Even after proving a device works, getting FDA clearance, and securing a reimbursement code, investors' final question is about market traction. They want to see revenue before funding the sales team required to generate it, creating a final catch-22.
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For early-stage MedTech startups, key milestones for investors are not just regulatory successes. They are fundamental proofs of concept—showing the device works in a model and demonstrating how it would function in a clinical setting. This builds an investor's vision of the product's future.
Zyda raised funds primarily from urologists and urogynecologists. These clinician-investors already understood the market need, provided crucial industry connections (like finding a clinical trial investigator), and became influential early prescribers, dramatically accelerating market entry and validation.
Innovative medical devices get a temporary 'tracking' CPT code. To secure permanent reimbursement, companies must demonstrate widespread physician adoption, but achieving that adoption is nearly impossible without the insurance coverage they are trying to obtain.
AdaptDx plans to first target specific, high-need clinical conditions like heart failure to secure FDA approval and reimbursement. This clinical validation and revenue stream will then fund the miniaturization and expansion into the broader consumer health and wellness market, bridging the gap between medical care and daily life.
Investors like Stacy Brown-Philpot and Aileen Lee now expect founders to demonstrate a clear, rapid path to massive scale early on. The old assumption that the next funding round would solve for scalability is gone; proof is required upfront.
The bar for pre-seed funding has risen dramatically. With an abundance of startups already generating revenue (e.g., $1M ARR), VCs are choosing these de-risked opportunities over pure idea-stage companies. This "flight to quality" has bifurcated the market, making it extremely difficult for pre-revenue founders to raise.
In Biotech, risk is removed pre-FDA approval via clinical trials, making a Chief Development Officer (clinical, regulatory, manufacturing) the most critical hire. In many MedTech sectors, risk is removed post-FDA approval via market adoption, making a Chief Commercial Officer paramount.
The most critical role for a physician co-founder extends beyond the initial idea. They must act as the primary evangelist and validator, sharing the engineering progress with their peers to ensure the device's design and function align with the broader clinical community's needs and vision.
For deep tech startups lacking traditional revenue metrics, the fundraising pitch should frame the market as inevitable if the technology works. This shifts the investor's bet from market validation to the team's ability to execute on a clear technical challenge, a more comfortable risk for specialized investors.
Founders often believe fundraising failure stems from a lack of connections. However, for early-stage consumer brands with low sales figures, the real barrier is insufficient traction data. VCs need proof of scalability, like a major distribution deal, before they will invest, regardless of the introduction.
