An Update on Private Venture Financing Activity in the Life Sciences Sector

The Evolving Role of Crossover Investors

June 29, 2021

In this report, we present our analysis of the private venture market for life sciences companies with a particular focus on crossover investors.

The Private Venture Capital Markets

  • Last year saw $43 billion in announced private investments in life science companies at the venture stage of development. This volume was up eight times over the prior decade.
  • A key question in all of our minds has been whether heightened awareness of the life sciences sector will result in improved capital flows to the sector as the pandemic winds down or will the capital recede.
  • We can answer this rather definitively now. Given volumes in the first half of this year, there is little doubt that 2021 will shape up to be the most active year in history for private financing activity in the life sciences sector. We are on track at mid-year for a $65 billion investment year in private venture deals in the life sciences.
  • A good way to look out at future financing volume is to analyze the flow of money into new venture funds.
  • Last year, $28.9 billion flowed into venture funds in the life sciences based on our count from various press releases.
  • This year, volumes are on track to hit $31 billion in fresh capital for the sector raised into new funds. There is a “wall of money” headed into our sector in upcoming years.

Crossover Investors

  • It’s no secret that crossover investors have become increasingly important in life sciences investments and the set up to IPOs.
  • A crossover investor round is one where some funds that predominantly invest in the public markets (e.g, mutual funds or hedge funds) participate in a pre-IPO financing.
  • Bankers and boards worldwide are looking to get crossover investors involved into their offerings with the hope that they will help to set up a successful IPO.
  • There were 123 crossover financings in biopharma, tools and diagnostics in the first half of 2021. If current trends persist to year-end, we are on track for $32 billion in crossover privates this year. This will be an all-time record.
  • Historically, crossover investments have been viewed as relatively rare events. In 2011, for example, 9% of venture raises included at least one public fund in the syndicate.
  • In contrast, in the first half of 2021 over half of venture stage raises involved at least one public fund.
  • The rate of crossover participation is up substantially – from 25%, for example, in 2019.

Crossover Investors and IPOs

  • We went back and analyzed private 484 venture life sciences financings from June 2020 to March 2021 and asked whether crossover involvement was associated with a higher likelihood of a successful IPO.
  • We found that companies who carried out a crossover round were four times more likely to go public than those that did not.
  • Companies that carried out a crossover financing had rounds that averaged $112 million in size versus $66.6 million for non-crossover rounds.
  • We separately looked at the 22 biotech companies that went public in the U.S. in Q2 2021 (with a size of $50 million or more through June 27th) and found that 19 had done a crossover round prior the IPO.
  • The step-up multiple from last crossover round to IPO in Q2 was 2.0x – higher than it has been in recent years. Non-crossover rounds had an average step-up of 1.3x.
  • It’s important to note that we saw two all-time market peaks in 2021 (one in February and another in late June). We think the improvement in market conditions going into IPOs has accounted for the historically high step-ups that we observed in recent IPOs.
  • We also found that after market performance for the IPO class of Q2 2021 has been better if a crossover fund was involved. But, there have been so few companies that have gone public without a crossover round, we don’t view this observation as particularly meaningful.


In a world awash with SPACs it’s important to note that the most important story about how life science companies are going public today involves the increasing role of crossover investors in venture financings. Fully half of venture dollars are raised today in rounds with crossover investor involvement. Traditional venture capital funds are still highly relevant to the market, of course. But increasing diversity of private investor types has transformed the private marketplace with evidently favorable effects on capital flows into the life sciences sector.

Please contact Torreya if you have any questions or comments:

Tom Babich  |  Head, Capital Markets  |  |  bio
Stephanie Léouzon  |  Partner, London  |  |  bio
Tim Opler  |  Partner, New York  |  |  bio

Data sources: S&P Capital IQ, Crunchbase, press releases, and Torreya calculations