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How to Diligence a Medical Device Startup

How to Diligence a Medical Device Startup

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    How to Diligence a Medical Device Startup

    min read How to Diligence a Medical Device Startup How to Diligence a Medical Device Startup A comprehensive investor guide to evaluating clinical value, regulatory risk, and commercialization potential Medical device startups operate within one of the most complex innovation categories, requiring mastery across engineering, clinical medicine, regulation, manufacturing, and reimbursement. For investors, diligence on these companies requires a structured, evidence-based approach that goes far beyond the pitch deck. This guide outlines how to properly diligence a medical device startup, integrating core industry frameworks, regulatory expectations, and the milestone roadmap unique to medtech innovation. Key content to highlight essential metrics, timelines, and development paths. 1. Clinical Problem & Unmet Need Every strong medical device startup begins with a validated, painful clinical problem. The most investable solutions are those that clearly improve outcomes, reduce complications, save clinician time, or reduce healthcare costs. Diligence Questions Is the problem clinically significant and supported by evidence Is the startup solving a proven, unmet need, or is it simply a “nice-to-have”? Does the device fit naturally into a clinician’s workflow? Evidence to Request Peer-reviewed publications Interviews with clinicians (surgeons, nurses, technicians) Hospital pilot interest or letters of support Workflow analysis Clinical validation is not optional; investors should look for early signs that the device will be accepted in practice. 2. Technology, Engineering Maturity & IP Investors must evaluate whether the technology is real, reliable, and defensible. Key Areas to Diligence Prototype functionality (bench testing, usability testing) Software validation (IEC 62304) Human factors engineering (IEC 62366) Reliability and failure mode testing Freedom-to-operate and patent filings Prototypes vs. Clinical Units Prototypes → used for engineering tests and early feedback Clinical unit → the version intended for formal clinical testing Investors should verify that the startup understands and is progressing toward an actual clinical unit, not just a lab prototype. 3. Regulatory Pathway, Risk Class, & Key Metric The regulatory pathway defines cost, timeline, risk, and capital needs. Misjudging it is one of the most common investor mistakes. Your One Key Metric: 510(k) Cycle Time For medical device startups, the key performance metric is not revenue, but rather: Cycle Time Through the 510(k) Application and Approval Process Why? A medical device cannot generate revenue until it receives FDA clearance. The 510(k) process exists to demonstrate that the device is at least as safe and effective as a predicate device already on the market. The typical cycle time ranges from: 50–300 days, depending on device complexity. Investors should ask the startup: What is the standard cycle time for comparable devices? How are you benchmarking against that? What regulatory consultant or QA/RA firm is guiding your path? Understanding this timeline is essential to evaluating execution risk and funding needs. 4. Clinical Evidence, Validation & Trials Investors must examine whether the startup is producing the right evidence at the right time. Core Stages of Clinical Validation Preclinical validation – Initial safety and bench/animal tests First-in-human tests – Early clinical study Clinical validation – Broader human clinical trial data Evidence to Request Cadaver/animal study results Human factors reports Early feasibility human data Biocompatibility and electrical safety testing Strong startups demonstrate a clear, statistically powered plan for pivotal clinical trials, including sites, budget, endpoints, and timeline. 5. Manufacturing, Quality Systems & Supply Chain A medtech startup must eventually scale hardware manufacturing, a central diligence area many investors overlook. Diligence Checklist Design for manufacturability (DFM) Supplier qualification Sterilization pathway and validation Packaging and shelf-life testing ISO 13485-aligned quality management system Without proper QMS and design controls, FDA clearance and manufacturing scale become extremely risky. 6. Reimbursement Strategy & Commercial Model Even with FDA approval, a device can fail commercially without reimbursement. Key Reimbursement Questions Is there an existing CPT, HCPCS, or DRG code? Will a new code be required? What is the economic value to hospitals and providers? Are early health economic studies underway? Strong startups can demonstrate real cost savings or efficiency improvements that justify purchasing. 7. Team, Advisors, & Capital Strategy Execution in medtech requires multidisciplinary excellence. What to Look For Founders with clinical or engineering depth Regulatory and quality expertise Key opinion leaders (KOLs) involved early Experience with device commercialization Capital Planning Medical device development often requires three to five years to reach FDA clearance and initial sales. Investors should verify: Milestone-based fundraising strategy Clear runway aligned to regulatory events. Transparent burn projection 8. The Medical Device Roadmap: A Critical Diligence Tool Medical Device Startup Roadmap Market requirements Product requirements Prototypes Clinical unit Preclinical validation First-in-human test Clinical validation CE Mark (Europe) First European orders 510(k) clearance (US) First US orders Break-even Growth and scale Why this matters for diligence Investors should map the startup’s current stage against this roadmap to evaluate: How far they’ve progressed Whether they are ahead or behind industry norms Whether capital needs align with upcoming milestones What risks remain before revenue is possible This roadmap provides a clear, standardized structure for evaluating readiness and execution risk. Common Red Flags During Diligence No predicate identified for 510(k) No regulatory consultant engaged Confusion between intended use and indications for use Only early prototypes, no pathway to a clinical unit Unrealistic regulatory timelines Limited or no clinical advisor involvement Weak or nonexistent reimbursement plan Underestimation of hospital sales cycles (12–24 months) Diligencing a medical device startup requires a holistic approach that integrates: Clinical need Technology maturity Regulatory strategy 510(k) cycle-time metrics Clinical validation Manufacturing readiness Reimbursement viabilit Team capability Roadmap alignment Capital planning By using these frameworks, especially the medical device roadmap and the 510(k) cycle time regulatory metric, investors can distinguish between a promising concept and a fundable medtech venture capable of achieving clinical and commercial success. Read More from TEN Capital Education here. Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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    How to Diligence a CPG Firm

