Navigating a Shifting Biotech Ecosystem
The foundations of the biomedical research are shifting beneath our feet.
The legacy ecosystem we’ve long taken for granted - built around an implicit and sometimes complicated compact between government, universities, venture capitalists, and pharmaceutical companies, is now facing an inflection point. Policies are changing, funding streams are uncertain, and the strategies that have sustained research institutions for generations may no longer hold. The question is not whether the landscape will change, but how those within it will adapt.
Two years ago, I launched this newsletter with an essay about ecosystem succession—the process through which complex communities, biological and otherwise, transition from one mode of organization to another. Usually, succession happens gradually, as one community prepares the conditions for another, more complex community to take hold. From lichens to grasses to shrubs. From beaches to sand dunes to oak savannahs. From one successful startup, to a startup cluster, to a hub. You get the drift.
Less often, the transition is sudden and chaotic. An exogenous shock drastically upends the previous order, causing the most specialized organisms to die out but opening a niche for the most adaptable to explode and reorder the world. The extinction of the dinosaurs is one example. The Second World War is another.
Naturally, NIH’s Friday announcement—that they would cap indirect costs on university grants to 15%—got me thinking about ecosystem succession. As you may have known before Friday, and almost certainly know now, indirect costs are the equivalent of grass to the modern biomedical research ecosystem. They provide the structure that holds everything in place and prevents it from sliding down a hill. Research buildings. IRBs. Support staff. Without indirect costs the whole system comes tumbling down, figuratively and perhaps literally.
A Brief Detour: How We Got Here
Our current biomedical research ecosystems, and especially the modern research university, find their origins in the waning months of the Second World War. Throughout the war, both Allied and Axis powers spent fantastic sums on scientific initiatives, from the Manhattan Project to the RAD Lab at MIT. Faced with the problem of unwinding this infrastructure at war’s end, the president’s chief scientific advisor, Vannevar Bush, urged him instead to repurpose it toward a new kind of war—“a war of science against disease.”
In my 2023 essay, I described this period, along with what preceded and followed it, in this way:
Over the course of the 20th century, the innovation ecosystem of the U.S. evolved from the bare rock and lichen of the pre-war system, where small numbers of scrappy researchers competed for limited private resources, to a stable, intermediate ecosystem centered around the university and underwritten by the public via government agencies.
The first shift in the 1940s—from private to public funding of research—stabilized the soil for permanent innovation ecosystems to form around universities, especially in major cities.
The second shift in the 1980s—from public to private ownership of research-derived patents—provided the nutrients needed for the resulting innovations to grow and bear fruit, allowing new “species” of companies (startups) and capital (venture capital) to evolve.
Forty years apart, each of these shifts represented a major perturbation to the U.S. research ecosystem, drastically altering its structure and the arrangement of its parts—from where innovation takes place to who funds it to who owns its outputs.
While much has changed since the 1980s, more has stayed the same. The major players—tech transfer offices, venture capitalists, startups, corporate acquirers—act and interact in much the same way they did forty years ago. They have evolved, certainly. They have experimented with new strategies around the margins. Niche players have emerged to fill valuable gaps. A few climax ecosystems, especially Boston and San Francisco, have grown dense and fruitful. But the playbooks for TTOs, VCs, and startups remain—relatively unchanged. We are now forty years on from Bayh-Dole, and it seems reasonable to ask: Are we due for another major shift?
The Next Great Shift Has Begun
This Friday’s announcement was, I believe, the perturbation that will mark the beginning of the next great shift. Future historians of science will look back on the opening months of 2025 as a transition as consequential to the structure of scientific research as the Bayh-Dole Act in 1980 or Vannevar Bush’s famous letter in 1944. From this point forward, the future is going to look a lot different from the past.
This isn’t because I believe the proposed caps on indirect expenses will hold; there are plenty of reason to expect otherwise. It’s not because I think the current administration will upend the FDA, or CMS, or Research Universities as we know them; that’s also possible, but I think equally unlikely. It’s because the university-centric, government-backed-then-VC-funded, mostly-functional, but sometimes-very-frustrating research regime we inherited from World War II has been showing it’s age for some time now. The ground began shifting for many years already. The shock is now here. From this point forward, the future will look a lot different from the past.
What Comes Next?
Like during any major ecosystem transition, I expect that we will see number of extinctions in the coming months as years, as well as the emergence of new species.
The most specialized players of the last 20 years are the most vulnerable. Their deep adaptation to the previous order—once a great strength—now makes them fragile in the face of change.
The apex species of the next alignment are already here. Like mammals before the K-Pg extinction event, they are ready and flexible enough to adapt to the new conditions.
Many Research Universities will have to rethink their model. Regardless of whether the NIH funding caps are implemented, they can no longer take stable, sustained basic-research funding as a given. At a minimum, this will require them to rethink their financial model, diversify sources of funding, and decide. It may require them to radically unbundle. (and this might be a good thing)
Startups, like always, will need keep their heads up, their hands on the wheel, and be constantly checking their mirrors. I’m particularly excited to see the 2026 and 2027 vintage of biotech startups - those which are nestled within universities now, but will launch in the next year or two. They will be a particularly scrappy bunch.
Forward-thinking foundations and consortia—such as the Walder Foundation, the CZ biohubs, the GRA or the Chicago Biomedical Consortium, have a BIG opportunity to reshape the research landscape by stepping into gaps left by shifting federal funding structures.
Emerging ecosystems have a once-in-a-generation opportunity to claim a new spot. Boston gained its current prominence when MIT and Harvard responded to World War II with big, bold moves to create institutions like MITs RAD Lab and the like.
Navigating the New Landscape
In times of transition, the ability to see, navigate, and adapt to new opportunities is critical. That’s where Stargaze comes in.
Stargaze was built for precisely this kind of moment—when the old maps are no longer useful, and new territories must be charted. By tracking innovation dynamics, mapping emerging clusters, and identifying the RisingStars of the next wave, Stargaze helps universities, startups, investors, and research organizations find their footing in a shifting ecosystem.
For those ready to embrace the change, this is an unprecedented opportunity. Old institutions will be unbundled. New hubs will rise. New funding models will take shape, and new players will define the next era of biomedical research. The question isn’t whether the change is coming—it’s how you position yourself to thrive within it.
The future belongs to those who can navigate the transition.
If this article resonated with you, or if you want to learn more about how Portal is helping companies navigate this transition, I invite you to get in touch. We live and breathe innovation ecosystems across the US and know that this process takes a village.
Suggested reading:
Science, the Endless Frontier: The foundational text from the architect of our current scientific research paradigm.
Unbundle the University - a provocative and maximalist take on unbundle the modern university, and why that may be a good thing.
Navigating University Startup Ecosystems - Another old essay of mine, about (legacy?) university research commercialization ecosystems. (shameless plug)
The Deeper Question Raised by the NIH Grant Overhaul - Why I don’t think any of the current pronouncements will stick. (But why that also may not matter.)
The Drug Industry is Having It’s Own Deepseek Moment - US policy changes aren’t happening in a vacuum.