Highest-Performing Companies to Dominate Fundraising in Venture Healthcare Market, However Challenges Persist

HSBC's Venture Healthcare Report reveals a 30% increase in healthcare investments in 2024 compared to 2023, with a notable shift towards larger rounds for top-performing companies.

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HSBC Venture Healthcare Report: Look What You Made Me Do showcases latest trends in Biopharma, Medical Devices, Healthtech, and DX/Tools

• Investors finally started to invest in new deals in 2024, shifting focus to large rounds for the highest-performing companies
• In 2025, first-financing to remain muted, excluding biopharma, as a weak exit landscape and trouble finding Series B investors have pushed VC investments to later stage
• With many companies leaning on insider fundraising rounds, there is a likelihood of consolidation or shut-downs if companies fail to secure new investor-led rounds

NEW YORK--(BUSINESS WIRE)-- The venture healthcare market saw a return to new investment, up 30% versus 2023, but not without careful consideration of risk, 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, according to the annual HSBC Venture Healthcare Report: Look What You Made Me Do.

“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, U.S. “We expect most new investment to focus on large rounds for the highest performing companies in 2025, which will yield a flat year of healthcare investment.”

Biopharma
Bouncing back from 2023, investment rose 33% overall in 2024, led by oncology and platform companies, with a surge in big financings in autoimmune, metabolic, and dermatology. First-financing dollars more than doubled in 2024, but deals were down as $100M+ mega-rounds accounted for 72% of all first-financing dollars. Many of these deals were venture-created, with an increasing focus on big exits with blank checks and deals in-licensing China assets. 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. For the year ahead, overall investment is expected to continue with strong support from VC, crossover, and growth investors, hitting $24-26B.

Medical Devices
While there was a surge in first-financing deals and dollars in 2Q 2024, overall first-financing investment was down for the year, 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. Notably, 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. Neurology, NIM, and Orthopedic indications led overall investments. 2025 may bring 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.

Healthtech
Early-stage investment in AI (artificial intelligence) applications continued to gain momentum, particularly within the clinical workflow subsector, although investments overall were down compared to 2023. Overall, 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. Investment dollars dipped in 4Q 2024 relative to earlier quarters, partially driven by investors waiting to see what happens with potential IPOs in 2025, as high-growth companies have been waiting in the wings. The market may continue to normalize in 2025 for early to mid-stage companies amid further proliferation of AI solutions, particularly in clinical applications. All eyes are on IPOs as the market tracks early IPO performance and digests the new deregulatory policy positions in healthcare.

DX/Tools
Overall investment was up but top-heavy as the top 10% of deals secured 48% of all dollars. Most of the larger deals were commercial-stage revenue-ramping companies, with the top deals at significant revenues and commanding large valuations. Facing financing risk and a tough exit environment, the first-financing slowdown persisted, hitting a four-year low in 2024. Corporate investment did increase in first-financing as traditional VCs retreated, with the largest funded deals focusing on themes such as radiopharma, computational bio, and oncology-focused liquid biopsy. In 2025, first-financing is likely to remain stable, while AI-enabled deals might see a spike.

The HSBC Venture Healthcare Report was written and produced by HSBC Innovation Banking’s Life Science and Healthcare Team, which serves the innovation economy by providing products and solutions to early and growth-stage companies.

“Even while investors are looking to decrease risk, the continued inflows to emerging sectors like AI are an encouraging sign for the year ahead,” said Katherine Andersen, Head of Life Science and Healthcare, HSBC Innovation Banking, U.S. “This report builds on previous insights to assess the past year of investment activity and create data-driven predictions for the year ahead, underpinned by our team’s dedicated experts. Our tenured and deep sector expertise in the global life science and healthcare ecosystems combined with the strength and stability of HSBC’s global platform allows us to best serve our clients in these sectors and beyond.”

Learn more about HSBC Innovation Banking.

About HSBC
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in 60 countries and territories. With assets of US $3,099bn at 30 September 2024, HSBC is one of the world’s largest banking and financial services organizations.

HSBC Bank USA, National Association (HSBC Bank USA, N.A.) serves customers through Wealth and Personal Banking, Commercial Banking, Private Banking, Global Banking, and Markets and Securities Services. Deposit products are offered by HSBC Bank USA, N.A., Member FDIC. It operates Wealth Centers in: California; Washington, D.C.; Florida; New Jersey; New York; Virginia; and Washington. HSBC Bank USA, N.A. is the principal subsidiary of HSBC USA Inc., a wholly-owned subsidiary of HSBC North America Holdings Inc. HSBC Innovation Banking in the U.S. is a business division with services provided in the United States by HSBC Bank USA, N.A.

For more information, visit: HSBC in the USA

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Source: HSBC