Global venture capital flows and US health care innovation

Introduction

Policy debates on trade and health care innovation often rest on the idea that the United States finances the world's R&D, with high domestic drug spending underwriting discoveries that benefit patients globally. This view emphasizes US-funded research and the reinvestment of manufacturer revenues at home.¹ However, it overlooks another crucial reality: the global capital markets that shape innovation well before products reach the market. For early-stage, high-risk startups, venture capital (VC)—not product revenues—is the critical lifeline, determining both the pace and direction of research.^2,3 These investments increasingly flow across borders, connecting international investors with US startups and linking US investors to companies abroad. Shifts in trade policy, including tariffs and restrictions on foreign investment, risk disrupting these channels of financing.⁴ Understanding the scale and direction of these cross-border flows is vital for assessing the role of the US in the earliest stage of the innovation process. In this study, we examine global venture capital investment into and out of the US, comparing patterns across countries and industries to shed light on how international capital markets sustain medical innovation.

Methods

We identified health care startups without established revenue streams using proprietary VC deal history data from PitchBook®.⁵ For each transaction, we recorded the startup's primary industry, headquarters location, deal size (inflation-adjusted to 2024 US dollars), investment date, and investor headquarters location.

Our analysis covers all VC transactions involving health care companies between January 1, 2020 and December 31, 2024, capturing recent dynamics in the global market. Companies were categorized into biopharmaceuticals, health care devices and supplies, health care services, and health care technology systems, based on their primary industry. Capital flows were calculated bilaterally for each investor–startup country pair. The three largest destination countries by total capital invested were analyzed individually, while others were grouped into Europe, Asia-Pacific, or the rest of the world.

To illustrate cross-border investment patterns, we constructed a Sankey diagram in which nodes represent countries and connecting bands depict the magnitude of flows, with band width proportional to relative size. All analyses were conducted using Stata, version 18 (StataCorp).

Results

This cross-sectional analysis included 38 145 VC transactions between 2020 and 2024, involving 22 532 health care startups across 107 countries and 23 137 investors across 122 countries. Deals missing location data for either startup or investor were excluded, representing 1.2% of total capital.

The United States was the largest single destination for global health care VC. As shown in Figure 1, foreign inflows to US-based startups totaled $256 billion, representing 60% of the $424 billion in global health care VC investment. In comparison, US investors directed $237 billion abroad (56% of global total), resulting in a net inflow of $19 billion. By contrast, China and the United Kingdom recorded modest net outflows of $2 billion each ($79 billion vs $77 billion; $19 billion vs $21 billion, respectively), while other regions also experienced net outflows.

Figure 1.

Global venture capital flow across countries in the health care sector. Figure plots the flow of venture capital from origin countries (left) to the destination countries (right) between 2020 and 2024. The numbers in the parentheses report the total amount in billions. The top three destination countries (United States, China, United Kingdom) are shown individually, all other countries are grouped into Europe, Asia-Pacific, and Rest of the World.

Approximately 18% of the investment in US-based startups originated internationally, led by Europe (excluding the United Kingdom, 6%), China, the United Kingdom, Asia-Pacific (excluding China), and the rest of the world, each accounting for 3%. By industry, the US biopharmaceutical industry attracted the largest share of foreign venture capital, with a net inflow of $11 billion, followed by $3 billion in health care technology systems, $2 billion in medical devices and supplies, and $2 billion in health care services (analysis not shown).

Discussion

The United States is not only the largest health care market but also the leading hub for global venture investment in health care innovation. By drawing more foreign VC than it invests abroad, the United States has effectively positioned itself as a net importer of global health care risk financing.

From a policy perspective, this reliance has two major implications. First, trade and investment restrictions—such as tariffs, enhanced security reviews, or limits on foreign ownership—could dampen inflows that support early-stage innovation. Policymakers concerned about protecting domestic industries must weigh these security considerations against potential reductions in startup financing. Second, cross-border VC strengthens global interdependence in health care innovation: US discoveries increasingly rely on capital from abroad, while US investors remain deeply embedded in foreign ecosystems. Disruptions to this balance could slow not only US innovation but also global medical progress.

As debates over trade policy and its implications for health care innovation continue, the role of international VC should be explicitly acknowledged. Domestic R&D capacity depends not only on United States spending but also on global capital markets. Recognizing and safeguarding these flows may be critical to sustaining innovation.

Funding

This work was supported in part by Arnold Ventures. The funder had no role in the collection of the data, analysis, interpretation, or reporting of the data or in the decision to submit the manuscript for publication.

Conflicts of interest

Please see ICMJE form(s) for author conflicts of interest. These have been provided as supplementary materials.

The authors declare that they have no competing interests. Please see ICMJE form(s) for author conflicts of interest.