February 14, 2024

Germany’s Earlybird raises €173m healthtech fund as it looks to tap 'unprecedented' biopharma opportunity

The 2030 pharma "patent cliff" means there's "loads more opportunities to exit" for startups, says Earlybird principal Christoph Massner

German VC Earlybird is today announcing the close of €173m for its second healthtech-focused fund. 

It will see the firm write cheques between €3-8m at Series A and B, for startups in the biopharma, medtech and digital health sectors. 

British Patient Capital backed the fund, alongside Barmer — one of the largest public health insurers in Germany. A number of family offices, an endowment fund and a bank also invested. 

The “unprecedented” biopharma exit opportunity 

The news comes eight years after Earlybird launched its first €83m healthtech fund. About half of the cash will be spent on biopharma startups, with the other half being split between medtech and digital health, says principal Christoph Massner.


It’s part of a push that will see Earlybird look to tap into the “unprecedented opportunity” in the biopharma space.

Big pharmaceutical companies are facing a “patent cliff” — when a number of drug patents expire and the market opens up for anyone to produce them — in 2030, Massner tells Sifted. Some estimate that $200bn in annual revenue could evaporate overnight when that happens. 

It means that pharma companies are scrambling to develop new drugs that can replace the lost income and one of the ways to do that is to acquire startups that are already a way down the road of developing a new pharmaceutical product, says Massner.

“Biopharma is a very mature M&A market — they’ve been buying innovative companies for decades. Those companies know how to fit a new asset or device into their pipelines,” he says. 

Combined with the added time pressure (Massner says “[Pharma companies] know they need to buy now”) it means there’s “loads more opportunities for exits”. 

Pharma deal making is already beginning to ramp up. 2023 saw a record 105 acquisitions for biotech and pharma startups, according to Dealroom. 

Earlybird has made four investments from the new fund — all in the biopharma space. That includes French immunotherapy company ImCheck Therapeutics, Swiss eye treatment startup Oculis, UK-based cancer tumour detection company Grey Wolf Therapeutics and German radiotherapy company Ariceum Therapeutics.

It's not the only VC splashing the cash on startups working in the pharma space — a trend that’s kept startups in the sector safe from the worst of the economic downturn. 

Across 2023, European biotech startups raised $5.7bn, just shy of the $6.2bn picked up in 2022, according to Dealroom. That's a far shorter drop than European tech funding as a whole, which fell from $98.6bn to $61.8bn over the same period. 

Earlybird also has a keen eye on startups building medical devices — a sector in which it says it's got three deals soon to be announced. It’s also looking at data analytics and foundational models for healthcare and drug development.


Where it’s not going to be investing is the digital therapeutics sector — startups which provide app-based therapies.

Slower-than-expected adoption and a fragmented reimbursement system across Europe means that it’s difficult to build a venture case for startups in the space, says Massner.

Digital therapeutics startups also often don’t have patents for their technology, which means a company needs to grow very quickly to get ahead in a market, he adds. But because of the complexities expanding into new markets and regulatory hurdles, “growing very quickly in healthcare is quite difficult”.

Emerging markets

Almost all of the 12-15 deals the fund does will be Europe-based — but there is also scope to back startups based in the US and Israel, says Massner. 

“The UK is one of the leading countries when it comes to techbio,” he tells Sifted — alongside Switzerland and France.

But Massner’s beginning to see more promising startups in the biopharma and medtech sectors from emerging markets like Italy and Spain. 

“We see very good stuff coming from the south of Europe — and we haven’t seen this before,” he says. “We’re starting to see the dispersion of innovation away from hot spots.”

Kai Nicol-Schwarz

Kai Nicol-Schwarz is a reporter at Sifted. He covers UK tech and healthtech, and can be found on X and LinkedIn