'Missing middle' is top of mind for Novo Holdings

For Novo Holdings, one of the world's largest life-sciences investors, the most pressing problem in venture is not a shortage of early-stage capital or a lack of breakthrough science. It is the missing middle: the funding gap that opens up between a promising young company's first institutional rounds and the large growth cheques reserved for proven winners. That gap, the firm argues, is where too many good companies stall.

The missing middle is a structural feature of the current market, not a temporary dip. Seed and early-stage capital remains relatively available, and the very largest growth and crossover funds still compete fiercely for the handful of companies that have clearly broken out. In between sits a no-man's-land: companies that have proven their early thesis but are not yet de-risked enough to attract the megafunds, and that need substantial capital to reach the next milestone. For science-heavy businesses with long development timelines, that middle stretch is exactly where the money is hardest to find.

Why the middle matters most in life sciences

The problem is sharpest in sectors like biotech and life sciences, where Novo Holdings concentrates. A drug or a platform technology can take years and large sums to move from early validation to the point where its value is obvious. Companies in that phase are too mature for seed funds and too unproven for the largest growth investors, and the slow exit environment has made later-stage backers more cautious about writing the cheques that would carry them through. The result is that genuinely promising science can lose momentum not because it failed, but because it could not raise the round that sat between proof and scale.

That is why Novo Holdings treats the missing middle as a priority rather than a footnote. As an evergreen investor with a long horizon and deep pockets, the firm is positioned to do what many others cannot: provide patient capital precisely at the stage where the market thins out. For an investor able to hold for years and write meaningful cheques, the middle is not a problem to avoid but an inefficiency to exploit, because the companies stuck there are often strong, simply underserved.

An opening for patient capital

The firms best placed to fill the gap are those whose structure frees them from the usual fund timelines. Evergreen vehicles, large family offices and strategic investors with permanent capital can underwrite the middle stage without the pressure to return money on a fixed schedule. That structural patience is a genuine edge when the rest of the market is rationing later-stage commitments and waiting for exits to reopen.

For the companies caught in the gap, the arrival of investors willing to fund the middle can be the difference between reaching a value-inflection point and quietly running out of road. A single committed backer at this stage can carry a company to the milestone that finally makes it attractive to the larger funds, turning a stalled story into a fundable one.

What it means for capital

Novo Holdings' framing is a useful signal for the wider market. First, the funding gap is structural and concentrated in capital-intensive, long-horizon sectors, so it will not close on its own as sentiment improves. Second, the investors who can address it are those with patient, flexible capital rather than those bound to standard fund cycles. Third, the gap represents an opportunity as much as a problem, because the companies in it are often de-risked relative to seed bets yet priced more reasonably than the breakout names everyone is chasing.

For allocators, the lesson is to look at where a manager sits in the capital stack. Backers that can serve the missing middle are accessing a part of the market that is underserved precisely because most of the industry is structurally unable to reach it. For founders building in life sciences and other capital-intensive fields, the message is that patient, mid-stage capital exists, but it concentrates with a small set of investors willing to fund the unglamorous stretch between promise and scale. Novo Holdings is signalling that it intends to be one of them.