Fundraising Best Practices for Early-Stage Medtech Companies
Learn how to attract and engage investors, leverage non-traditional funding sources, and optimize your funding rounds for maximum impact.
Refine your pitching skills and engage VCs over time: Don't make your first pitches the make-or-break ones; allow yourself some room to see what resonates with potential investors. And don’t expect immediate funding, rather cultivate relationships with VCs over time and include them in your journey through regular updates.
Build and leverage your network: Leverage social media and local organizations to connect with early-stage and institutional investors. Common interests might be useful for reaching out, but make sure you have a solid understanding of where and how they invest, too.
Make your pitch deck stand out: Good design can be just as crucial as the information it includes. Opt for professional design services or try out some free AI tools to give your pitch deck the extra polish it may need to get you to a ‘yes’.
Understand your investors’ profile and capacity: Research potential investors' interests, their previous and current portfolio companies, and their financial capacities in order to tailor your pitches. And, remember: your valuation will increase substantially if there’s a clear path to commercialization, and that’s usually only possible through reimbursement.
Apply for grants early on: Submit SBIR grant applications early and often, even if they are not perfect. The timelines are often long and the feedback you receive will serve as a valuable springboard. Consider multiple avenues and use tools like NIH’s SEED program and NIH Matchmaker to align your grant applications with relevant institutions.
Focus on the Long Game
Daniel Powell discovered his true calling in the neurostimulation space. After multiple stints at large medtech companies, he co-founded Spark Biomedical, where his team has developed the Sparrow Ascent, an FDA-cleared, drug-free, non-addictive, non-invasive, wearable tech to fight the effects of opioid withdrawal. Now, they’ve set their sights on the next challenge: adapting this technology to help newborns suffering from Neonatal Opioid Withdrawal Syndrome.
Similar to most entrepreneurs, raising capital came with a learning curve for Daniel, particularly when it came to understanding the nuances between individual angel investors and venture capital firms. Initially, he tried setting terms with VCs himself, like proposing valuations for his company, only to quickly understand that certain decisions weren't his to make.
The other thing Daniel discovered about VCs is asking for a simple ‘yes’ or ‘no’ isn’t always the best move. Rather than putting pressure on VCs for an immediate decision, Daniel realized the importance of fostering relationships over time. “What I should have done,” he shares, “is introduced myself to every VC possible over the course of a year, put them on a mailing list, given them regular updates every quarter, become familiar like an everyday brand that they're watching.” By doing so, he would have cultivated a competitive atmosphere when the company was ready to open its Series A round, strengthening his hand with better terms. He also shares, "You don’t want a quick answer because you might end up dealing with a junior associate who isn’t fully equipped to evaluate your business. Instead, let your presence simmer. Make sure everyone at the firm is aware of you."
Raising capital is an educational process for everyone, even for experienced founders and CEOs. If you’re uncomfortable with reaching out and building relationships, remember that investors want to get to know you. That’s why, in most cases, convincing prospective capital partners will take time. Daniel’s advice is to allow yourself the freedom to experiment and learn what resonates with potential investors, test different messaging and refine your story, and build confidence over time. Importantly, he shares, “Don't let one of your first pitches be the critical one you need to land. You need to give yourself permission to explore what works and adjust accordingly.”
Build Trust with Investors
Anish Kaushal is an ex-physician turned healthcare investor at Amplitude Ventures, one of Canada's leading healthcare VC firms.
He believes that in venture capital, it’s really important that you build trust. When time is short for thorough assessments, VCs often rely on similarities to make quick judgments—a psychological concept known as the principle of similarity. You can leverage this concept by finding common ground with potential investors, be it a shared interest in the NFL, a favorite color, or even the same car model. "Find one thing that makes us the same—it doesn’t even matter what it is," Anish advises.
While the principle of similarity can initially grab attention—like in a cold email—it isn't enough to seal a deal. Investors need to see that you have great ideas and the ability to execute. This requires a deep understanding of your product development cycles, including manufacturing and regulatory approvals, and the challenges in your industry. “As an investor, making money is all about commercialization, reimbursement, and access,” explains Anish. To get VCs interested, be prepared to articulate strategies you planned for these phases, such as how your product will enter the market, its cost benefits to healthcare providers, and the reimbursement pathways.
Another working formula is building relationships beyond fundraising. "You don't want to go to people only when you need something, but you do want to go to them for updates as you go, establishing relationships, building them over time," Anish explains. Keep a consistent line of communication open, send periodic updates and progress reports.
“Later stage investors want to see progress, we want to see companies that have actually advanced and executed on their promises,” Anish shares, “At the end of the day, it always comes down to data and proving it.” Do not oversell, nor shy away from challenges you’re experiencing. Provide tangible evidence of progress and be honest about your journey, including any setbacks.
And lastly, don’t forget to tell your story in an appealing way. A visually strong pitch deck, for example, impacts how potential investors perceive your startup. "It shouldn't be very long. I would say maybe 10 to 15 slides max... What's the tagline? What's the problem you're solving? How is your solution better?" Anish suggests. And invest in the look and feel of your presentation. A clean and professional appearance enhances credibility and makes it easier for investors to engage with the story. For this, you can find a freelancer on a budget, or even use free AI software.
Fundraising is a Numbers Game
Dave Rosa is the CEO of NeuroOne, a company developing a thin-film electrode technology for neurological conditions such as epilepsy and Parkinson's disease. Before NeuroOne, Dave’s career spanned key roles at multinational strategics like C.R. Bard, Boston Scientific, and St. Jude Medical. Notably, he excels in fundraising, having successfully raised over $200 million in the capital markets.
