The Founder’s Guide to Biotech Funding From Pre-Seed to IPO

Turning a promising scientific discovery into a biotech company takes more than good science. It takes money to move an idea from the lab to the clinic, build a team, navigate regulatory requirements, develop a payer strategy, and ultimately bring new treatments to the people who need them.

Raising that money is rarely linear. Each stage of development comes with different financial demands, investor expectations, and risks. It helps to understand the full process before you start, including what funding options exist and how to plan for each stage.

Early-stage investors may take a chance on compelling research and a strong team. Later-stage investors expect clinical progress, a clear path to market, and a viable business model. Knowing the difference helps you decide when to raise and which investors are best positioned to back you.

This guide walks through the full biotech funding path, from pre-seed to exit: how each stage works, what investors look for, where non-dilutive money fits, and how financing decisions shape a company's path from early concept to approved therapy. The advice centers on therapeutics companies. Where medical device and diagnostics companies follow a different path, we say so.

What Makes a Biotech Fundable

Biotech fundraising is a years-long process in which your science and your business story develop side by side. From the first round, you need a story that connects early research to future clinical milestones, commercial potential, and investor returns.

"The biggest mistake I see founders make is treating each funding round as a discrete event rather than a continuous narrative," said David H. Crean, PhD, founder and managing partner of Cardiff Advisory LLC, a life sciences M&A and strategic advisory firm. "The story you tell at seed has to be architected to survive Phase 2 data even if the science pivots."

Proving the science and showing an unmet medical need is the starting point. Strong science alone will not carry a company with a weak commercial plan or unrealistic valuation expectations. You have to explain what your company does, why the problem matters, and how the company can generate a return for investors.

"Fundable companies have one thing in common: the founder can speak fluently in both the language of science and the language of capital," Crean said.

Before You Raise

From the start, investors should see two things in your company: a credible team and defensible intellectual property (IP). Together, they show you have the experience to navigate development and the rights to commercialize the technology.

"Most first-timers think biotech is about picking the right drug," Crean said. "It's actually about picking the right team to navigate a decade of uncertainty. Investors invest in people, first and foremost."

Without exclusivity on your core assets, there is no durable product and no reason for an investor to back you over someone else in the same space, said Carter Caldwell, director of the Penn Medicine Co-Investment Program, which has backed more than a dozen Penn Medicine spinouts since 2018.

"Investors need confidence that the core assets are protected, that freedom to operate has been thoughtfully considered, and that the IP estate can support long-term value creation," Caldwell said.

After that, your job is proving the biology is real. That means generating proof-of-concept data strong enough to eventually support an Investigational New Drug (IND) application, and framing it in terms an investor can act on.

Work out your regulatory and payer strategy early, too. Talk to the FDA well before you file an IND, work backward from the evidence it will need to approve the product, and think about reimbursement, pricing, patient identification, and companion diagnostics where relevant. A common mistake is treating FDA strategy as something to figure out after Phase 2 data comes in. Investors will push hard on regulatory preparedness in due diligence.

Finally, do the math on your capitalization table, or cap table, the record of who owns what percentage of the company. Asking for a check that implies an outsized valuation will end the conversation, regardless of the science. Expect each priced round to cost founders a meaningful slice. Across all sectors, seed rounds have consistently taken about a fifth of the company, according to J.P. Morgan's H1 2026 Startup Insights report, and life sciences startups give up significantly more than average because they raise larger rounds.

Non-Dilutive Funding

Non-dilutive funding pays for research, drug development, and runway without giving up ownership. It matters most at the earliest stages, when it can generate the data that gets you to a first priced round on better terms. Some options restrict how the money is spent, require repayment, or carry other trade-offs, so it helps to know how each works.

• Grants: Funding from government agencies, foundations, and other organizations, usually with no repayment or equity required. Grants work best for early research, validating a scientific concept, or generating the data needed to attract investors. AOA Dx, for example, got its early proof of concept from an academic lab's small non-dilutive grant before raising outside money.

