Medtech fundraising advice from a CFO

In 2024, medtech investors did 828 deals in 2024 totalling $13 billion—a 10% dollar value increase, according to PitchBook. On the surface, this looks healthy. 

But dig deeper and you’ll see deal volume is down; that total is due to a few mega-deals. At the same time, general and administrative expenses are rising and 12% of medtech startups faced down rounds last year, the highest year on record, according to PitchBook. 

Given how competitive the fundraising market is, we're ensuring our medtech clients have a strong hold on their financial foundation and cash management ahead of a fundraise. In this article, we share our best advice to founders raising in medtech based on our experience helping 300+ startups raise a collective $2.1 billion. 

Read how we helped Medcorder’s CEO save 7 hours per month →

What you need to know when raising a medtech round

1. Figure out what type of funding you even need

Grants are becoming scarce and founders are rethinking whether they can afford to rely on them as a primary source. The National Institute of Health (NIH) cut $4 billion and the resulting competition for the remaining SEED and SBIR grants is fierce.

You probably have more private sector funding alternatives than you think, some dilutive, some not. Venture capital is of course the most common. But before you decide which, ask yourself: 

• What are your top priorities in the next 12 months? 
• What do you need to reach those priorities in terms of hiring and capital?
• What is a realistic timeline to commercialization?

Venture capital can be a good option where investors are, say, former physicians positioned to help make connections and accustomed to working on the FDA’s timelines. But remember, with investors, your story will have to change to speak more to near-term profitability and mechanisms of scale, such as AI. Five out of the top 10 medtech deals in the final quarter of last year went to AI companies in diagnostics and wearables.

This may sound basic, but figure out the right amount to raise, too. We’ve seen too many founders have to re-raise shortly thereafter with limited progress to show because they didn’t raise enough. For any client of ours that is cash flow negative due to heavy R&D expenses or is pre-revenue, we look at both their operating cash flow as well as their ending cash balance each month to get a better sense of a long-term burn estimate. 

We included a sample chart below of what we tend to create for a client. It shows projected operating cash flow which can help guide decisions, like how much to raise.

2. Tell a compelling value story

Medtech investors are looking for disciplined market positioning. There is so much specialization in medtech these days that saying, “We’ll just capture 1% of the market” is a major red flag. It suggests inexperience.

We find the medtech story hinges on having a clearly defined niche where you can demonstrate tangible expertise and a defensible difference—whether clinical or technological. For example, “Clinical AI that analyzes hospital charts.”

Yes, we hear you, you may actually be able to serve that broader market. But at this stage, narrowness helps you sell. Just 5% of healthcare capital goes to medtech. You must be memorable. Specificity helps with that.

Take, for example, the startup NeuroAnimation. It helps stroke victims regenerate their motor cortex and memory by manipulating complex animals through a proprietary VR app—such as a big, purple octopus.

Imagine being an investor and hearing, “Medtech, medtech, medtech,” and then THAT description.

We’ve also found that tying your story to the finances tends to make you stand out. For most of our medtech clients with chunky capital expenditures or inventory expenses, we like to put together a forecast to show growth over the next 2-3 years. We want their investors to see the long-term growth potential from these near-term expenses. A simple chart like the one below can build a lot of confidence.

3. Do your due diligence on the investor

Not all money is created equal and the right investors really can unlock proverbial doors. Knowing what they know both increases your chances of making a pitch and helps you narrow your list to those most likely to say, “Yes.” So unlike poor Jeff Bezos, you don’t have to give 60 pitches. 

Questions to ask when evaluating an investor:

• What else have they funded? 
• Have they been active recently?
• Do they have experience in your particular field? 
• Do they have uniquely useful hospital or other connections? 

You should be especially interested to hear from other founders on how those investors have behaved  during down rounds. Were they willing to bridge finance as the timeline stretched on? 

Use tools like SEED and NIH Matchmaker to find institutions aligned with your product. When you reach out, aim to start a conversation. Put them on a quarterly investor mailing list where you provide milestones and updates. Ask permission first, of course. Not all will read, but many will passively follow and this will make future funding rounds significantly easier.

4. Let your investors help set the valuation

Valuation is not a zero-sum negotiation to obtain the highest number possible. Recall that 12% of medtech startups had down rounds last year because they aimed too high. Medtech unicorn BostonGene dropped from a $2.2 billion valuation to $1.5 billion and Element Biosciences, a similar percentage.

At the same time, you don’t want to give away too much up front. It can be helpful to have an outside trusted CFO to advise on the right balance. You must rigorously prepare to justify your valuation model and base it on realistic market scenarios. We recommend providing extra analyses to articulate the valuation ranges based on various milestones, such as pre- and post-FDA approval. 

5. Pitch your mid-tier contacts first

Warm up on the contacts of medium importance first. Reason being, you want to save your best contacts for when you have your pitch refined. You don’t want to start with your least interesting contacts first because they probably do not resemble your top-tier contacts and thus their feedback will lead you astray.

Those mid-tier investors will help you refine your valuations and terms. Use those conversations to test assumptions and adjust your financial projections. 

What do investors want to hear? That you have a good idea and the ability to execute. To some, it’s all about the founder and their relentless ability to push through obstacles no matter how big.

6. Get help with your pitch materials and valuation

Don’t let investors get hung up on correcting you on avoidable errors in your deck. That first impression is an opportunity to show your financial credibility and tenacity; if they’re spotting typos in your slides or logical errors in your projections, it puts you on a diminished footing.

Consider hiring an outside financial expert to:

• Produce detailed cash flow forecasting
• Model out various burn rate scenarios
• Define major risks and assumptions 
• Run scenario-based forecasts that pre-address objections
• Position you as a responsible steward of their capital
• Design the deck

That last point—good design—is essential. A skilled designer will use form, color, and hierarchy to gently guide the reader’s eye from point to point like the lighting on a stage. It will give viewers the subconscious feeling that everything makes perfect sense. Whereas a poorly designed deck, no matter how good the story, will do the opposite.

7. Don’t hide the truth

Raising in medtech is hard and VCs know it. They are living it—most of their calls every day are helping founders deal with various crises. If you are not upfront about the critical issues, your investors will find them. It’s their job to do so. And that puts you in an awkward position, on your heels, rather than explaining that you already know and have already planned to address those—or at the least, are aware of the risk. 

Whereas if you are upfront about everything and demonstrate you have a plan and are credible, you can invite them into helping resolve those issues together.

Need help with the financials?

Talk to our CFO Services team for a healthtech-specific strategic advisor that can help build a compelling pitch deck and models, as well as guide you through the medtech fundraising process. We are currently involved in 25 active fundraises and have closed nine rounds within the last two months.