    7 min read How to Diligence a CPG Firm Diligencing a consumer packaged goods (CPG) business has nuances that set it apart from pure software or marketplace investing. Whether you’re an angel investor, family office, or VC, evaluating a CPG company means diving into supply chain dynamics, product economics, brand strength, and more. Here’s a structured, risk-aware playbook to help you evaluate a CPG firm like a pro. 1. Understand the Business Model & Unit Economics Gross Margins and Cost Structure Ask for a breakdown of the cost of goods sold (COGS): raw materials, packaging, labor, and overhead. Determine how variable costs scale: Does margin improve with volume, or are there fixed costs that drag at low volumes? Verify whether the company’s pricing is sustainable in different sales channels (direct-to-consumer vs. retail). Lifetime Value (LTV) vs. Customer Acquisition Cost (CAC) If the company sells direct to consumers, evaluate repeat purchase behavior: what is the retention rate over 6- and 12-month cohorts? For wholesale distribution, calculate the per-customer margin and reorder frequency. Model LTV in each channel and compare it against CAC across those same channels. Pricing Strategy and Sensitivity How elastic is demand for their products? If costs rise or discounts shrink, how will that impact volume? What is their value narrative — are they competing on premium quality, sustainability, or price? That will shape pricing power. 2. Supply Chain & Manufacturing Risks Sourcing and Raw Materials Who are their suppliers, and how diversified is the supply base? Are there single-source risks? (e.g., only one supplier for a key ingredient.) What is the lead time for critical raw materials, and how volatile are their costs? Manufacturing Capacity & Scalability Where is the product manufactured? In-house, co-packer, or a network of partners? If they use co-packers, do they have contracts in place, and is there slack capacity for scaling? Are there quality control systems? Ask for defect rates, returns, or consumer complaints. Inventory Management What is their inventory turnover? High inventory on hand could indicate demand forecasting risk. How do they manage shelf life, especially for perishable or seasonal products? What’s the working capital tied up in inventory — is it a cash drag? 3. Go-to-Market Strategy Distribution Channels Where do they sell: DTC (direct-to-consumer), brick & mortar retail, grocery chains, or specialty stores? For retail distribution: what’s their push strategy? Do they have favorable slotting terms? What are their trade spend and promotional allowances? For DTC: analyze their customer acquisition channels (paid ads, organic, SEO, email), conversion rates, and cost per acquisition. Brand Strength & Positioning What is the company’s brand story, and how does it resonate with its target customer? Do they have customer testimonials or social proof (e.g., reviews or word of mouth)? How do they differentiate (taste, packaging, sustainability, health angle)? Is this differentiation defensible, or is it easily copied Marketing Efficiency What percentage of revenue is being reinvested into marketing? How efficient are their sales funnels? (e.g., Email open/click rates, ad ROAS, conversion from trial/sample to repeat purchase) Are there community or viral growth vectors (referral programs, user-generated content, influencers) 4. Regulatory and Compliance Considerations Food Safety & Quality Does the CPG company comply with relevant regulatory bodies (FDA in the U.S., local food safety authorities elsewhere) Request documentation such as HACCP plans, food safety audits, or third-party quality certifications (e.g., SQF or BRC). How do they handle product recalls, and what is their track record? Packaging & Labeling Are labels compliant with nutrition, ingredient, and allergen disclosure regulations? Does the firm use any sustainable or recyclable packaging? If yes, how does that impact COGS and supply chain risk? Environmental, Social, Governance (ESG) If ESG is part of their value prop (eco-friendly, local sourcing), verify their claims with evidence, such as supplier audits, lifecycle assessments, carbon impact assessments, etc. Are there sustainability-related liabilities (e.g., packaging waste, carbon offset obligations)? 5. Product & Innovation Evaluation Product-Market Fit Conduct a sensory evaluation: sample the product (if possible) or collect feedback from early customers. Analyze repeat purchase rates, product lifecycle (i.e., are customers buying again, or is it a “try once” product?). How broad is their SKU (stock-keeping unit) mix? Do they plan to expand into new SKUs or adjacent categories? Innovation Pipeline Do they have a roadmap for new flavors, size formats, or product lines? How much of their R&D or product development budget is allocated to innovation vs. core SKUs? Have they tested new products in pilot markets? What were the results? 6. Team & Operational Execution Founders & Leadership What is the founding team’s background? Do they have experience in consumer goods, manufacturing, or retail? Have they scaled a physical product business before, or is this their first CPG venture? Meet the team responsible for operations, supply chain, and quality — are they capable of handling scale? Organizational Structure How is the organization structured across procurement, manufacturing, sales, and marketing? Do they have robust systems for demand forecasting, production planning, and logistics? What is their talent strategy for hiring and retaining people in key roles? Execution Metrics Ask for KPIs such as yield rates, batch failure rates, on-time delivery, inventory shrinkage, and return rates. How quickly have they scaled since launch — both in production volume and sales? What evidence is there of operational discipline (e.g., documented SOPs, contracts with co-packers, audits)? 7. Financial & Capital Structure Historical Financials Request P&L statements, balance sheets, and cash flow for at least the past 2–3 years. Compare their burn rate vs. growth: are they reinvesting heavily, or burning cash without traction? Understand working capital needs: how much cash is tied up in inventory or accounts receivable (especially for retail customers)? Projections & Scenario Modeling Review their financial model: are their assumptions realistic around growth, margins, and cash needs? Run downside and base-case scenarios: what happens if growth slows, COGS rise, or customer acquisition costs increase? How much capital will they need to scale, and what is their runway? Cap Table & Funding History Ask for a full

