Venture capital is accelerating a transformation in biotechnology, with substantial capital flowing into AI-enabled drug discovery, synthetic biology and next-generation therapeutics.
Thanks to venture equity investment in the life sciences that topped $50 billion in 2024, up from $33 billion the year before, tools and data once confined to specialized labs are now widely available, lowering the barrier to innovation. Unfortunately, the barrier to risk has also fallen.
Biosafety and biosecurity — the prevention of accidental harm or deliberate misuse of biotechnology — have not kept pace with the dramatic growth in the field. This fact can no longer be a peripheral concern for life science investors. It is a source of financial, regulatory and reputational exposure. As with cybersecurity and ESG evaluations, biosafety and security must now become a standard component of early-stage diligence. The stakes include pandemic-scale consequences.
In biology, new tools — from gene editors to synthetic cells — emerge every few years, each with unique safety implications. In AI and climate tech, firms that adopted early risk-reduction frameworks attracted stronger partnerships, avoided regulatory bottlenecks and built market trust. Biotech now offers its investors a similar opportunity to stay ahead of the game.
Biotech’s history of safety lapses and near misses
Risks to biosafety and security are increasingly difficult to ignore. Although inconclusive on COVID-19’s origins, the World Health Organization’s late-June assessment identified weaknesses in oversight, transparency and governance in high-consequence biological research, reinforcing concerns that when safeguards falter, scrutiny reaches beyond operators to their funders.
Startups are especially vulnerable. Many operate with minimal compliance infrastructure, evolving protocols and little redundancy — conditions that increase the likelihood of safety lapses. A single biosafety incident may not only endanger public health; it can trigger investigations, litigation and lasting reputational harm. In biotech, credibility shapes valuation, partnerships and regulatory outcomes. The risk is real — and material.
Biosafety lapses have been at the root of some of the most consequential biological incidents of the past century. In 1977, a strain of H1N1 influenza believed to have escaped from a Soviet laboratory triggered a global outbreak, and in 2014, the US Centers for Disease Control and Prevention mishandled live anthrax samples, exposing personnel and prompting a national review of lab safety. In 2020, COVID-19 demonstrated the scale of disruption a catastrophic biological event can cause, and how fragile our biological risk assessment systems remain.
Most recently, a facility in Reedley, California — operated by individuals behind the corporation Universal Meditech Inc. and its successor, Prestige Biotech Inc. — was found storing unpermitted pathogens, manufacturing unauthorized diagnostics, and operating without basic biosafety and biosecurity protocols. Federal indictments followed.
When funders become part of the fallout
Biosafety and biosecurity incidents rarely remain isolated. They prompt scrutiny not just of the company in question, but of every firm connected to its funding.
In China, the controversy surrounding the firm tied to research suspected, by some, of playing a role in the COVID-19 outbreak shows how gaps in oversight—real or perceived—can entangle institutions far beyond the lab. EcoHealth Alliance, a U.S. research nonprofit, became a telling example: despite no conclusive tie between its projects and the pandemic’s origin, its funding was suspended and it faced multiple investigations. The issue was not the support for risky research per se, but shortcomings in transparency and governance. The case made clear that funders are judged not just on scientific outcomes, but also on the oversight systems they require for the research they enable.
This risk is among the reasons why VCs should use the leverage they have and not leave biosafety and security solely to scientists or regulators. Investors can influence which ideas scale and how safely they are brought to market. With oversight trailing innovation, calls from international health authorities are creating an organic opportunity for forward-looking funders to lead where regulation still falls short.
Legal exposure is another concern. Investors may not be liable by default — but courts increasingly assess whether foreseeable risks were addressed in a meaningful way. In the landmark corporate governance case In re Caremark, it was held that failing to establish or monitor legal compliance and risk reporting systems in good faith can breach fiduciary duties.
In the wake of COVID-19, legal experts caution that overlooking biosafety risks — especially without documented diligence — can heighten litigation exposure and affect access to D&O insurance. For biotech VCs, early biosafety review is more than good governance. It’s strategic risk mitigation.
A blueprint for responsible biotech investment
Fortunately, some investors are beginning to ask questions about containment protocols, incident response and internal oversight as part of pre-funding evaluations. These steps do not require micromanaging technical details; they require early engagement, expert input and clear expectations.
There are resources to help investors make this change. The International Bio Funders Compact is a shared pledge among life science funders to integrate biosafety and biosecurity into investment decisions through early risk review.
One way funders are putting these principles into action is through the Bio Funders Forum—a collaborative effort established to support knowledge-sharing and coordination on risk governance and oversight. In the Forum, participants share how they assess risks, make decisions, and handle compliance challenges, helping each other learn in a field where standards are still evolving.
Diligence on biosafety and biosecurity is a low-cost, high-impact de-risking tool. It aligns with ESG principles, strengthens reputational standing and helps investors stay ahead of evolving norms.
Biology evolves. So do regulatory expectations. The future of biotech will depend not only on what science delivers, but on how investment decisions shape its trajectory. Those who lead on biosafety and security will not just reduce risk — they will define which innovations endure, and which investors are trusted to back them.
Aparupa Sengupta is a senior program officer and Helia Samani is a program associate for the Nuclear Threat Initiative’s Global Biological Policy and Programs.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
