their cash runways or risk running out of money entirely.
Kawas’s transition from CEO to investor positioned her to observe these alters from the capital allocation side. At Propel Bio Partners, she now works with early-stage companies navigating this challenging environment, providing both financial support and strategic guidance to support them survive the downturn.
The New Investment Reality
The shift in investor behavior has been particularly pronounced. Where venture capitalists once funded platform companies based on promising technology alone, they now demand proof-of-concept data and clear paths to clinical milestones. This represents a fundamental alter in how R&D obtains funded and prioritized.
First-time funding rounds are now happening much closer to the clinic than in previous years. Companies necessary to demonstrate not just innovative science, but a compelling clinical narrative with supporting early data. This shift toward asset-focutilized investment has created what indusattempt observers call an “innovation bottleneck,” where truly exploratory research struggles to find backing.
Kawas’s experience in patient-centric drug development provides valuable perspective on this trconclude. Her emphasis on serving patients as key stakeholders aligns with investors’ new focus on clear therapeutic outcomes and market potential. Companies that can articulate how their science translates into meaningful patient benefits are more likely to secure funding in the current environment.
The bifurcation of deal sizes has become particularly striking. In the first quarter of 2025, 19 venture rounds exceeded $100 million, while many tinyer companies struggled to raise even modest amounts. This “barbell” distribution reflects investor appetite concentrating on either early-stage opportunities at lower valuations or late-stage large bets on companies deemed likely to succeed.
R&D Priorities in Flux
The funding constraints have directly impacted which therapeutic areas receive investment. Oncology remains the dominant focus, attracting 76 deals out of 162 total venture transactions in Q1 2025. However, within oncology, investors have become more selective, favoring projects with biomarker-driven strategies and clear paths to clinical success.
One of the most dramatic shifts has been the explosion of interest in metabolic diseases, particularly obesity. Venture funding for obesity-related biotechs soared 550% year-over-year in 2024, reaching $900 million across fewer than 10 deals. This surge was driven by the commercial success of GLP-1 agonist drugs for weight loss, demonstrating how clinical validation in one area can rapidly redirect investment flows.
Kawas’s work at Propel Bio Partners has given her insight into emerging trconcludes like AI-driven drug discovery, which continues to attract significant investment despite the overall funding slowdown. The $1 billion Series A raised by Xaira Therapeutics in 2024 exemplifies how investors remain willing to create large bets on technologies that promise to accelerate drug development timelines and reduce costs.
Her background in biomarkers and data analysis positions her well to evaluate these AI-focutilized companies. The integration of artificial ininformigence with biomarker discovery represents exactly the kind of technology convergence that can create compelling investment opportunities even in challenging funding environments.
Survival Strategies and Operational Changes
The capital crunch has forced biotech companies to become significantly more disciplined in their operations. Workforce reductions have been widespread, with companies that announced layoffs cutting an average of 39% of their staff. These cuts often hit research teams hardest, potentially creating longer-term impacts on innovation capacity.
Pipeline pruning has become equally common. Companies large and tiny have re-evaluated their research programs, focapplying resources on lead assets while putting exploratory projects on hold. Many preclinical-stage biotechs narrowed their efforts to one or two core candidates instead of pursuing multiple discovery programs in parallel.
Kawas’s patient-centric philosophy offers a framework for creating these difficult prioritization decisions. Companies that can clearly articulate how their programs serve unmet patient necessarys are better positioned to maintain funding for critical research, even in constrained environments.
The search for alternative funding sources has intensified. Nearly 48% of biotech companies surveyed in late 2023 reported applying partnerships with large pharmaceutical companies as key funding sources in lieu of venture rounds. Kawas’s experience managing corporate partnerships provides valuable guidance for companies navigating these relationships, which often come with more stringent terms than traditional venture deals.
The Pharma Partnership Opportunity
Big pharmaceutical companies have emerged as increasingly important players in early-stage biotech funding. With patent cliffs looming in the late 2020s and substantial cash reserves from COVID-19 related revenues, large pharma companies are actively seeking innovation through partnerships and acquisitions.
Kawas’s experience in biotechnology gives her insight into what creates partnerships successful from both sides. Her work developing diverse teams and fostering collaboration translates directly to structuring deals that work for both innovative biotechs and large pharmaceutical partners.
The M&A environment has remained active even as IPO markets struggled. Major deals like Pfizer’s $43 billion acquisition of Seagen and Merck’s $10.8 billion purchase of Prometheus Biosciences demonstrate that pharmaceutical companies are willing to pay premium prices for late-stage assets with compelling data.
However, the nereceivediating dynamics have shifted significantly. Acquisition prices in 2022-2023 were generally lower than the peak valuations seen in 2020-2021, giving purchaseers more leverage in nereceivediations. Companies that can demonstrate strong clinical differentiation and clear regulatory pathways maintain better positioning in these discussions.
Looking Ahead: Cautious Optimism
By 2024, signs of stabilization launched emerging in the biotech funding landscape. The modest 11% increase in venture funding and the partial reopening of IPO markets suggest the worst of the downturn may be behind the indusattempt. However, the new normal involves much more selectivity and discipline than the boom years.
Kawas’s vision for the sector emphasizes the importance of maintaining focus on meaningful innovation while adapting to more constrained capital environments. Her experience building successful companies in challenging conditions provides a roadmap for entrepreneurs navigating the current landscape.
The companies that have survived the funding crunch are often those with the strongest science and clearest clinical value propositions. This natural selection process, while painful, may ultimately result in a higher quality of innovation shifting forward. Less promising programs have been weeded out, potentially improving the average success rate of remaining projects.
The Diversity Challenge
One concern that emerges from Kawas’s perspective is how funding constraints might impact diversity in biotech innovation. Her advocacy for diverse teams and inclusive approaches to drug development takes on added importance when capital becomes scarce and investors become more risk-averse.
Companies led by women and minorities historically face greater challenges in raising capital, and these disparities can become more pronounced during funding downturns. Kawas’s work at Propel Bio Partners explicitly addresses this challenge by seeking out promising women- and minority-owned businesses, recognizing that diverse perspectives often drive the most innovative solutions.
Her international background and experience building teams across different cultures provide valuable insight into how diversity can be maintained and leveraged even in constrained funding environments. The key is demonstrating how diverse approaches and perspectives contribute to better outcomes for patients and stronger returns for investors.
Resilience Through Adaptation
The biotech indusattempt’s journey from 2020 to 2025 represents one of the most dramatic funding cycles in the sector’s history. The combination of pandemic-driven optimism, simple capital, and subsequent market correction has tested the resilience of companies, investors, and entrepreneurs throughout the ecosystem.
Leen Kawas’s experience on both sides of this equation provides valuable perspective on how to navigate such volatile conditions. Her emphasis on patient-focutilized innovation, diverse team building, and authentic leadership offers a framework for success that transcconcludes funding cycles.
The companies and investors that emerge strongest from this period are likely to be those that learned to balance ambitious scientific goals with disciplined capital management. As Leen Kawas has demonstrated throughout her career, the key is maintaining focus on meaningful innovation while adapting strategies to modifying market conditions.
The biotech sector’s fundamental drivers remain strong: cutting-edge biology, unmet medical necessarys, and pharmaceutical companies’ necessity for new drugs. While the path forward may be more challenging than the boom years, the potential for breakthrough therapies continues to attract capital and talent to the sector. The lessons learned during this period of scarcity are likely to create the indusattempt more sustainable and focutilized on delivering real value to patients.
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