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    How to Diligence a Therapeutic Startup

    7 min reading How to Diligence a Therapeutic Startup “In therapeutic investing, the science must be right, but the strategy must be smarter.” Diligencing a therapeutic startup is unlike any other form of early-stage investing. It requires balancing scientific rigor with business realism. From molecule to market, investors must evaluate not just whether the science works, but also whether the pathway to revenue and, eventually, to exit is both capital-efficient and strategically defensible. In this article, we distill insights from Startup Funding Espresso episodes on diligence, biotech assessment, and founder fit to create a structured playbook for investors, founders, and diligence teams navigating therapeutic innovation. The Purpose of Diligence Therapeutic startups operate at the intersection of science, regulation, and capital markets. The goal of diligence is to validate alignment across three domains: Technical feasibility — Does the underlying science or technology platform hold up under scrutiny? Regulatory viability — Is there a clear pathway through the FDA, EMA, or equivalent agencies? Commercial potential — Is the market large enough, accessible enough, and ready enough to support sustained adoption? The episode “Setting up Due Diligence” underscores that diligence is not a checklist but a risk-reduction process. Each layer, technical, market, financial, and team, reveals not only what’s known but also where uncertainty resides. Key Pillars of Therapeutic Diligence Across episodes like “What Investors Look for in a Biotech Startup”, “Core Skills for Biotech Drug Development”, and “Best Practices for Therapeutic Startup Fundraising,” five diligence pillars consistently emerge: a. Scientific Validity Evaluate the mechanism of action and supporting pre-clinical data. Look for peer-reviewed validation or collaborations with credible institutions. Avoid overreliance on early, non-replicated studies. b. Regulatory Readiness Determine if the company understands its regulatory classification (drug, biologic, device, or combination product). The episode “Key Documents for Your Due Diligence Box” reminds investors to confirm the presence of pre-IND or pre-submission feedback and a mapped timeline to key milestones (IND, Phase I/II/III, etc.). c. Intellectual Property Strong IP defines competitive durability. Diligence teams should verify patent ownership, freedom-to-operate analyses, and upcoming expirations. The episode “Red Flags in Due Diligence” lists weak patent coverage and licensing ambiguity as common deal-killers. d. Market and Reimbursement The episode “How to Diligence the Market” highlights the importance of mapping addressable markets, reimbursement codes, and pricing elasticity early. In therapeutics, the buyer is often not the user; understanding payer dynamics is as critical as clinical efficacy. e. Team and Execution From “How to Diligence the Team” and “How Much Diligence to Run on a Founder,” we learn that successful therapeutic founders combine scientific depth with regulatory and commercial literacy. Look for balanced teams, scientific founders complemented by business operators and regulatory veterans. Evaluating the Science: From Discovery to Translation Scientific diligence is both art and analytics. The episodes “Technical Due Diligence” and “Performing Due Diligence Like a VC” emphasize reviewing: Preclinical data integrity (sample sizes, control design, statistical significance). Translational relevance (animal model to human trial correlation). Scalability of the therapeutic platform (manufacturing, formulation, delivery). Replicability and documentation quality. The diligence process should involve external subject-matter experts who can assess biological plausibility and experimental design. Investors often underestimate how manufacturing complexity and stability testing can become multi-million-dollar bottlenecks post-Series A. Regulatory Diligence: Navigating the FDA Maze Episodes like “Due Diligence: The Thorough Approach” and “Signing NDAs in Due Diligence” note that regulatory diligence is not just about confidentiality; it’s about clarity. Investors should verify: Has the company engaged with the FDA through pre-IND or Q-submission meetings? Does the clinical plan align with regulatory precedent? Are timelines and budgets realistic given the required studies? For devices and diagnostics, the 510(k), De Novo, and PMA pathways drastically change time-to-market and capital requirements. For drugs, investors should validate the clinical endpoints that regulators will recognize and the CMC (Chemistry, Manufacturing & Controls) readiness. Market Validation and Adoption Risk The episodes “How to Perform Marketing Due Diligence” and “The Role of Social Media in Due Diligence” remind us that even brilliant therapies fail if they can’t cross the commercial chasm. Critical diligence questions include: Who pays for this therapy—patients, insurers, or hospitals? What’s the comparative cost versus the current standard of care? How do KOLs (Key Opinion Leaders) view the therapeutic value? Savvy investors go beyond market sizing they look for evidence of early traction, like investigator interest, LOIs from clinics, or grants validating unmet needs. Financial and Risk Diligence In “Financials, Team and Domain Diligence” and “Going Through Due Diligence,” Hall T. Martin highlights the need to align scientific milestones with capital tranches. Key insights include: Link fundraising to de-risking events (e.g., IND submission, Phase I completion). Assess capital efficiency: how much per data point? Model downside scenarios: what happens if the lead candidate fails? Therapeutic startups should demonstrate clear cash-to-value conversion, showing how each dollar accelerates the next stage of validation. Qualitative and Quantitative Diligence From “The Quantitative and Qualitative Side of Due Diligence,” effective investors integrate metrics and intuition. Quantitatively, they evaluate market size, runway, and clinical timelines. Qualitatively, they examine founder motivation, transparency, and resilience. The best diligence blends data with discernment; a founder’s honesty in disclosing failed experiments often signals stronger integrity than perfect slides. Common Red Flags Episodes like “Red Flags in Due Diligence” and “What Isn’t Being Said in Due Diligence” reveal recurring warning signs: Overstated preclinical results or missing negative data. Lack of clarity on IP ownership or licensing. Unrealistic regulatory timelines. Founders are resistant to third-party validation. Weak capitalization structure or unrecorded convertible debt. Any one of these can indicate a lack of maturity in governance or readiness for institutional investment. Building the Due Diligence Box The “Key Documents for Your Due Diligence Box” episode lists must-have files: Executive summary and pitch deck Scientific white papers IP portfolio summary Regulatory correspondence Financial model and cap table Team bios and advisory board profiles For therapeutics, include clinical protocol summaries and manufacturing validation reports. Organizing these early signals professionalism and preparedness. Performing Diligence Like a VC In “Performing Due Diligence Like a VC,” the guidance

