Industry insight article – fundraising 101: Milestones and money: how life-sciences rounds get staged

By Jason Ng, MBA, ClavystBio

At ClavystBio, we spend our days backing founders who are turning science into new treatments and technologies. This is the kind of work that, when it succeeds, changes and even saves lives. Raising money for it is hard. One thing that catches out many first-time life-science founders is not how much they raise, but how the money actually arrives. In a lot of life-science rounds, the cash doesn’t come as one lump sum. It comes in stages.

In this article, I will walk through, in plain terms, how staged (or "tranched") financing works, why investors in our field so often ask for it, and the handful of things worth sorting out before you sign.

1. What does it mean to “stage” a financing?

Normally you would picture a round like this: you agree to terms, the investor wires the full amount, and you are off. Staging changes the second part. The investor still commits to the whole round on the agreed terms, but will pay in instalments or “tranches”. The first tranche lands at the initial closing. Later tranches are released only when your company hits the agreed milestones.

It is worth being clear about what staging is not. It is not the same as simply raising another round later. A new round means fresh terms, a fresh valuation and a fresh negotiation. Staging is one single round that is agreed on one set of terms but paid out in parts as you make progress.

If you are raising funds in Singapore, you may be working from the Venture Capital Investment Model Agreements (VIMA 2.0) published by the Singapore Academy of Law and the Singapore Venture and Private Capital Association. The standard VIMA documents assume you receive the whole investment at a single completion. They do flag, in a drafting note, that the documents can be adapted for multiple completions tied to milestones, but they stop there, leaving the detailed mechanics to you and your investor.

Rounds often also leave a short window after the first close, say 60 to 90 days, for more investors to join on the same terms (a “rolling” or subsequent close). That window runs from the first close, not from each later tranche. An investor who joins “catches up” by paying into the first tranche the others have already funded, and commits to its share of the later, milestone-based tranches too, so the syndicate fills out across the round.

Figure 1: A staged round is paid in instalments as milestones are met. A short rolling-close window lets more investors join on the same terms and fund their share of every tranche.[1]

2. Why do life-science investors ask for this?

Life-science companies are simply different from, say, software start-ups. Value does not climb steadily with revenue. It jumps at specific moments (e.g., a drug candidate works in early testing, or a regulator gives a green light), and between those moments there is real, sometimes binary, risk.

Staging lets an investor put money in as that risk falls away, keeping the option to continue, pause, or commit more as results come in. It shares risk and keeps everyone focused on real progress.

This is the mainstream practice, not an oddity, especially among earlier-stage companies. Around a quarter to a third of life-sciences venture rounds are structured in tranches. According to law firm Cooley whose surveys track this figure specifically for life sciences, 28.1% of reported deals in the first quarter of 2026 are tranched.[2] The structure is also becoming more standardised: in October 2025 the US National Venture Capital Association added ready-made tranched-financing mechanics to its widely used model documents.[3] Singapore’s ecosystem is younger than long-established hubs like Kendall Square,[4] and most life-science companies here are still at earlier stages, which makes staged financing more likely to be what founders see locally.

How often you see tranching in practice varies. It tends to depend on things like the experience and track record of the management team (less need for tranching if it is a seasoned management team), the area of science and how complex the target indication is, differences in regional market norms, and the scale of capital the company needs.

There is an upside for founders, too. A well-designed staging plan, with clear milestones and a sensible split, makes a round easier for several investors to back together. This matters in life sciences where capital needs are large and few investors fund the whole journey alone. A clear structure is more likely to attract a well-formed syndicate, one aligned on what each tranche is for, and is better placed to see the company through to its next inflection point.

3. How is the money usually split?

There is no single “right” way to split a round into tranches, and the split matters as much as the total. To make it concrete, picture an illustrative S$9 million round across three tranches. The same headline number can be shaped very differently:

Figures are illustrative. The point is not the total, but how much lands up front versus how much depends on future milestones.

