Life sciences has overtaken software as the primary recipient of early-stage funding
For as long as I can remember, and I’ve been in the startup world since the 1990’s, venture capital has been nearly synonymous with software.
From the dotcom daze where money was thrown at even the stupidest ecommerce concepts to the pre-covid days where funding flowed to SaaS, virtual reality, crypto, fintech, and AI for anything and everything, if you wanted venture capitalists to fund your startup, you needed to be pitching some sort of software.
But in the past few years, the dominance of software has waned. Life sciences has become the new king of the sand hill.
In 2022, 54% of the startups that Tech Coast Angels, one of the most active angel groups in the country, invested in were life sciences, including pharmaceuticals, medical diagnostics, medical devices, and digital health. Software accounted for only 22% of deals, consumer products for 7%, and everything else was in the noise.
Last year wasn’t a one-time fluke. Life science funding has continued to grow since 2000, grabbing a larger and larger slice of the pie away from software and applications.
Life Science vs Software Business Model & Funding
The standard venture capital funding model runs in well-trod stages from friends and family to angel seed funding. As revenues grow, validating the size of the market, venture capital funds write increasingly larger checks to expand the marketing and help the company expand until it eventually reaches critical mass and is acquired by an industry giant to goes public in an IPO.
In this standard venture funding model, the product is less important than the market and marketing. Building the core of a software product takes maybe $1M. Getting that product in front…