Finance follows function

Throughout biotech history the pendulum has swung between two basic philosophies of venture investing: give managements what they need up front so they can focus on development rather than fund-raising, or drip feed managements so they don't waste money and are focused on meeting milestones. Today, the sheer amount of money private companies are raising could suggest the potential for profligate spending is on the rise.

But VCs say what's really going on is that they are aligning funding strategies with the types of biotechs they are building. The largest sums are going to companies with broad platforms that range from immune sequencing to new therapeutic modalities to cloud-based healthcare IT. With few exceptions, single-asset and narrowly focused biotechs are getting less...