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    How to Diligence a Marketplace Startup

    10 min read How to Diligence a Marketplace Startup The Hidden Complexity of Marketplace Investing Marketplace startups look deceptively simple—connect buyers and sellers, take a transaction fee, and scale. Yet beneath the surface lies one of the most intricate business models in venture capital. Each marketplace comprises three intertwined systems: supply acquisition, demand generation, and transaction trust. Diligencing such a company requires investors to look beyond vanity metrics and into the structural mechanics that sustain the network. Unlike SaaS or product companies, a marketplace’s moat emerges not from technology alone but from network density, unit economics, and behavioral liquidity. Accurate diligence measures how these forces interact over time—not just whether the platform is growing, but whether it is compounding. 1. Market Definition and Network Dynamics Total Addressable Market (TAM) and Fragmentation Start with clarity on the target market’s size and fragmentation. The best marketplaces often enter highly fragmented, inefficient markets where incumbents lack digital coordination, such as real estate agents, local services, or niche B2B verticals. A large TAM alone isn’t enough; investors should assess whether participants are ready for platformization. Markets with strong offline incumbents or regulatory friction may resist the shift. Ideal markets have: Many small, independent providers have poor discovery tools. High-frequency transactions that encourage repeat use. A clear “pain point” in finding, vetting, or paying counterparties. Two-Sided Liquidity: Solving the Cold Start Problem The cold-start problem — how to attract both sides of the market simultaneously — is the defining risk for early marketplace ventures. During diligence, look for tactical liquidity strategies: Single-vertical focus: Does the company start narrow to seed density before expanding? Demand priming: Are they subsidizing one side (often the supply side) until cross-traffic builds? Community seeding: Is there an existing user base or offline network that can be digitized quickly? Early liquidity in even a small segment signals the flywheel potential that investors prize. 2. Business Model and Unit Economics Revenue Model Fit The most common monetization models include take rates (transaction fees), subscription tiers, and lead-generation fees. Each implies different risk structures. Transaction fees require trust, and an integrated payment is high-value but high-friction. Subscription models indicate recurring revenue but can mask low transaction activity. Lead models work early but limit scalability once competition rises. Investors should ask: Is the monetization aligned with the core user value? A mismatch between value creation and value capture, like charging suppliers before buyers exist, can choke early growth. Economics per Transaction Healthy marketplaces exhibit a positive contribution margin once acquisition costs normalize. During diligence, evaluate: Take rate vs. CAC: Does the average customer transaction justify the acquisition cost? Repeat usage: Is retention improving as users deepen engagement? Cohort profitability: Do earlier cohorts improve over time (a sign of compounding trust)? An investor-grade model includes LTV/CAC ratios above 3x, declining CAC, and evidence that organic or referral traffic is growing faster than paid channels. 3. Supply and Demand Validation Supply-Side Diligence Strong supply is the backbone of marketplace liquidity. Look for evidence of supply stickiness: Contracts, integrations, or switching costs that prevent churn. Platform tools that embed suppliers’ inventory management, CRM, and analytics. Precise segmentation of high-value vs. low-value suppliers. Investors should scrutinize how supply quality is maintained at scale. The best marketplaces curate, not just aggregate through reputation systems, ratings, or algorithmic filtering. Demand-Side Diligence Demand validation is equally critical. Look for signals of habitual usage: Percentage of users completing transactions vs. browsing. Repeat rate within 30–90 days. Conversion from search to transaction. If acquisition is primarily through paid channels, ask whether organic channels (SEO, referrals, word of mouth) are growing. A healthy marketplace eventually “earns” its traffic through brand trust and liquidity, not just ad spend. 4. Trust, Safety, and Transaction Infrastructure Trust is the invisible currency of marketplaces. Investors often underestimate the importance of dispute resolution, escrow systems, and user verification. Diligence questions to ask: How does the platform mitigate fraud or low-quality interactions? Is there buyer and seller verification? How quickly are disputes resolved? What share of GMV occurs on-platform versus off-platform? A marketplace with a strong safety reputation accelerates network effects. Each satisfied user adds both volume and confidence to future participants. 5. Technology, Data, and Defensibility Technology as an Enabler, Not the Moat While marketplaces are technology-enabled, their defensibility lies more in data loops than in code. Assess: Proprietary matching algorithms or dynamic pricing systems. Unique datasets built from repeated transactions. Predictive analytics is improving the balance between supply and demand. Technology amplifies the moat once scale is achieved, but rarely substitutes for it. Diligence should confirm that technology shortens the distance between intent and transaction. Network Effects and Switching Costs Ask: Do more users make the platform better for all participants? Are switching costs increasing (data lock-in, reputation scores, embedded tools)? Is there evidence of local network effects, city-by-city or niche-by-niche density? True network effects are measurable: declining CAC, improving retention, and rising transaction frequency as density grows. 6. Regulatory and Operational Risks Marketplaces often enter semi-regulated sectors (transportation, healthcare, finance). Investigate compliance exposure early: Licensing or labor classification risks (e.g., gig economy). Data privacy or payment compliance (PCI, GDPR). Local versus national jurisdiction variance. Operational diligence should review internal controls—how the company handles disputes, refunds, and payment reconciliation. Hidden liabilities here can erode margins later. 7. Team, Culture, and Execution Capability In marketplaces, execution discipline matters as much as vision. Founders must balance product growth with operational rigor. Red flags include: Overemphasis on growth without tracking unit economics. Weak analytical culture or reliance on anecdotal success stories. Lack of expertise in supply-chain or logistics for physical marketplaces. Green flags include: Founders who deeply understand both sides of the market. Clear frameworks for scaling liquidity (e.g., city rollout models). Experienced data and operations leadership. Diligence should include references and operator interviews with those who have scaled networks before, as they are rare and invaluable. 8. Investor Fit and Exit Pathways Investors must map the marketplace’s growth to their own fund model. Marketplaces can deliver large exits but often require long gestation periods before compounding effects take hold. Key investor diligence checkpoints: Time to liquidity: Are transaction volumes doubling

