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
