As thousands of healthcare startups are caught in limbo by NIH funding cuts, one company is offering a potential lifeline: Altitude Lab, a biotech accelerator started by Recursion in Salt Lake City, has created a pre-seed venture fund targeting startups with promising science but no federal dollars.
The fund will support Small Business Innovation Research (SBIR) reviewed companies that demonstrated merit but are stuck in funding uncertainty. The SBIR program, described as "America's Seed Fund," is a competitive federal grant initiative that provides early-stage funding, which range from $150,000 to over $1 million, to small businesses conducting research aiming to translate scientific discoveries into treatments.
"Earning our early SBIRs was a pivotal moment for Recursion," said Chris Gibson, CEO of Recursion and Altitude Lab board chairperson, in a news release. "The few million dollars that came in via the SBIR mechanism in our early years allowed us to build the fundamentals of our platform upon which we have now raised over $1B in private investment."
The new fund will provide up to $250,000 in pre-seed capital along with 12 months of lab and office space at Altitude Lab's facilities. Recipients must have received an Impact Score of 20 or less in a recent SBIR submission, indicating high scientific merit.
The Economic Stakes of Research Funding
The implications of NIH funding cuts extend far beyond individual research projects. According to United for Medical Research, every dollar of NIH funding generates nearly $2.50 in economic activity across the United States. In fiscal year 2023 alone, the $38 billion that NIH awarded to researchers supported more than 410,000 jobs and generated $93 billion in economic activity nationwide.
The growth in NIH funding from 2015 to 2023 has been critical for biomedical innovation, resulting in more than 14,600 grants and supporting nearly 90,000 additional jobs. These investments not only advance scientific discovery but create economic ripple effects throughout communities hosting research institutions.
"The NIH and the American government have had a special role to play in funding some of the audacious early science that has made America the leader in biotech and beyond for the past 100 years," Gibson wrote in a recent Stat News opinion column, citing examples like rituximab, which received early SBIR grants before becoming a breakthrough cancer therapy that generated over $6.7 billion in global sales in 2019.
Biotech Investment Climate Shows Signs of Cautious Optimism
Biotech startup funding in 2024 shows a clear shift toward smaller, earlier investments with different terms than previous years. While the sector raised approximately $263 million in early-stage funding, biotech companies are increasingly shifting toward simplified investment agreements that offer more flexibility but fewer investor protections than traditional debt-based financing, according to Carta's 2024 “State of Pre-Seed Funding,” report.
The broader investment landscape for healthcare companies shows tentative signs of improvement heading into 2025, though challenges remain. According to data from Silicon Valley Bank, early-stage startups are entering the year with cautious optimism, with seed-stage deals accounting for nearly 40 percent of all healthcare investments in 2024 — a substantial increase from 26 percent in 2021.
Biotech’s IPO Market
Later-stage startups, however, face more challenging conditions. Private biotech companies are increasingly delaying public offerings and seeking alternative financing options, creating a backlog of companies that have raised more than $100 million in private financing rounds.
According to Jefferies Research, while 2024 IPOs have been particularly difficult — down an average of 50 percent from their deal prices — the 2025 cohort is showing more promise, with a median performance of +10 percent over deal price.
Still, results have been mixed. Jefferies Research shows that among the five companies to sell shares to the public for the first time in 2025, three are trading above their initial offering, but three companies are also in the red for the year to date. This group includes Aardvark Therapeutics, Ascentage Pharma, Maze Therapeutics, Metsera and Sionna Therapeutics.
"In many cases, the under-performance could be ascribed to specific reasons such as discontinued lead pipeline programs," according to the Jefferies note.
Government Funding Challenges Create Critical Gap
Former FDA Commissioner Scott Gottlieb, MD, wrote on X.com (Twitter) that the cuts to NIH may not mean less funding overall.
“A cut to NIH indirect funding isn't necessarily a reduction in total NIH research funding,” Gottlieb wrote in a Feb. 11 post. “The presumption is that if indirect funding is reduced, provided the overall NIH budget remains constant, it'll free up more money for direct research funding, including additional grants.”
Beyond the immediate impact of any potential cuts, the longer-term ability to remain a leader in research is at stake, Recursion’s Gibson wrote in his Stat News opinion column.
"While private funds cannot and should not replace the critical funding from the NIH and other public entities, neither can we afford to allow a setback to cut off the flow of early science that has made every single biotech company in the country possible," Gibson wrote.