• SBIR and STTR awards: The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs fund eligible small businesses developing technologies with commercial potential, without taking equity. STTR awards require a formal partnership with a nonprofit research institution. SBIR awards do not. Both programs lapsed for six months and were reauthorized through 2031 in April 2026, and NIH has reopened applications. The new law added proposal caps per company and stricter foreign-risk screening, so check current rules before you apply.

• State funding programs: Many states offer grants, loans, and tax incentives to attract life sciences companies. Startups use them for research, hiring, equipment, and facilities, depending on program rules. Eligibility varies by state, so start with your state's economic development agency, biotech initiatives, and university commercialization programs. Cure has a guide to whether state funding fits your startup.

• Venture philanthropy: Disease foundations and patient groups fund programs aligned with their missions, through grants, loans, or equity. The best-known case is the Cystic Fibrosis Foundation, which put $150 million into Vertex Pharmaceuticals' cystic fibrosis program in exchange for royalties. In 2014, it sold those royalty rights to Royalty Pharma for $3.3 billion.

• Partnerships and licensing deals: Upfront and milestone payments from pharma partners are a major source of non-dilutive capital, especially for platform companies that can license one asset or application while keeping others. Biopharma licensing deals reached $250.2 billion in announced value across 516 deals in 2025, the most since 2016, according to J.P. Morgan. Most of that headline value is milestone payments; upfront cash was 7 percent of the total. The trade-off is giving up some rights and economics on what you license.

• Venture debt: Loans for venture-backed startups, usually taken alongside or after an equity round. Venture debt can extend runway to a clinical milestone, but it must be repaid with interest and may carry fees, covenants, or warrants.

• Royalty financing: Capital in exchange for a contractual share of future revenue, usually until a negotiated repayment cap or other terms are reached. It avoids dilution but suits later-stage companies with an approved product, existing sales, or a credible path to revenue, not startups with an early research concept. For more, see Is a Royalty Deal Right for Your Biotech?

Early-Stage Rounds

With a team in place, your IP protected, and a plan for non-dilutive money, you're ready to raise. Early-stage funding typically falls into four rounds: pre-seed, seed, Series A, and Series B. For the latest deals at each stage, see Cure's Biotech Funding Tracker.

Pre-Seed

Pre-seed is the first step in turning a discovery into a business. Founders typically draw on personal funds, friends and family, angel investors, accelerators, and grants to generate proof-of-concept data and show early market potential. The goal is enough evidence and momentum to attract seed investors.

Money at this stage usually comes in through a simple agreement for future equity (SAFE) or a convertible note. Both let investors put in cash now and receive shares later, at the next priced round, so you avoid setting a valuation before you have data to support one.

"It's a step-by-step approach," said Oriana Papin-Zoghbi, Co-Founder and CEO of AOA Dx, which is developing a blood test for the early detection of ovarian cancer. "You start with the early plan, show feasibility through partnerships and traction, and that makes it possible to then build internally."

Papin-Zoghbi raised $27 million across pre-seed and seed, including about $5 million in pre-seed extension capital from Y Combinator. You may also have to leave your comfort zone and learn the fundamentals of company-building. A business case that clearly lays out the market and a credible path to commercialization is key to attracting early capital.

Seed

Once you have early proof-of-concept data, you're ready for a seed round. Where pre-seed money supports the earliest exploration of an idea, seed funding typically pays to develop the technology, generate data, and lay the foundation for a Series A.

Across all sectors, the median seed round has held between $3.0 million and $3.3 million since early 2025, but companies that went on to raise a Series A typically raised $4 million to $7 million at seed, according to J.P. Morgan. Biotech rounds often run larger. AOA Dx followed its pre-seed money with a $17 million round led by Good Growth Capital.

Seed money can come from venture firms that specialize in early-stage life sciences, as well as venture creation firms, research awards, venture philanthropy, university funds, and state grants.