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    How to Diligence a Deeptech Startup

    5 min read How to Diligence a Deeptech Startup Deeptech investing sits at the frontier of science and innovation where research, engineering, and commercialization intersect. Unlike pure software startups, deeptech ventures build defensible advantages through hard science: novel materials, AI hardware, quantum systems, robotics, medtech, or energy storage breakthroughs. These opportunities are exciting but also carry unique risks. Traditional venture diligence frameworks often fall short when technology readiness, regulatory hurdles, and manufacturing scalability dominate the risk stack. This article distills key lessons from Startup Funding Espresso episodes on diligence, technology risk, and commercialization. The goal: to help investors and founders apply a structured, evidence-based approach to evaluating deeptech startups. Why Deeptech Diligence Is Different Every deeptech company compresses three risk domains—science, engineering, and market adoption into a single domain. The challenge is not just whether the technology works, but whether it can be built repeatedly, validated independently, and sold at scale. Traditional diligence focuses on traction and market fit; deeptech diligence begins earlier, with proof-of-concept data, IP defensibility, and regulatory feasibility. Investors must verify not only what exists today but also how quickly risk can be reduced per dollar invested. Key mindset shifts include: From forecasting revenue to mapping technology readiness. From tracking KPIs to testing falsifiable hypotheses. From scaling growth to scaling evidence. 1. Technology and IP — The Foundation of Value The first diligence lens is technical validation. Investors must separate scientific promise from engineering reality. Ask: What has been independently demonstrated, and what remains unproven? Use a Technology Readiness Level (TRL) framework to map progress: TRL 3–5: Lab validation and prototype proof-of-concepts. TRL 6–7: Pilot or limited field trials with defined performance metrics. TRL 8–9: Qualified production systems ready for deployment. Request replicable data, third-party lab results, prototype test reports, and failure analyses. Look for structured experimentation and defined “next proof milestones.” Equally critical is IP defensibility. Strong patent portfolios are not measured by quantity but by claim strength, enforceability, and market coverage. Review patent claims with a freedom-to-operate (FTO) analysis and assess continuation plans. Green flags: independent validation, multiple claims granted, clear continuation strategy.Red flags: single provisional filings, overlapping prior art, or reliance on unprotected trade secrets. 2. Regulatory and Standards Pathway Many deeptech sectors—especially medtech, energy, and advanced materials face heavy regulatory oversight. Evaluate: Applicable standards and certifications (FDA, CE, UL, ISO, ITAR, etc.). Defined testing phases, costs, and lead times. How compliance and certification are budgeted within the funding round. A credible startup presents stage-gated plans, design verification, safety testing, and third-party audits with clear contingency budgets. Failing to anticipate certification hurdles can derail commercialization even when performance is strong. 3. Manufacturing and Supply Chain Deeptech ventures live or die by manufacturing scalability. A prototype in a lab is far from a product on a production line. Focus diligence on: Design for Manufacturability: Has the team engineered around tolerances, yield loss, and cost variability? Supplier validation: Are key materials single-sourced or dual-qualified? Cost curves: Does the company model BOM reduction as a function of volume? Unit economics should improve with scale—not degrade under real-world conditions. Review supplier references, pilot production data, and yield reports, along with contingency plans for critical components. 4. Market Validation and Go-to-Market Strategy Deeptech adoption is slower and more conservative. Market traction is measured by pilots, paid proofs of concept (POCs), and letters of intent (LOIs), not user downloads. Ask: Who are the anchor customers? Are there signed pilots with success metrics? Do successful pilots convert to purchase orders or rollout commitments? Look for evidence of market pull rather than push. Strong startups identify a beachhead market, a narrow, high-value initial use case to expand from once technical and regulatory risks are reduced. 5. Business Model and Unit Economics Deeptech success depends on translating innovation into a sustainable business. Assess: Pricing logic: value-based or cost-plus. Service model: warranty, maintenance, support obligations. Margin progression: gross margin by production lot and expected BOM reductions. Validate a clear path to profitability once production stabilizes. Many deeptech companies underestimate hidden costs tooling, certification renewals, and warranty exposure. Confirm how gross margins evolve with scale and how service costs are managed. 6. Team and Execution Capability Winning deeptech teams blend: Scientific depth (core technology and IP creation). Engineering discipline (system integration, QA, and reliability). Commercial skill (enterprise sales and regulatory navigation). Assess whether the team balances technical and operational expertise, or knows when to bring in external expertise. Signs of execution maturity: Detailed experiment and pilot schedules. Hiring plans tied to risk milestones. Advisors or board members with relevant domain expertise. The best teams demonstrate self-awareness and a plan to close capability gaps as they grow. 7. Financial and Capital Planning In deeptech, capital efficiency equals risk reduction per dollar spent. Each round should connect the capital directly to the risk milestones: Proof of principle → validated prototype. Prototype → regulatory clearance or pilot. Pilot → scaled production or recurring revenue. Ensure the round fully funds the next de-risking event. Partial funding during critical phases, such as certification, can dramatically increase failure risk. Common Red Flags Reliance on anecdotal or non-replicable data. Undefined or unrealistic regulatory timelines. Missing supplier validation for long-lead components. Pilots without success criteria or written commitments. IP limited to provisional filings without FTO analysis. When several appear together, they signal structural risks, not minor gaps. Clear Green Flags Independent third-party validation of test data. Detailed regulatory roadmap with time and budget estimates. Qualified manufacturing partners and early yield data. Paid pilot contracts with expansion pathways. Documented BOM and cost-reduction roadmap. These signals indicate a company transitioning from research to execution, where investors can confidently participate in scaling innovation. Read More from TEN Capital Education here.

