Emerging Markets, Including RTP, See Influx of Venture Capital
By Alex Keown
April 12, 2023
Despite a nearly 30% downturn of venture capital funding across the nation in 2022, emerging markets, including North Carolina’s Research Triangle Park continued to receive a significant amount of funding, a new report shows.
“The Research Triangle in North Carolina has been at the forefront of rapidly emerging life science clusters in the U.S. It is home to the country’s most prominent research park, Research Triangle Park (RTP), known for its high-tech facilities and upper echelon of life science tenants,” the report reads.
The “National Life Sciences State of the Venture Capital Market & 2023 Outlook” analysis conducted by Savilis Research and Data Services shows that in 2022, venture funds raised more than $58 billion for the life sciences, the second-largest fundraising year for the industry. Of those funds, the report found about $2 billion of VC funding flowed into the region in 2022, a slight bump over the $1.9 billion invested in 2021. The 2022 numbers fall short of 2021 when VC funding in RTP reached $2.6 billion.
First established in 1959, RTP is home to hundreds of life sciences companies. Since its founding, the area has drawn significant interest from the pharma and biotech industries, as well as the tech sector. North Carolina is home to 810 life sciences companies that employ 75,000 people. RTP was ranked 9th in Genetic Engineering News’ annual top 10 biopharma clusters report released in 2022.
A report from economic development analyst TEConomy Partners shows an annual economic impact of more than $2.4 billion. Over the past five years, N.C. has seen a 38% increase in life sciences-related business establishments. That outpaced national growth, which came in at 14%, TEConomy said.
That’s expected to continue. NCBiosciences, the state’s life sciences advocacy organization, noted over the past two years, there have been 63 different expansion and relocation announcements. If those programs come to fruition like expected, the organization said these economic development plans could provide 9,115 new jobs.
“Raleigh (and the RTP) has a very vibrant, early-stage ecosystem,” explained Savilis life sciences lead Austin Barrett. He said that vibrancy is drawing the eyes of investors even during a period of economic uncertainty causing VCs to hold their purse strings tighter.
Beyond those early-stage companies, RTP is also home to established and legacy pharma companies, a thriving contract research organization cluster, three major research universities and multiple incubator programs. The combination of those has propelled RTP into the top 10 of biopharma clusters in the United States. While GEN ranked RTP ninth in the nation, Savilis’ report ranks RTP in the seventh spot for VC funding. San Francisco, Boston, Chicago, New York, San Diego and Seattle came in ahead of North Carolina. With $1.6 billion in VC funding, Maryland came in at the ninth spot and Philadelphia rounded out the top 10 with a reported $1.2 billion in VC funding, the Savilis report shows.
Since a high of VC funding in 2021, driven by developmental projects for COVID-19 and other indications, the amount of money has retracted nearly 30% due to uncertainties in the market. Still, Barret noted that compared to pre-COVID years, funding is considerably higher.
“It’s still a healthy market, he said.
While the market remains strong, Barret predicted that Series A financing rounds through crossover rounds will remain low, due to skepticism of pre-commercial life sciences companies. He said VCs will be awaiting for companies to provide significant data readouts before making meaningful investments.
As 2023 continues to unfold, Barret said VC firms have an ample amount of cash reserves. Those funds are likely to be dispersed to support developmental projects that will likely generate a return on investment, he said. Barret noted that VC firms are measuring how quickly that return will be made and how cost-effective the project will be.
Life science companies are shifting their expectations regarding how long fundraising may take in 2023, what valuation expectations will look like, and which investors are sitting on available capital and are ready to deploy it. In 2023, companies will try to do more with less, he said.
Other measures for future VC funding will hinge on available talent. Barrett predicted more VC funding will flow into smaller markets over the next year due to the science conducted by companies as well as the availability of existing top talent, as well as future talent currently being trained for roles across the industry.
Numerous training programs throughout RTP, such as the Eli Lilly-backed program at Wake Technical Community College in Raleigh, the Novo Nordisk-supported program at Durham Technical Community College, as well as similar programs in Maryland, indicate a healthy supply of available and future talent.
“Companies are committed to tapping into academics. They’ll have to continue to make investments in training,” Barret said.
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Alex Keown is a freelance journalist who writes about a variety of subjects including the pharma, biotech, and life science industries. Prior to freelancing, Alex has served as a staff writer and editor for several publications.