"Almost every state has an innovation authority or economic development corporation, so they want to foster the companies that are in their state. That is a benefit to them," said Marissa Fayer, CEO of DeepLook Medical, whose FDA-cleared software outlines and measures suspicious lesions on medical images, with a focus on dense breast tissue.

DeepLook moved its headquarters to Scottsdale, Arizona, in 2025, and Fayer was struck by how much support the state provides startups. "We raised a lot of money, and we just won a program that comes with grants and publicity-driven introductions to investors," she said. The program was likely the Arizona Commerce Authority's Arizona Innovation Challenge, which named DeepLook one of 10 Fall 2025 awardees two months before Fayer spoke to Cure. Awardees receive $100,000 in non-dilutive funding and three months of support from a state-designated partner, and the finalists are judged by Arizona venture investors.

Series A

Series A is typically the first large priced round, led by an institutional venture investor that sets the valuation and usually takes a board seat. For a therapeutics company, investors at this stage want a lead candidate with strong preclinical data and a credible plan to reach the clinic. When Evommune raised an $83 million Series A in September 2021, the company said the money would take every program in its pipeline into the clinic. At least 152 biotech companies raised Series A rounds in 2024, totaling more than $6.7 billion, and 23 of them raised $100 million or more, according to BioCentury.

Device, diagnostics, and software companies are judged differently and usually raise less. For them, Series A is often the round that buys early revenue and customers. "For therapeutics, they have a much bigger gain. They have to raise a lot more money for a lot of different clinical trials," Fayer said.

Expect a long process. Fayer said DeepLook's Series A, which closed in October 2024, took hundreds of investor conversations and extensive due diligence. Papin-Zoghbi stressed discipline, runway planning, and adjusting burn.

"You can't wake up one day and decide to fundraise and expect it to close in a few months. You need time, materials, and a well-run process. Then if it happens faster, that's a bonus," she said. "And know when to pull the levers. Spend slower if needed."

Raise enough in Series A, or you'll have a short runway to hit the milestones Series B investors expect. That can mean a lower valuation, unnecessary dilution, and trouble raising a Series B at all.

"Not raising enough in Series A is the number one mistake," said Kyle Carver, Chief Financial Officer of Evommune, which went public on the NYSE in November 2025. Over-projecting milestones can leave a company scrambling to raise a Series B with depleted funds or unmet promises.

Series B

Timing varies. Evommune raised its $50 million Series B in April 2023, about 19 months after its Series A, and later extended it to $57.5 million. There's no reliable clock. J.P. Morgan found that founders who planned on the common 18- to 24-month gap between seed and Series A were sometimes caught short, and that timing varies by sector, city, and round size.

For therapeutics companies, Series B usually funds clinical work, with investors looking for human data. When Evommune raised its round, its lead drug was in a Phase 2a trial for atopic dermatitis. Median venture rounds for companies with Phase 2 assets reached $60 million in 2025, according to J.P. Morgan's Q4 2025 biopharma report.

"Investors want to see that your molecule behaves as expected in humans, not just in the lab. Even promising preclinical data won't replace the need for human proof of concept," Carver said.

"At this point, investors want to know that you did what you said you were going to do over the last five years with the seed series. They aren't betting on potential anymore; they want proof," he said.

Valuation and Term Sheets

A biotech company's valuation is what the business is worth at the time of a funding round. It depends on the stage of development and how much risk remains, and it is ultimately negotiated between the company and its investors.

Valuation is quoted two ways. Pre-money valuation is what the company is worth before the new investment. Post-money valuation is the pre-money figure plus the new cash. If investors put $10 million into a company at a $30 million pre-money valuation, the post-money valuation is $40 million and the new investors own 25 percent.

Because early-stage biotechs usually have no revenue, investors weigh the strength of the science, IP, preclinical or clinical data, market opportunity, competitive landscape, development costs, and the management team's experience.