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    The Benefits of a Family Office

    5 min read  The Benefits of a Family Office In today’s complex financial landscape, many affluent families are turning to family offices to manage their wealth and ensure the longevity of their family legacy. A family office is a centralized entity that provides a range of services tailored to the unique needs of a family, particularly those with significant assets. Here are some key benefits to consider when contemplating the establishment of a family office. 1. Carry Out the Stated Mission of the Family BusinessA family office can help articulate and execute the family business’s mission and vision, ensuring that all activities align with the family’s core values and long-term objectives. 2. Optimize Wealth Through Investment StrategiesBy employing sophisticated investment strategies, a family office can optimize the family’s wealth, ensuring that assets are managed effectively and grow over time. 3. Reduce Taxes Through Tax-Advantaged StructuresFamily offices can implement tax-efficient structures that help minimize tax liabilities, allowing families to retain more wealth. 4. Provide Education for Future LeadersA family office can facilitate educational programs for family members, preparing them for future leadership roles and instilling a sense of responsibility towards the family legacy. 5. Ensure Continuity Through Succession PlanningEffective succession planning is crucial for the longevity of a family business. A family office can help create a structured plan for leadership transitions, ensuring a smooth handover of responsibilities. 6. Preserve Family Wealth Through Ongoing ManagementWith dedicated management, a family office can help preserve wealth across generations, implementing strategies that safeguard assets against market volatility and other risks. 7. Organize Services for Running the Family BusinessA family office can streamline operations by organizing various services needed to run the family business efficiently, from financial management to legal support. 8. Coordinate Advisors into a GroupBy bringing together various advisors—financial, legal, and tax professionals—a family office can create a cohesive strategy that benefits the family. 9. Provide Better Control of the Family BusinessA coordinated program allows for better oversight and control of the family business, ensuring that all aspects are aligned with the family’s goals. 10. Manage Trustee Functions More EffectivelyFamily offices can take on trustee functions, ensuring that trusts are managed under the family’s wishes and legal requirements. 11. Provide Investment OversightWith dedicated investment oversight, a family office can monitor and manage the family’s investment portfolio, ensuring it aligns with their risk tolerance and financial goals. 12. Estate Planning for the Family BusinessA family office can facilitate comprehensive estate planning, helping to ensure that the family’s wealth is passed down according to their wishes while minimizing tax implications. 13. Create a LegacyEstablishing a family office can serve as a testament to the family’s values and commitment to future generations, creating a lasting legacy that reflects their principles. Structuring a Family Office for Tax Benefits When setting up a family office, structuring it for tax benefits is a critical consideration. Here are some points to keep in mind: Separate Legal Entity: By establishing the family office as a separate legal entity, families can shift certain costs from individual family members to the family office, potentially reducing personal tax burdens. Tax-Deductible Expenses: Under Section 162 of the US tax code, investment analysis expenses may be tax-deductible, allowing families to optimize their tax situation. Criteria for Deducting Expenses: The case of Lender Management outlines specific criteria for deducting investment management expenses, emphasizing the importance of regularity, continuity, and the separation of ownership and control. Structuring a Family Office: Key Considerations Structuring a family office involves several important decisions: Identify the Beneficiaries: Determine who the family office will serve, typically the family and their descendants. Define Services Offered: Establish a core set of cost-effective services that ensure the family office meets its members’ needs. In-House vs. Outsourced Services: Decide whether to utilize in-house resources or outsource services, as this choice significantly impacts operational costs. Service Charges: Consider how to charge family members for services rendered to maintain financial sustainability. Profit vs. Cost Coverage: Determine whether the services should generate a profit or cover costs, considering the need for overhead management. Expense Oversight: Implement oversight mechanisms to monitor expenses, potentially including a controller function. Legal Structure: Choose an appropriate legal structure. Many family offices opt for an LLC with S-Corp designation, though other structures may offer distinct advantages. Establishing a family office can provide numerous benefits, from optimizing wealth and reducing taxes to ensuring continuity and creating a lasting legacy. By carefully considering the structure and services of the family office, families can effectively manage their wealth and prepare for future generations. If you’re contemplating setting up a family office, weigh these benefits and considerations to make informed decisions that align with your family’s goals.   Read More from TEN Capital Education here. Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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    Understanding the Types of Family Offices: A Guide for Family Businesses

