Eye On AI: Funding To Biotech And Healthcare Startups Using AI Takes Off After Dip In 2023

Chris Metinko

This column is a look back at the week that was in AI. Read the previous one here.

Earlier this week, life sciences venture firm Dimension Capital announced it had raised a new $500 million second fund — just two years after its first — to hunt for startups that are using artificial intelligence to develop new medicines.

The new fund is just the latest example of investor excitement about healthcare- and biotech-related uses for AI.

Venture funding to AI-related biotech and healthcare startups hit only $4.8 billion in 2023, a significant decrease from 2022. But in 2024, funding to the area has bounced back — with such startups raising $6.7 billion through early December, per Crunchbase data.

While you might think the general fervor around all things artificial intelligence means 2024 is a new high for the intersection of AI and biotech/healthcare, both 2021 and 2022 were strong funding years for the space. In 2021 — which was a record year for venture capital investment overall — $12.5 billion was raised by AI-related biotech/healthcare related startups.

Nevertheless, venture investors seem to be excited about the use cases for AI to discover new drugs, improve diagnoses or even just help doctors deal with administrative tasks.

Some of the biggest AI biotech/healthcare rounds this year include:

In April, Xaira Therapeutics saw 2024’s biggest round in the field. The San Francisco-based biotech came out of stealth and announced it had secured more than $1 billion of committed capital from lead investors Arch Venture Partners and Foresite Capital — both of which jointly incubated the company. Xaira — which is using AI models to find new drugs — is led by founding CEO Marc Tessier-Lavigne, who previously served as president of Stanford University but resigned last year after questions arose concerning some of his scientific research.
In February, Abridge, which is building AI-powered clinical documentation tools, raised a $150 million Series C led by Lightspeed Venture Partners and Redpoint Ventures. The new round reportedly valued the Pittsburgh-based startup at about $850 million.
In June, New York-based EvolutionaryScale, which has developed a large language model for creating novel proteins, raised a $142 million seed funding. The round was led by Daniel Gross, Lux Capital and Nat Friedman. Amazon Web Services and NVentures, the venture capital arm of Nvidia, also took part in the round.
Finally, in October, Los Angeles-based Terray Therapeutics — a biotech startup developing small molecule drug therapeutics through its AI platform — raised a $120 million Series B led by new investor Bedford Ridge Capital and existing investor NVentures.

There is no doubt AI is impacting nearly every industry — from defense to marketing to cybersecurity to — and it seems venture investors are betting big that biotech and healthcare will be no different.

Things that caught our eye and other stuff:

We’ve talked a lot about data centers in this space, and once again this week a related startup raised big. London-based AI hyperscaler Nscale raised a $155 million Series A led by Sandton Capital Partners. The company, launched just in May, develops sustainable AI-ready data centers, deploys GPU infrastructure and delivers AI cloud services. AI cloud and compute services are booming, and so is venture funding to those that provide it.