The main concern is whether or not early-stage biotech companies that banked with SVB will be able to access their cash. With no cash flow, nascent pharmaceutical startups rely on their cash reserves to fund drug development.��

SVB was an active pillar in the biotech community — a regulation-laden industry where companies often spend years and billions of dollars before ever seeing profitability. Per its Q4 2022 earnings report, 12% of the bank’s $173 billion in deposits belong to the health care and biotech sector.��

The bank’s failure could have wide-reaching impacts in biotech. Life sciences is already a risky industry to fund — a drug company can easily spend around a decade and billions of dollars to develop a single product, and many drugs fail.��

Still, as recently as January, SVB was interested in expanding its life sciences business. The bank pointed out in its that the life sciences and health care space was a robust market and worth digging into further.

Biotech spending spree

The bank, in large part thanks to biotech, had already enjoyed a boom in 2020 and 2021 when funding to health care-related sectors flourished. Not only did it provide financial services to nearly half of all tech and life sciences companies in 2022, it boasted large clients that invested in the health care space such as and .��

A few years earlier in 2019, SVB said it would acquire , an investment bank that invested exclusively in the life sciences sector. The acquisition was a huge get for SVB, which had already been investing in the space but now was able to unlock a wealth of regulatory and advisory expertise it had not been privy to.

It was also big news for biotech and health care. Early-stage health care startups had a new avenue to raise money from an investor enthusiastic to grow its footprint in the space. And early-stage biotech companies, as they were nose deep in research and development, had a place to house their reserves.��

SVB spent its next few years leaning further into the life sciences. Per a Q4 2021 earnings report, the financial institution hired another 50 investment bankers in the life sciences space. It called health care a “robust market” with a lot of opportunity.�� 

One investor told me the news felt like hearing about a death in the family. “We’re all just trying to figure it out because SVB was such a great company,” the investor said in a text message. “They are a huge lender in the tech, biotech and venture community.” 

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Using funding rounds data from Crunchbase, we plotted the count of venture capital funding rounds raised by companies in the fairly expansive biotechnology category in Crunchbase. In the interactive chart below, you can hover over individual data points to see the number of venture rounds raised in a given metro area between the start of 2018 and late May 2019 (as of publication). Although there are biotechnology companies located throughout the world, we focused here on just the U.S.

Unlike in the software funding business, where New York City (and its surrounding area) ranks second in overall deal volume, the greater Boston metro area outranks the Big Apple in biotech venture deal volume. The SF Bay Area (which includes both San Francisco and the towns in Silicon Valley north and west of San Jose) outranks Boston in biotech deal volume, but, then again, it’s also a much larger geographic area with a higher density of startups overall.

The Bio Business Model Breeds Big Deals

Crunchbase News recently covered a $120 million round raised by immunotherapy upstart AlloVir. In the software business, a raise that large would be notable; however, in the business of biology, not so much.

Just for reference, the average Series B round raised by U.S. enterprise software startups between 2018 and May 2019 was . The average Series B for biotech companies from that same time period: just about .

Spinning up a cluster of cells at a lab bench is costlier, harder to do, and the outcomes of experiments are less certain than the results of implementing a new software framework. Add to that the tremendous cost of performing clinical trials and clearing regulatory hurdles—all before costly sales and marketing campaigns to get treatments in front of doctors and end users—and it’s easy to understand why many biotechnology companies need to raise so much money in the early stages of the startup cycle.

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AlloVir is also the first venture to publicly join the portfolio of , a Cambridge, MA-based company which aims to advise and assist cell and gene therapy upstarts throughout the discovery, development, and commercialization lifecycle. Earlier this month, ElevateBio announced it raised led by . AlloVir financiers Samsara BioCapital, Redmile Group, and EcoR1 Capital also back ElevateBio.

According to published by ElevateBio on Wednesday, AlloVir “is a leading innovator in allogenic, off-the-shelf, multi-virus specific T-cell immunotherapies.” What does that mean?

Let’s break it down:1

• “Allogenic,” meaning, basically, that biological material used to create the company’s treatments are sourced from (compatible) donors, rather than from the patient themselves.
• “Off-the-shelf,” in this specific case, means that AlloVir’s products could be integrated into a treatment regime immediately, sitting in storage in the meantime. In the context of T-cell therapeutics (which we’ll get to in a moment), a treatment wouldn’t be “off the shelf” if it required sampling, modifying, and culturing cells from the patient.
• Jumping out of order a bit: are a foundational part of the human immune system. There are many types of T cells, all of which play specific roles in responding to infection. Cancer patients, HIV positive people, transplant recipients, people with chronic infections, people with autoimmune diseases, or other immuno-suppressed populations have lower counts of these key cells. This makes them more susceptible to infection and illness.
• According , its primary T cell therapy offering, Viralym-M (ALVR105), can target six different viral pathogens, including: BK virus (which can affect kidney transplant patients), cytomegalovirus, adenovirus, Epstein-Barr virus (which causes mononucleosis, aka “mono”), JC virus, and human herpesvirus 6. Preliminary research findings on the company’s next therapy, ALVR106, which “targets four common and devastating community-acquired respiratory viruses” in the journal Haematologica last month.

So, basically, AlloVir is in the business of sourcing and training immune cells from healthy donors to fight viral infections in folks with compromised immune systems.

AlloVir’s therapies are still in clinical trials. The company from its Phase 2 study in the Journal of Clinical Oncology, finding that 93 percent of treated patience “demonstrated a clinical response (or met clinical response criteria) following treatment with Viralym-M.” ElevateBio CEO David Hallal that AlloVir will start Phase 3 trials of Viralym-M in 2020.

AlloVir’s as-yet-unnamed ALVR106—targeting respiratory syncytial virus, influenza, parainfluenza virus, and human metapneumovirus—is expected to enter the first phase of clinical trials within the next 12 months, according to coverage

This latest funding round brings AlloVir’s total backing to at least $159 million. The company (which at the time was still called ViraCyte) filed with the SEC in September 2018. The regulatory filing disclosed the company closed at least $30 million out of a targeted $50 million funding round. It’s unclear whether ViraCyte has closed the remaining $20 million from that round. Prior to that deal, the company from the Cancer Prevention and Research Institute of Texas.

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This is the firm’s third fund dedicated solely to these university startups, bringing its total assets to $600 million. Like the two previous funds, the investment will be used to “invest in companies developing technology discovered in the labs of its partner institutions,”

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According to , a principal on OUP’s tech investment team, their fund has slightly different requirements for investment, versus other venture capital firms.

Most startups start with a market problem, develop meaningful tech, and solve said problem. With research startups, “you’re kind of going backwards,” on that process, Lee said.

You’re first developing a technology, then you’re trying to solve a problem, Lee explained. They’re taking a chance on those kind of startups. And since 2009, they’ve taken a bunch of chances by investing in 140 startups, .

OUP works with 98 universities, research institutions, and accelerators in the U.S. and abroad, including Harvard University, New York University, Michigan State University, Rutgers and Tel Aviv University (others found ). They invest in an even split of life sciences and tech companies. The fund shares its investment profit with the universities the startups are born out of.

Some of its include, a biotech company,, a genetic medicine company, and , a biopharmaceutical company.

While this fund will be used to continue to invest in companies, like all venture capital firms, OUP will continue to pour time into companies that aren’t quite up and running yet, Lee said.

OUP also advises professors, graduate students or academics eyeing the idea of starting their own company, he said. This means connecting them to co-founders or giving them knowledge on how to start a company.

There’s a value in investing in university spinouts, before they fully materialize: it will catalyze deal flow – and be the “tide that lifts all boats,” Lee said.

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