Fuelling biotech innovation: Key steps to securing capital at every stage

In biotech, it’s often said “the science is easy, but the funding is hard.” For entrepreneurs in this space, securing funding is one of the most critical—and challenging—steps in growing a successful business. 

The journey to secure capital is tough and intertwined with different challenges, with each stage—pre-seed, seed, and Series A—requiring different skills, networks and funding sources. Government and academic grants are key early-stage financiers, with 63% of biotech startups spinning from academic institutions [1, 2]. As companies scale, equity investments become vital. Alongside funding, factors like product development, intellectual property (IP) strategy, and regulatory approvals are crucial in attracting investors and ensuring success.

Pre-seed round: Where the magic (and funding) starts

The pre-seed stage is the starting point of a biotech startup, focused on turning great science, prototypes, or proof of concept into a validated product, often through preclinical testing in cell cultures or animal models. Key priorities include the product development plan, market research, and patent application filing. At the same time, entrepreneurs might look into long-term goals for regulatory challenges, like Health Canada/FDA requirements [3, 4]. There are early-stage grants from government programs like the Natural Sciences and Engineering Research Council of Canada (NSERC) [5] or the Ontario Centre of Innovation (OCI) [6], which can provide some much-needed financial support while developing business and product development strategies. Entrepreneurs must also overcome key challenges, such as proving technology readiness, strengthening their IP strategy, and navigating the complexities of regulatory approval.

Noa Therapeutics raised an oversubscribed CAD$2.2 million in their pre-seed round, demonstrating strong investor confidence [7]. Similarly, Roga, a neurotech wellness company, secured $1.2 million in pre-seed funding, further highlighting the growing momentum of MaRS-supported ventures. Both companies leveraged MaRS’s programs to scale their innovations and attract early-stage capital [8].

Seed round: Where the dream gets real (and investors get nervous)

The seed round is when a biotech startup proves its worth by refining the product, identifying target customers, and exploring partnerships. Seasoned biotech investors have long understood the high risks associated with early-stage investments; this perception remains particularly common among newer, sector-agnostic investors. The idea that seed-stage biotech could generate 100x returns was often met with skepticism. However, the landscape has changed dramatically in recent years. The ability to outsource product development activities to contract research organizations (CROs), along with gaining access to coworking lab spaces (when available), has made it easier and more affordable to take biotech ideas from concept to market-ready solutions [9, 10, 11].

Need to secure external funding for the first time? Say hello to seed venture capital firms, government-driven funds (for example, OCI, FACIT, TIAP, MaRS IAF), and angel investors. They aren’t here to light cigars, but to see a strong founding team and a solid development and IP strategy. In 2022, startups secured over $22 billion in VC funding, with 2023 already raising $12 billion through Q3, continuing the strong growth [12]. 

MaRS-supported Hdax Therapeutics reached a major milestone with an oversubscribed US$3.2 million seed round, highlighting strong investor interest in its innovative approach. This success was fuelled by MaRS’s investor readiness resources, including personalized advisory, access to a robust network, market insights, and deal negotiation expertise—setting the stage for accelerated growth [13].

Series A: Time to stop saying “We’re just a startup” and start growing

Congratulations! You’ve made it to the Series A round. At this stage, you need more cash and you need it fast. Series A is your first major funding round, fuelling expansion with bigger teams, more marketing, new markets, and increased manufacturing. You’re ready to scale. Enter Series A or later-stage VCs, who will be handing over those multimillion-dollar checks, but not without some conditions. VCs like to invest as a syndicate because no one wants to go all in by themselves. By sharing risk, they limit their downside and pool their expertise. Don’t be surprised if you see a mix of leading and following investors at this stage. Some VCs like to lead, others prefer to follow, but they are all hunting for a company that’s ready to scale and show it can not only survive but thrive.

You might also see strategic investors—companies looking to form partnerships and tap into synergies with your product. At this point, investors are looking for more than just a great idea; they want to see results, a clear path to profitability or exit opportunity, and the ability to scale successfully. In other words, it’s time to prove you can thrive on a larger stage [15]. Spiderwort Inc., a MaRS-supported venture, used its Series A funding to drive growth and product development [16]. 

Securing funding in biotech is no small feat—it requires strategic planning, resilience, and a clear understanding of what investors expect at every stage of growth. At MaRS, our mission is to help increase the odds of your success. While it may feel like a small drop in the ocean, those drops create vast seas. With our advisory services, investor network,s and market insights, we’re here to help startups transform groundbreaking ideas into commercial triumphs. Keep pushing boundaries—the future of biotech relies on innovators like you.