    3 min read Understanding the Types of Family Offices: A Guide for Family Businesses When managing wealth and ensuring the longevity of family legacies, family offices play a crucial role. However, not all family offices are created equal. They vary in type and structure, each catering to different needs and circumstances. Here, we’ll explore three primary types of family office structures to help you determine the best fit for your family business. 1. Single-Family Office The single-family office (SFO) is designed to provide services exclusively to one family. This structure offers the most customized program, allowing for tailored solutions that align with the family’s specific needs and goals. However, it is also the most expensive type of family office structure, making it best suited for ultra-high-net-worth families who can afford the bespoke services and dedicated resources that come with it. 2. Multi-Family Office In contrast, a multi-family office (MFO) serves several families, pooling resources to provide commonly used services such as accounting, tax, and investment advisory. This structure offers a lower cost model, as expenses are shared among the families involved. MFOs work best for high-net-worth families who seek professional management without the high costs associated with a single-family office. 3. Virtual Family Office The virtual family office (VFO) operates primarily online, utilizing technology to deliver services. This structure provides the lowest cost option, as it often employs fractional services from various professionals rather than maintaining a full-time staff. VFOs are ideal for families that do not require highly customized services and prefer a more flexible, cost-effective approach. As you consider setting up a family office for your family business, weigh these structures carefully to find one that best suits your family’s needs and financial situation. Key Functions of a Family Office A family office can provide many essential functions for managing a family business effectively. Here are some essential functions to consider including: Wealth Management: Setting objectives, identifying investment opportunities, and providing ongoing oversight. Impact Focus: Pursuing investments that promote social, economic, or governance causes. Investment Management: Designing an investment thesis and pursuing opportunities that align with it. Security and Privacy: Implementing measures to protect the identity of family members and mitigate cybersecurity threats. Succession Planning: Preparing the next generation for leadership roles and transitioning responsibilities. Tax Management: Handling tax returns and structuring investments for optimal tax outcomes. Compliance: Ensuring adherence to tax and regulatory requirements. Many of these functions can be outsourced to specialized providers, allowing your family office to operate efficiently while focusing on core objectives. Challenges in Running a Family Office While family offices can provide significant benefits, they also come with their own set of challenges. Here are some fundamental problems to watch out for: Treating the Family Office as a Hobby: It’s essential to recognize that a family office is a legal entity with employees, investments, and tax filings. Treating it as a business is crucial for its success. Lack of Clear Goals: Developing a focused strategy can be challenging without a defined purpose. Establishing clear goals is vital for guiding investment decisions and overall direction. Poor Governance: A family office needs clear rules and regulations to function effectively. Leadership is also essential; without it, the office may struggle to achieve its objectives. Succession planning is necessary to ensure continuity in leadership. By proactively addressing these challenges, you can enhance the effectiveness of your family office and ensure it serves your family’s long-term interests. Setting up a family office is a significant step for any family business. By understanding the different types of family office structures, the essential functions they can provide, and the challenges you may face, you can make informed decisions that will benefit your family for future generations. Take the time to review your family office and consider how it can best serve your family’s unique needs and aspirations. Read More from TEN Capital Education here. Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Read More »

