Medical device development is expensive, time-consuming, and uncertain—and virtually none of it happens without outside capital. For translational researchers making the transition from lab to startup, fundraising is often unfamiliar territory, requiring a different kind of persuasion than a grant application or a journal submission. Investors aren't evaluating the elegance of your science; they're assessing whether your device solves a real clinical problem, whether the market is large enough to justify the risk, and whether your team has what it takes to navigate the long road from concept to commercialized product. Understanding the funding landscape — the sources available, the stages involved, and the expectations attached to each—is not peripheral to your development journey. It's central to it.
For insight into funding strategies for medical devices, we spoke to Ilana Lam Gotlib, Founder, ILG Consulting, LLC.
Most successful founders use multiple different sources of funding over time. These sources, each with advantages and disadvantages, can be bucketed into dilutive and non-dilutive. Dilutive funding is capital raised in exchange for equity in the company, whereas non-dilutive is secured without relinquishing any equity or ownership.
Non-Dilutive Funding
Self-funding. The advantage of putting your own money behind your venture is that it's easy to access and it may show credibility and commitment to future investors. The downside is clear: it's your pocket, and it's potentially unsustainable. If earnings are not quickly achieved and there's no paycheck for any of the owners or partners down the road, it can stress the team.
Friends and family. Accepting money from those around you is another funding source with similar advantages and disadvantages, plus it’s probably not enough to get you very far. Ilana says, “You'll hear different industry averages, but I would say the highest that most friends and family investments go up to is $50,000, maybe $100,000 at most.” In many cases, friends and family investors want a share of the business, making it dilutive funding. But in some cases, it may be provided as non-dilutive funding.
Crowdfunding. Asking for money from the public was popular in the mid-2010s, but according to Ilana, it has fallen out of favor. It may still work for an unregulated retail product. The advantages are that you can build a community, collect some customer data, validate the market, and show future investors that your business is attractive. But the disadvantages include that crowdfunding is public, so if you're not successful, it could hurt your reputation. And again, the funds might be insufficient.
Government grants. The clear advantage is that grants are non-dilutive and don't need to be repaid. Plus, it's an immediate infusion of cash to cover your day-to-day operations and build your roadmap. Options include the Small Business Innovation Research (SBIR) program. The major disadvantages of grants are that they're very time-consuming and extremely competitive.
Philanthropic grants. Foundations and other philanthropic organizations, often focused on specific therapeutic areas, can be a source of non-dilutive funding. Examples include the Capillary Foundation, which supports the development of new medical devices, and the Intuitive Foundation, which focuses on robotic-assisted surgery.
Debt financing. You don’t have to give up any equity, but you must repay over time. The disadvantages are significant: you might have to accept a high interest rate and a potential impact on your credit rating. Also, this method could trigger a transfer to dilutive funding if certain terms are not met.
Dilutive Funding
Angel investments. Typically investing up to about $100K, angel investors take the greatest risk because they don't necessarily know who you are and they're stepping in at a very early phase of your development.
Accelerators and incubators. The advantage of working with these organizations is that you can collaborate with a network of mentors and investors. Sometimes they can provide equipment, resources, even lab space, which obviously helps you manage your costs. The disadvantage is that again, you give up equity. And accelerators/incubators are often not a secure funding source; it's hard to rely on year-over-year.
Strategics. Established companies/market leaders invest in startups/early-stage companies to support development and, ultimately, set the stage for acquisition. Advantages include access to infrastructure, distribution networks, and other resources as well as validation of your product. Disadvantages may include some loss of control, diminished attractiveness to other buyers, and less operational assistance than VCs offer. A major disadvantage is a reduction in ownership percentage, as strategics usually inject capital in exchange for shares.