"Founders should understand that valuation is not just a number. It reflects how investors perceive future potential and current risk," said Hope Khoury, Chief Operating Officer and Co-Founder of Go Vertical ICM, a product innovation and development firm.

A higher valuation means less dilution now, but it can cause trouble later if the company can't meet the expectations that justified the price. A realistic valuation attracts investors and leaves room to grow into the next round.

What a Term Sheet Contains

A term sheet outlines the proposed terms of an investment before the parties sign binding legal agreements. It typically covers the amount invested, the valuation, the type of security investors receive, and the resulting ownership stake. It may also address board composition, voting rights, investor protections, and liquidation preferences.

A liquidation preference sets who gets paid first, and how much, if the company is sold. The market standard is a 1x non-participating preference: investors get either their money back or their share of the sale price, whichever is greater, but not both. In Q2 2026, 95.8 percent of venture deals handled by law firm Cooley carried a 1x preference and 96.4 percent used non-participating preferred stock, according to its Q2 2026 Venture Financing Report. A multiple above 1x or a participating preference is worth pushing back on.

One term shows up often in biotech: tranching, where investors commit a round but release the money in pieces as the company hits set milestones, such as a clinical readout. Cooley reported that 29.6 percent of life sciences venture deals were tranched in Q2 2026. Tranches lower investors' risk, but a missed milestone can leave the company without the second half of its round.

"A term sheet puts the main business terms on paper so you can find out what everyone actually meant when they said they agreed," said Joseph Tucker, PhD, CEO of Enveric Biosciences. "How much money? At what valuation? Who owns what? Who controls what? What conditions must be met? You discuss the broad strokes, capture them in a draft, and work through the differences. Verbal agreement can survive a surprising amount of misunderstanding. Written terms are less accommodating."

That's why Tucker wants experienced counsel involved early enough to spot a structural problem, before teams of expensive lawyers start negotiating the definitive documents.

"The purpose is to expose the deal killers while walking away is still relatively inexpensive," he said. "Spending $50,000 on legal drafting before discovering that the other side expects control you would never surrender is a costly way to learn that everyone enjoyed the meeting for different reasons."

Later Stages and the Exit

After Series B, biotech companies may raise a Series C, a crossover round, or pre-IPO financing to fund larger trials, prepare for commercialization, or get ready for the public markets. By this stage, investors expect substantial evidence that the company can deliver on its scientific and business goals.

Series C and Beyond

Series C rounds typically fund late-stage development, often larger Phase 2 and Phase 3 trials for therapeutics companies. Investors look for strong leadership, efficient use of capital, regulatory progress, and a clear path to approval and a strategic outcome. For device and diagnostics companies already selling, commercial traction and a path to profitability matter more.

"In healthcare, this also means stronger evidence around clinical adoption, reimbursement, regulatory milestones, manufacturing scalability, and market access," said Khoury. "By Series C and later stages, the conversation [also] changes significantly. Investors are no longer asking, 'Can this work?' They are asking, 'Can this scale?'"

Crossover and Pre-IPO

Crossover and pre-IPO rounds prepare a company for a potential initial public offering (IPO). Crossover investors, such as mutual funds and hedge funds, invest in both private and public companies. Their participation often signals that an IPO is near.

"Crossover and pre-IPO financing are not simply larger fundraising rounds," said Khoury. "They represent a transition where investors are looking for companies that have moved beyond potential and are demonstrating institutional-level readiness."

Biotech companies usually go public before they have revenue. Public investors price them on clinical data, the market for their lead programs, and the cash runway to the next readout. The bar has risen since the 2021 boom. Of the six biotechs that priced IPOs in the first quarter of 2026, all but one had drugs in mid- or late-stage testing, and no preclinical company had gone public since 2024, according to BioPharma Dive. A company also needs strong governance and financial reporting systems in place before it lists.

"Investors will also look closely at clinical evidence, regulatory status, reimbursement strategy, manufacturing capabilities, and whether the company can operate at scale," Khoury said.