4. What do milestones usually look like?

Milestones tend to fall into three broad families. Scientific or technical ones ask “does the product work?”. Examples include a lead candidate, preclinical or clinical data, a regulatory clearance, or a device validation study. Commercial or financial ones ask “is there a business?”. Examples include a revenue or billings target, a key customer contract, a market-entry plan, or a reimbursement pathway. Leadership or operational ones ask “is the team ready to scale?”. Examples include appointing a key executive such as a CEO, building a sales or operations function, or setting up in a new country.

Which family dominates depends on how close you are to selling a product, and that is where therapeutics and medtech differ. A therapeutics company is often years from revenue, so its milestones cluster around the science and regulatory path: candidate selection, preclinical data, an IND filing, a clinical readout, etc. A medtech company reaches the market sooner, so alongside regulatory clearance you will more often see commercial and financial milestones, and sometimes leadership ones, like a CEO search or building a commercial team. The closer you are to customers, the more milestones shift from “does the science work?” to “is the business working?”.

Whatever the family, one rule holds: a milestone must be clear and easy to check, an event that plainly happened or plainly did not. Vague milestones are the single biggest thing to watch out for, and the most common cause of disputes later. The difference is illustrated in the table below:

Scientific milestones are central for therapeutics; commercial, financial and leadership milestones show up more in medtech, but many rounds blend all three.

5. The bits that really matter (and that the model documents leave to you)

This is where founders most often get caught out. Three questions deserve your full attention:

Who decides a milestone has been met: you, the board, or the investors by majority vote? This is the most important question, and the most often glossed over. Where you can, tie it to objective evidence, such as a regulator’s acknowledgement or a dated lab report, rather than someone’s judgement call. A milestone can also be waived and the next tranche released even if it wasn’t strictly met, but that call rests with the investors, not you. So the pressure to deliver stays real; don’t plan on a waiver.

How and when is the next tranche released? Spell out the timing and the steps, so both sides know exactly what triggers the next payment once a milestone is met. The final tranche also need not be drawn on the original terms: the existing investors sometimes “snowball” it into a fresh round at new terms, which can help catalyse your next raise, fitting the whole point of staging: to carry the company to its next value-inflection point, ready for the next equity round.

What happens if a milestone is missed, or an investor does not pay? Options range from a window to renegotiate, to partial funding, to a penalty for an investor who walks away. A common one is “pay-to-play”: an investor who fails to fund the next tranche loses some rights. For example, their preference shares will be converted into ordinary shares. Pay-to-play featured in about 7% of all venture deals in the first quarter of 2026 (it has run between roughly 6% and 10% over the past year).[5] These provisions cut both ways. They protect you from an investor who disappears, but you also need to understand how they apply across everyone in the round. The VIMA series has a dedicated Fundraising 101 article on “pay-to-play”.

6. So what should you, as a founder, do?

A few practical habits can go a long way:

• Negotiate the milestones and the “who decides” process as carefully as you negotiate valuation. They matter just as much to where you end up. Ask for room to adjust them if the science genuinely changes. Research rarely runs to plan, and you don’t want to be locked into targets that no longer make sense.
• Model the whole round, not just the first tranche. Each closing issues new shares, so size the option (ESOP) pool with every tranche in mind rather than for the first one alone.[6]
• Weigh the trade-off honestly, and use the tools you have (such as VIMA). Staging can help you assemble the larger syndicate capital-intensive science needs, in exchange for performance pressure and later funding that depends on progress. VIMA 2.0 documents can be tailored to the multiple-completion structure described here, and other plain-English VIMA 2.0 explainers are also worth a read, including an earlier Fundraising 101 article on the valuation of start-ups. Get advice before you sign.

Conclusion

The science only reaches patients because founders push it forward. How your funding is structured should not be a mystery that trips you up. Staged financing is common in earlier-stage life sciences and can work well for everyone, provided you understand the milestones, who judges them, and what happens if things don’t go to plan. Ask questions early, lean on VIMA and good advice, and keep your focus where it belongs: building something that helps people.