Venture capital. VC funding offers a huge network for you to leverage, and expertise from folks that are hopefully familiar with your domain. Disadvantages include giving up equity and probably a board seat. It’s also a difficult community to break into. Within the VC community, there's certain domains that they specialize in, and then domains within those domains. Different companies also have different investment theses and hypotheses. Finding a perfect match can take a long time, and signing a deal takes a lot of leg work.
Established medical device companies—market leaders like Boston Scientific, Medtronic, and Abbott—often invest in early-stage startups through corporate venture arms or direct strategic partnerships. Unlike financial investors, strategics bring more than capital: they offer access to infrastructure, manufacturing expertise, regulatory experience, distribution networks, and commercial validation that can meaningfully accelerate development.
The tradeoff is real, however. Strategics typically take equity in exchange for investment, which reduces your ownership percentage and can complicate future fundraising or acquisition discussions. Some founders also find that strategic partnerships limit operational independence or make the company less attractive to competing acquirers down the road.
Knowing who you're talking to before any meeting is essential. Some strategics only engage with already-commercialized products—they want proof that a company has sold something, somewhere in the world, before they'll take on the risk of early-stage development. Others maintain dedicated corporate venture arms specifically designed to invest at earlier stages. Doing that homework upfront and tailoring your pitch accordingly signals to the strategic that you understand their business, not just your own.
When approaching a strategic, Ilana advises making the fit explicit: "Here's my understanding of your structure. Here's my understanding of your product lines. Here's where you're great in X market. But I see that you are missing Y, and we can fill that gap. Here's why it's an obvious sell for your sales team. Here's why it's an easy lift for your customers."
It's also worth remembering that your contact at a strategic—typically someone in business development — is putting their own internal political capital on the line by championing your deal. Give them what they need to represent you successfully to their leadership team. Transparency and preparation aren't just courtesies; they're strategic assets.
Most medical device startups don't raise all their capital at once. Instead, funding typically progresses through a series of stages, each tied to meaningful development milestones and each carrying different expectations from investors.
Pre-Seed and Seed. The earliest stage is about proving that your idea has merit. Funding at this stage typically comes from personal funds, friends and family, angel investors, and early government grants like SBIR. The amounts are modest—often under $1 million—and the bar is concept validation: a working prototype, early bench data, or a compelling clinical rationale. Investors at this stage are taking the greatest risk and know it.
Series A. By the time you're raising a Series A, typically in the $3–10 million range for medtech, investors expect to see more than a promising idea. They want evidence of a defined regulatory pathway, early clinical or preclinical data, a credible reimbursement strategy, and—critically—a team that has the right mix of scientific, clinical, regulatory, and commercial expertise. This is often where translational researchers first encounter institutional venture capital, and where gaps in team composition become highly visible. As Ilana notes, a room full of PhDs with no one who has taken a product through approval and to market is a red flag, regardless of how strong the science.
Series B and Beyond. Later-stage rounds are about scaling—expanding clinical evidence, navigating regulatory submissions, building out commercial infrastructure, and preparing for market entry or acquisition. The capital required grows substantially, and so does investor scrutiny. At this stage, strategics often become more actively interested, sometimes participating in rounds directly or signaling acquisition intent through partnership agreements.
It's worth noting that medical device development timelines are long, and the path from seed funding to a commercialized product can span a decade or more. This makes capital efficiency—stretching each round as far as possible before the next raise—a discipline that investors will assess at every stage. Founders who can articulate not just what they need but precisely what milestones that capital will achieve tend to inspire far more confidence than those who present a lump funding need without a clear roadmap attached to it.
Translational researchers face three main fundraising challenges.
Clear Communication of Value
Making sure your story is crisp and clear is the first hurdle of getting your big ideas out to investors. Sometimes, that’s a challenge. Ilana observes, “I’ve sat through hundreds and hundreds of investor meetings. Often, the presentation is 27 minutes in and I think, I don’t yet know what these people are doing, I don't know how they’re going to make money, and more importantly, I don't understand how investors will make money.”