IPOs

An IPO, when a company sells shares to the public for the first time, can provide substantial capital to fund late-stage trials, pursue regulatory approval, and commercialize treatments. Evommune, for example, raised about $157 million in net proceeds in its November 2025 IPO. Going public also brings reporting requirements, regulatory obligations, and pressure to meet public investors' expectations.

The window is narrow. BioPharma Dive counted 11 biotech IPOs in 2025, and HSBC Innovation Banking's Jonathan Norris told BioPharma Dive that 20 would count as a good year.

Khoury said the decision should start with what outcome best serves the company, the product, and its stakeholders. "Continuing to raise private capital makes sense when the company still has significant growth opportunities and additional investment can accelerate value creation. An IPO may make sense when the company has reached sufficient scale, predictable growth, strong governance, and the ability to meet public market expectations."

Mergers and Acquisitions

With IPOs scarce, M&A and licensing are the more common exits. Biopharma M&A reached 129 deals worth $138 billion in 2025, according to J.P. Morgan. Rather than keep raising money, the company is bought by a pharmaceutical or biotech company looking to add a drug candidate, expand its pipeline, or enter a new therapeutic area.

An IPO raises capital while the company stays independent. An acquisition transfers ownership and control to the buyer. For founders and early investors, M&A can be the point at which years of development and investment finally turn into a financial return.

"An acquisition may be the right path when a strategic partner can accelerate adoption, provide resources, or create more value than remaining independent," said Khoury. "But one of the biggest mistakes founders make is waiting until they receive acquisition interest before preparing. Companies that are acquisition-ready are usually those that have been building strong foundations all along."

What Holds at Every Round

Each stage has its own milestones and investor expectations, but a few principles apply from pre-seed to a late-stage round. You need investor relationships, a realistic read on your financial needs, a strategy for how much to raise, and a clear plan for how you'll spend it.

Build Relationships

Investors rely on trusted referrals to find promising companies. An introduction from a founder, scientific advisor, physician, executive, or another investor can get you a meeting with a fund that would overlook a cold email. Building relationships before you need capital also gives investors time to get to know your science, team, and progress.

"Shake people's hands, reach out to 10 different founders, ask them to give you two introductions and those two to give you two more introductions," Papin-Zoghbi said. "You build your network from the ground up through a mix of networking and purposeful outreach."

Target Investors Who Match Your Stage

Not every investor can fund every biotech company. Some specialize in early-stage ventures and are comfortable with scientific risk. Others want compelling clinical data, a defined regulatory path, or a product nearing commercialization.

Investors also differ in therapeutic focus, check size, geography, and willingness to lead a round. Research these before approaching a fund so you spend your time on investors who can invest and are likely to be interested.

Carver ran into this while raising Evommune's Series B. Many investors said they would co-lead but did not want to set the price on the term sheet.

"Finding that lead investor is very difficult, especially if you're trying to find a new investor," he said. "We met with about a hundred funds thinking they all could potentially lead. If you really boil it down, there were only five to 10 funds who would actually be capable of leading a private round at that time."

Plan Your Runway

Research, clinical trials, and regulatory work are expensive, and timelines shift. Your runway, the time your cash lasts at your current burn rate, should cover the cost of reaching your next milestone, plus room for delays.

"You need to fund six to 12 months past what you intend, so that you have some buffer if you experience delays or something happens," Carver said.

Raising too little can force you back into fundraising before you're ready. Raising more than you need can mean unnecessary dilution or unfavorable terms. Aim for enough capital to reach a milestone that strengthens your position for the next round, with time to fundraise before cash runs low.