So, Dave knows from experience that it's always difficult to find interested investors, especially when you're just trying to get things started. He says there is no bulletproof recipe for finding capital. “The formula is to get out in front of as many people as you can find.”
Dave suggests starting locally. "Look for societies or organizations in your area that support startups and small businesses," he recommends. For instance, Dave's engagement with Medical Alley, a Minnesota-based organization, has been instrumental in the development of his company. These organizations often have connections to early-stage investors and can offer resources like job portals, which are valuable for building teams without the high costs of recruiters.
Or you can do the opposite: target your competitors’ investors. Dave suggests researching them as they may be open to diversifying their investments in similar technologies or markets, or in Dave’s words, to making "a second bet" in the market.
However, expanding your search for financial partners is crucial. Dave advises conducting thorough research on companies within your industry, including potential competitors. This way, you can identify their investors and target potentially like-minded firms.
Moreover, leveraging your existing network is vital; if it's not robust enough, you can build and expand it. For Dave, social media is a necessity. He has successfully used platforms like LinkedIn to reach out to investment bankers and analysts, creating valuable connections. "I've established several relationships through social media that have been incredibly beneficial throughout my career," he shares. These connections often manage investments for high-net-worth individuals willing to consider smaller, early-stage investments. He adds, "You need to get your face out there. You need to get your story out there. People need to see you." Don’t underestimate the power of telling your story. Being visible and consistently sharing updates about your startup increases the chances of attracting interest from investors, potential partners, or collaborators.
And lastly, Dave warns: "Investors are usually very complimentary about what you're doing. You have to be very careful no matter what any of these investors tell you. Until that check is cleared in the bank, you don't have the money." Many investors might express enthusiasm without a commitment. So it’s important to pursue multiple opportunities at the same time. Keeping this in mind saves you from relying on funds that will never come through.
Figure Out Who Has the Money
While getting in front of as many people as possible is important, it’s equally crucial to understand precisely who you're engaging with.
Dan Rose, a veteran with 25 years in the medical device space, has contributed to both multinational corporations and startups. As the CEO of LimFlow, Dan orchestrated its exit to Inari Medical.
Dan starts by emphasizing that fundraising is a number game. "I talked to 60, 65 funds and got two term sheets. I ground through 60 diligence processes. It's a huge grind." he shares. That’s why you need to be precise. For example, it’s crucial to know potential investors' financial capacity and interests. He explains, "One of the things that's really important is just knowing who you're talking to. What investments do they make? What are they looking for in a venture? Have they had successes similar to what you're proposing? Do they have available funds? How many investments have they made from their current fund, and how far into that fund are they?" Understanding these elements, their history, investment focus, and whether your company aligns with an investor’s past successes, Dan notes, can save immense time and energy. He also advises verifying if investors have capital available before engaging. In his experience, it’s common for investors to be scouting without immediate plans to invest. You can learn this simply by asking direct questions about the status of their funds and their timeline for investment.
According to Dan, another critical aspect of fundraising is understanding reimbursement processes, which he describes as "a powerhouse of value creation if managed correctly." While you don't need exhaustive detail in the early funding stages, the depth of your knowledge should increase with each round of investment. "By the time we reached Series E, about 35-40% of our discussions with VCs focused on reimbursement," he shares.
Overall, Dan’s advice is to be ready for a good grind and thoroughly understand your potential investors' profiles and financial capacities. Examine their previous successes, interest in similar ventures, and if they are readily available for funding you in the near future. While doing so, make sure you thoroughly understand who is going to pay for your device.
Don’t Forget About Grants
Ahmed Zobi is the founder and CEO of Syntr Health Technologies, where they developed SyntrFuge, an automated microfat processing system, and the youngest recipient of a Phase 1 SBIR grant in 2017. As a board member at various organizations, including the Wound Healing Society and the UCI Center for Innovation and Entrepreneurship, Ahmed advocates for taking advantage of non-dilutive funding sources, like SBIR grants, as an early-stage startup.
"You have to really plan out: who do you want to target? Before that, are you even VC-backable? A lot of this goes under the radar," Ahmed says. Not every startup is suited for venture capital funding. For example, VCs often seek large market opportunities where their investment can yield high returns so you need to evaluate your market size and growth potential before even approaching them.
If you choose to go for a grant, Ahmed’s first advice is applying early and often. “A lot of people think that you should put the most perfect, best foot forward on your SBIR application.” he says, “But if you think it's good enough, put that application in.” Founders often don't realize there are three submission windows for the NIH. If you submit your application in January, for instance, it gets reviewed in March. The next review follows in June, with potential funding disbursed between July and September. The review process is long, but is a great way to get valuable feedback.
But this doesn’t mean submitting a sloppy application. Ahmed recommends utilizing resources like the NIH SEED program and NIH Matchmaker, which help you find relevant institutions aligned with the product you aim to build.
He also suggests a proactive approach when nearing funding approval: if one institution hesitates, reach out to others listed on the application. “The process of having another entity interested in your grant could potentially expedite the grant approval process or at least the transfer process,” he comments.
Finally, Ahmed advises against limiting your product to a single niche. “You might initially target the diabetes division with your product, but it could also have applications in bioengineering, dental, or other fields.” Being flexible can open up new avenues that you might not have anticipated before.
To follow Ahmed’s advice, apply for SBIR grants early, even if your application is not perfect. Make full use of available resources, such as NIH’s SEED program and NIH Matchmaker. Don’t hesitate to reach out to other institutions in your field that might be interested, and keep a flexible outlook on your niche—your offering might have potential applications across various domains.