Part of the issue is that startup leaders often struggle to explain the competition or will say that they have no competition. But that’s a signal to investors that you haven't thought enough about that question, because even if your invention is completely novel and your product is unique, there’s something clinicians are doing today. The competition might be the standard of care. Maybe it's a “do nothing” or “wait and see” approach. You need to show investors that you understand that.
Misaligned Expectations
Translational researchers sometimes jump straight to marketing and sales, assuming that, “If we build it, they will come.” You need to think about who the buyer for the product will be—patients? surgeons? hospitals?—and how those purchase decisions will be made. Ilana says, “In healthcare, we're not making the newest coolest sneaker that people will just show up to buy. You need to figure out how and by whom you're going to get paid, and what your price point is to be successful.”
Lack of Expertise
Academics and researchers are rewarded by publication. Investors and strategic partners are concerned with regulatory clarity, a reimbursement pathway, and risk reduction. You may be unaware of all the different disciplines you need to have in place, and the experts you need to work with; this can be a red flag for investors. They’re always looking at how your team is comprised. Ilana notes, “Many times the executives will say, ‘Here’s my six teammates, we’re all clinical specialists, and we have many PhDs between us.’ But unless you have a partner or advisors that have regulatory and commercialization expertise, the investors are going to say, ‘You folks are all super smart, but you're not going to be able to get out of your lab.’”
Early on, you should bring in a business partner who has experience taking a product from R&D through approval all the way to commercial launch. This shows investors that you’re thinking about the right steps and involving the right people. Ilana notes, “If this person has experience with partnerships or with exits, that's even better, because then you have somebody on board who knows how to structure a deal, such as an IP and technology deal for development or a commercial partnership for distribution.”
Ilana also advises companies to make sure that you have a good blend of what she calls “translators.” She says, “You need somebody who can talk the science to the FDA. You need somebody who can talk clinical relevance to physicians, because that's how physicians learn best, and they’ll trust that person. And you need someone who can understand the numbers and the risk for your investors and strategics.”
She shares an example of a company that’s doing Series A fundraising. When she reviewed their slide deck, she questioned whether they have someone on their direct team, board, or advisors with expertise in regulatory, market access, and commercialization. Investors want to see all these different skill sets. And if you don’t have that on your team yet, they will challenge you on it.
You will also need to answer this question: who is getting the value of this product? Is it the surgeon, the hospital, the patient? You don't want to make investors think too hard about those things; serve that information up to them. According to Ilana, the big messages you want to get across are, “Here is the problem. Here's the solution. Here's why the market is attractive and big enough. Here's why we're the right team to solve this problem. And then here's some more detail behind it.”
Fundraising is its own discipline and talent in and of itself. Some translational researchers, as they start to build a company around their product, are ready to learn about fundraising because they understand that it’s the lifeblood of their development journey. In other cases, they’re willing to outsource this work. Depending on what you want to do, you can collaborate with someone who can help you; for example, a matchmaker-type of person who can make introductions to VCs, or an expert in government grants.
Investing in medical device development is inherently risky. Ilana says that while some data show that fundraising is taking longer and fewer startups are receiving funds, “I think what’s happening is that funding is becoming more disciplined and selective. Investors are still very excited about the healthcare space. But I think there's less tolerance for vague claims and exaggerated market numbers.”
When it comes to a total available market (TAM) number, for example, you need to show investors your thinking behind what you believe you can capture. Investors will try to pressure test whether you’re credible. They might take issue with your assumptions but if they can see your reasoning, that’ll help.
Fundraising strategies that balance risk and draw from multiple sources are more likely to succeed. Ilana observes, “Companies that can show clear clinical value, capital efficiency, and strong evidence generation will always bubble up to the top.”
She adds, “Healthcare is really an exciting space. And I find that most people in it are doing it for the right reasons, because they feel strongly that their technology can make a difference to patients.”
About Ilana Lam Gotlib