A Pre-Raise Checklist

• Exclusive rights to your core IP, with freedom to operate assessed

• A team that covers the science, the business, and regulatory strategy

• Proof-of-concept data framed around the milestone this round will fund

• A regulatory path worked backward from what the FDA will need to approve the product

• A cap table you can explain, and a valuation you can defend

• A budget to the next milestone, plus six to 12 months of buffer

• Non-dilutive options identified, including grants and state programs

• A target investor list sorted by stage, therapeutic focus, check size, and ability to lead

• Warm introductions lined up before you need the money

• Experienced counsel ready to review a term sheet

Glossary

Here are 40 funding terms every founder should understand before talking to investors.

Accelerator: A program that gives startups advice, training, and mentorship to get the company off the ground, sometimes with funding or pitch events.

Angel investor: An individual with significant capital who invests in early-stage startups.

Bootstrapping: Starting a business with your own money or resources rather than outside funding.

Bridge financing: A short-term round that keeps a startup funded between larger rounds.

Burn rate: How quickly a company spends its cash reserves.

Business model: A plan for how a startup's product will meet its market's needs and make money, and what resources that requires.

Cap table: Short for capitalization table, a record of who owns what percentage of the company and through which securities.

Convertible note: Short-term debt that converts into equity later, usually at the next priced round.

Crossover investor: A fund, such as a mutual fund or hedge fund, that invests in both private and public companies, often in the last private round before an IPO.

Crowdfunding: Raising money from many individual backers through an online platform.

Dilution: The drop in existing shareholders' ownership percentage when a company issues new shares.

Due diligence: An investor's review of a startup's science, data, IP, finances, and team before investing.

EIR: An entrepreneur in residence, an experienced businessperson who advises on investments and new ventures, usually at a university or investment firm.

Equity financing: Funding in exchange for partial ownership of the company.

Grant: Funding awarded to support research, often by government agencies, foundations, or nonprofits, usually without repayment or equity.

Incubator: An organization or facility that supports early companies with shared resources, expertise, and often space.

Initial public offering (IPO): When a private company sells shares to the public for the first time.

Investigational New Drug (IND) application: The FDA filing a company must clear before testing a new drug in people.

Late stage: A company with an established product or late-stage clinical program, focused on approval, commercialization, or scale.

Lead investor: The investor that typically puts in the largest amount, sets the price, and negotiates the terms of a round.

Limited partner: An investor in a venture capital fund, such as a pension fund or endowment, with no role in the fund's investment decisions.

Liquidation preference: A term that sets how much preferred shareholders get back, and in what order, before common shareholders when the company is sold or liquidated.

Milestone: A measurable achievement that shows progress toward a larger goal, such as a clinical readout or regulatory filing.

Overhang: The dilution an existing pool of stock options and other equity awards could cause, or a large block of shares that may be sold into the market.

Pre-money and post-money valuation: A company's value before a new investment, and that value plus the new cash.

Preferred stock: A class of shares, usually issued to venture investors, with more rights than common stock.

Pro rata rights: An investor's right to buy enough shares in future rounds to keep its ownership percentage.

Proof of concept: Evidence that a product or approach is feasible, usually from early experiments or a pilot study.

Right of first refusal: A right, usually held by the company or existing investors, to buy shares a shareholder wants to sell before they go to a third party.

Runway: How long a company can operate before running out of cash at its current burn rate.

SAFE: A simple agreement for future equity, an investment that converts into shares at a later priced round without setting a valuation now.

Scalability: A company's ability to grow to meet rising demand.

Seed round: The first sizable round of outside funding, usually after pre-seed, to build proof of concept and prepare for a Series A.

Series A: Typically a company's first large priced round, led by an institutional investor that receives preferred stock.

Series B, C, D, E: Later priced rounds in which investors receive preferred stock.

Tranche: A portion of a funding round released only when the company hits an agreed milestone.

Valuation: What a company is worth at a given point, usually negotiated in a funding round.

Value inflection point: A milestone that significantly raises a company's value or credibility with investors.

Venture capital (VC): Funding from firms that invest in startups at every stage, from seed through late-stage rounds, in exchange for equity.

Warrant: A right to buy a company's stock at a set price within a set period.