The Biotech Rollercoaster: Hold On Tight, the Troughs Are Coming

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A number of years ago, I was chatting with an investment director about the trials and tribulations of early-stage startup investments. 

He grabbed a scrap of paper and scrawled a squiggly line, and for the next 15 minutes, I got an education in the emotional rollercoaster of startup life. 

Spoiler alert: it’s not pretty. It wasn’t a stock chart or a futuristic scientific breakthrough—it was a line mapping “Expectation vs Time”—basically the emotional timeline of an investor.

I’ve kept that ragged piece of paper for years, and every so often, I look back at it, amused and bemused by what he said.

Fast forward to today and raising capital for life sciences startups feels tougher than ever. The scars left by companies that got a little too comfy in the Covid bubble—and then burst spectacularly—are still fresh.

Earlier this week, I met a CEO from an early-stage startup in London who had just returned from an investor conference, feeling demoralised. He’d seen VC firms with signs that said “No Life Sciences”—like a big "no entry" sign on the biotech highway.

So, I mentioned this to a colleague in a government business department, explaining that I, too, was in a similar boat. I’m working with an incredible company trying to raise enough to get to a Series A, but the “begging cap” is embarrassingly bare—maybe a couple of milk bottle caps and a few foreign coins. His suggestion? Apply for grants, which, let’s face it, are about as user-friendly as assembling Ikea furniture without the manual.

Recently, #Penny Warren shared an article on LinkedIn showing that the top two sectors attracting investment this year were hospitality and healthcare. Healthcare? Ok, so there’s a flicker of hope for us after all. But I can’t help wondering—how long before those green shoots finally sprout here in the UK?

I made sure to pass the article on to my government colleague, just to keep things interesting.

Here’s the thing: the biotech, life sciences, and diagnostic sectors are often misunderstood. But maybe, just maybe, the issue isn’t with the investors; maybe we haven’t fully communicated the complexities of getting a scientific product to market. The many, many, many verification and validation steps, the tweaks, the re-tweaks, the endless optimisation. The prototype phase—where dreams are made—is just the beginning. It’s a journey. A very long, expensive journey.

So, if you're investing in biotech startups, this "squiggly line" I keep going back to might be your best friend. You know, like the compass you wish you had when you first joined this wild ride.

🧬 The Biotech Dream Starts High

We kick off with maybe an unrealistic optimism—brilliant founders, a shiny new platform, some sparkling early assay data. It’s like Christmas morning for investors. strong valuations, and investor decks brimming with "We’re going to change the world!" And guess what? Capital is available. It’s all smooth sailing—until it's not.

😬 Enter the Trough of Despair

Here comes the crash. The science slows down. Trials stall. Revalidation. Redesign. Adjustments that somehow take months longer than expected. The money’s burning faster than anticipated, and suddenly, expectations are in freefall. For many startups, this is the “sink or swim” moment.

Some investors bail out here, but the savvy ones double down, focusing on the teams that show grit, the data that still promises hope, and the platforms that seem to have just a little more room to grow. The “Valley of Doom” looms ahead, and let's face it, most companies that don't pivot or find emergency funding rarely make it out.

📈 Climbing the Heights of Reality

Survivors? Well, they start the long climb to the Heights of Reality. It’s not glamorous—maybe it’s a strategic partnership or a paying (but small) customer. The data’s solid, but the hype has definitely toned down. Now, investors aren’t buying potential. They’re backing actual, measurable progress. You’re no longer chasing dreams—you’re proving them.

🤔 The Second Trough

Just when you think you've reached smooth sailing, along comes the Second Trough. Maybe it's a regulatory delay, or some unexpected cost from a manufacturing site on the wrong side of the world. Bam! Another obstacle. This is when the true believers separate from the tourists—those who can handle the brutal grind and the constant capital infusion.

✅ Plateau of Acceptance

Finally, if all goes well, you reach the Plateau of Acceptance. The market finally understands the real value of your company. Products get approved (or acquired). It’s not the “cure-all” breakthrough we dreamed of, but maybe you’ve found a niche in the market—whether it’s the clinical space, veterinary medicine, or agriculture.

The takeaway? You’ve survived. You weathered the Troughs of Despair, avoided the Valley of Doom, and maybe didn’t get rich overnight, but you reached a place where evidence-backed success is the foundation.

Lessons for Biotech Investors:

1. Expect the Troughs – Science is tough, timelines are long, and the outcome is uncertain. This is not for the faint of heart.

2. Back Resilience – Founders who pivot thoughtfully, communicate honestly, and attract top-tier talent will stand out. It's about grit, not just the idea.

3. Know Your Appetite – Can your fund—or your patience—survive the Valley of Doom for 18 months? If not, maybe biotech isn’t your thing.

4. Celebrate the Plateau – Biotech returns are asymmetrical, but they are built on consistent, grounded progress, not hype.

Biotech investing is definitely not a cosy, risk-free journey. But if you can handle the bumps, the dips, and the occasional loop-the-loop, you could be riding the wave to the next big medical breakthrough. Or at least a few solid returns on a hard-earned investment.

References:

• Pisano, G.P. (2006). Science Business: The Promise, the Reality, and the Future of Biotech. Harvard Business Press.

• Golec, J. and Vernon, J.A. (2010). ‘Financial risk in the biotechnology industry’, Pharmacoeconomics, 28(8), pp. 637–653.

• Gladwell, M. (2008). The Tipping Point: How Little Things Can Make a Big Difference. Abacus.