    Understanding the Types of Family Offices: A Guide for Family Businesses

    3 min read Understanding the Types of Family Offices: A Guide for Family Businesses When managing wealth and ensuring the longevity of family legacies, family offices play a crucial role. However, not all family offices are created equal. They vary in type and structure, each catering to different needs and circumstances. Here, we’ll explore three primary types of family office structures to help you determine the best fit for your family business. 1. Single-Family Office The single-family office (SFO) is designed to provide services exclusively to one family. This structure offers the most customized program, allowing for tailored solutions that align with the family’s specific needs and goals. However, it is also the most expensive type of family office structure, making it best suited for ultra-high-net-worth families who can afford the bespoke services and dedicated resources that come with it. 2. Multi-Family Office In contrast, a multi-family office (MFO) serves several families, pooling resources to provide commonly used services such as accounting, tax, and investment advisory. This structure offers a lower cost model, as expenses are shared among the families involved. MFOs work best for high-net-worth families who seek professional management without the high costs associated with a single-family office. 3. Virtual Family Office The virtual family office (VFO) operates primarily online, utilizing technology to deliver services. This structure provides the lowest cost option, as it often employs fractional services from various professionals rather than maintaining a full-time staff. VFOs are ideal for families that do not require highly customized services and prefer a more flexible, cost-effective approach. As you consider setting up a family office for your family business, weigh these structures carefully to find one that best suits your family’s needs and financial situation. Key Functions of a Family Office A family office can provide many essential functions for managing a family business effectively. Here are some essential functions to consider including: Wealth Management: Setting objectives, identifying investment opportunities, and providing ongoing oversight. Impact Focus: Pursuing investments that promote social, economic, or governance causes. Investment Management: Designing an investment thesis and pursuing opportunities that align with it. Security and Privacy: Implementing measures to protect the identity of family members and mitigate cybersecurity threats. Succession Planning: Preparing the next generation for leadership roles and transitioning responsibilities. Tax Management: Handling tax returns and structuring investments for optimal tax outcomes. Compliance: Ensuring adherence to tax and regulatory requirements. Many of these functions can be outsourced to specialized providers, allowing your family office to operate efficiently while focusing on core objectives. Challenges in Running a Family Office While family offices can provide significant benefits, they also come with their own set of challenges. Here are some fundamental problems to watch out for: Treating the Family Office as a Hobby: It’s essential to recognize that a family office is a legal entity with employees, investments, and tax filings. Treating it as a business is crucial for its success. Lack of Clear Goals: Developing a focused strategy can be challenging without a defined purpose. Establishing clear goals is vital for guiding investment decisions and overall direction. Poor Governance: A family office needs clear rules and regulations to function effectively. Leadership is also essential; without it, the office may struggle to achieve its objectives. Succession planning is necessary to ensure continuity in leadership. By proactively addressing these challenges, you can enhance the effectiveness of your family office and ensure it serves your family’s long-term interests. Setting up a family office is a significant step for any family business. By understanding the different types of family office structures, the essential functions they can provide, and the challenges you may face, you can make informed decisions that will benefit your family for future generations. Take the time to review your family office and consider how it can best serve your family’s unique needs and aspirations. Read More from TEN Capital Education here. Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Read More »

    Understanding the Types of Family Offices: A Guide for Family Businesses

    3 min read Understanding the Types of Family Offices: A Guide for Family Businesses When managing wealth and ensuring the longevity of family legacies, family offices play a crucial role. However, not all family offices are created equal. They vary in type and structure, each catering to different needs and circumstances. Here, we’ll explore three primary types of family office structures to help you determine the best fit for your family business. 1. Single-Family Office The single-family office (SFO) is designed to provide services exclusively to one family. This structure offers the most customized program, allowing for tailored solutions that align with the family’s specific needs and goals. However, it is also the most expensive type of family office structure, making it best suited for ultra-high-net-worth families who can afford the bespoke services and dedicated resources that come with it. 2. Multi-Family Office In contrast, a multi-family office (MFO) serves several families, pooling resources to provide commonly used services such as accounting, tax, and investment advisory. This structure offers a lower cost model, as expenses are shared among the families involved. MFOs work best for high-net-worth families who seek professional management without the high costs associated with a single-family office. 3. Virtual Family Office The virtual family office (VFO) operates primarily online, utilizing technology to deliver services. This structure provides the lowest cost option, as it often employs fractional services from various professionals rather than maintaining a full-time staff. VFOs are ideal for families that do not require highly customized services and prefer a more flexible, cost-effective approach. As you consider setting up a family office for your family business, weigh these structures carefully to find one that best suits your family’s needs and financial situation. Key Functions of a Family Office A family office can provide many essential functions for managing a family business effectively. Here are some essential functions to consider including: Wealth Management: Setting objectives, identifying investment opportunities, and providing ongoing oversight. Impact Focus: Pursuing investments that promote social, economic, or governance causes. Investment Management: Designing an investment thesis and pursuing opportunities that align with it. Security and Privacy: Implementing measures to protect the identity of family members and mitigate cybersecurity threats. Succession Planning: Preparing the next generation for leadership roles and transitioning responsibilities. Tax Management: Handling tax returns and structuring investments for optimal tax outcomes. Compliance: Ensuring adherence to tax and regulatory requirements. Many of these functions can be outsourced to specialized providers, allowing your family office to operate efficiently while focusing on core objectives. Challenges in Running a Family Office While family offices can provide significant benefits, they also come with their own set of challenges. Here are some fundamental problems to watch out for: Treating the Family Office as a Hobby: It’s essential to recognize that a family office is a legal entity with employees, investments, and tax filings. Treating it as a business is crucial for its success. Lack of Clear Goals: Developing a focused strategy can be challenging without a defined purpose. Establishing clear goals is vital for guiding investment decisions and overall direction. Poor Governance: A family office needs clear rules and regulations to function effectively. Leadership is also essential; without it, the office may struggle to achieve its objectives. Succession planning is necessary to ensure continuity in leadership. By proactively addressing these challenges, you can enhance the effectiveness of your family office and ensure it serves your family’s long-term interests. Setting up a family office is a significant step for any family business. By understanding the different types of family office structures, the essential functions they can provide, and the challenges you may face, you can make informed decisions that will benefit your family for future generations. Take the time to review your family office and consider how it can best serve your family’s unique needs and aspirations. Read More from TEN Capital Education here. Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Read More »

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