Investing in Medtech and Biotech Startups: What the Pros Look For

Investing in a medtech or biotech startup is a bet on large markets and on big corporations that pay a lot of money for new technologies. But it can take about 10 years for such an investment to pay off, if it pays off at all. At a Companisto masterclass in May 2026, two investment directors, a founder, and a business angel explained what matters in health startups and the most common reasons they fail.

Place a finger on the sensor, wait a few seconds, and the device is designed to display your blood glucose level. A finger prick would no longer be necessary. The Berlin startup DiaMonTech has been working on this technology since 2015. When it launched a funding round on Companisto in 2025, co-founder and CEO Thorsten Lubinski expected to raise €2 million to €3 million. In the end, the round brought in €8 million.

Even so, raising capital in medical technology is not easy. When he talks to institutional investors, his success rate is maybe two to three percent, Lubinski said in May 2026 at the Companisto masterclass “Biotech und MedTech: Die nächste Evolutionsstufe” (“Biotech and Medtech: The Next Evolutionary Stage”). Out of 100 conversations, he said, he ends up with two commitments. “Medicine is complicated, hardware is complicated, everything takes a long time.”

For Companisto investors, the sector is not a niche topic: the share of funding rounds on the platform that come from health care has risen in recent years, COO Sarah Buge said at the start of the masterclass. Investment directors Nicky Hughes and Andreas Fakler explained how they assess young medical technology and biotech companies and why they consider the sector attractive despite the long road to market. They then discussed financing, teams, and artificial intelligence with Lubinski and business angel Ralph Lägel.

Why the health care market is on the move

Health is not a fad, Lubinski said. “Health is always there.” What’s new, he said, are the tools: artificial intelligence and wearables that capture readings that couldn’t be measured before. And once people start paying attention to their own health this way, they want answers, too.

Germany spends around €540 billion on health every year, Lägel noted. Germany’s Federal Statistical Office (Destatis) puts health spending for 2024 at €538.2 billion, or 12.4 percent of GDP. For 2025, the office estimates spending at €579.5 billion.

Fakler named artificial intelligence first among the drivers, calling medical technology one of its most useful fields of application. He also cited increasingly connected devices and demographic change: the population is aging, while hospitals have fewer and fewer resources. Innovation therefore has to come from startups, or hospitals have to become more innovative themselves. He added that far more venture capital is available today than 10 or 20 years ago.

A few weeks before the masterclass, Hughes had attended DMEA, a Berlin trade fair for digital health. The overarching theme there, he said, was the shortage of doctors and skilled health care workers. Almost every product he saw was about relieving doctors of bureaucracy and paperwork so they could put their expertise to better use.

What makes a medtech startup investable

Hughes named four criteria that determine whether a medtech startup is a candidate for investment:

• Scalability: This is about more than the technology, he said. The clinical evidence, manufacturing, adoption into routine care, and sales also have to be repeatable. The question that matters: After the first product, does the company find it easier to build the second?
• Medical benefit: The benefit has to be measurable, clinically relevant, and convincing to patients and payers alike. In other words, a new product should improve treatment outcomes and lower costs or free up scarce capacity.
• Certification and reimbursement: A company that wants to grow within the health care system needs a clear path to reimbursement, from certification as a medical device to coverage by health insurers. The CE marking, which allows a medical device to be placed on the market in the EU, is a step in that direction, as is marketing authorization from the U.S. Food and Drug Administration (FDA), he said. But neither is proof yet that the product will catch on in the market (product-market fit). A startup delivers that proof only once doctors are using the product, patients are using it, and it saves money.
• Team: Besides scientific expertise, what’s needed above all is regulatory experience, close ties to clinical practice, and an understanding of how reimbursement works. That’s because the health care market, with its many players and strict regulation, is extremely complex.

As with any startup, commercial execution matters, too. How well a company meets these criteria determines its risk profile, Hughes said. Especially at an early stage, a company is rarely equally advanced on every point. That isn’t necessarily a bad thing. The assessment looks at how much a startup has already achieved on each one.

Who pays, who buys, who uses it?

Sales are also more complicated in health care than in other industries. Because Germany isn’t a market where patients pay out of pocket, reimbursement by health insurers is, in effect, market access, Hughes said. A startup therefore has to know exactly who pays for its product, who buys it or makes the purchasing decision, and who ultimately uses it. Only on that basis, he said, can it build a sales strategy.

Lägel said that before any investment, the first thing he now asks himself is: Is someone willing to pay, and are they able to pay? There has to be a real need and someone who is prepared to spend enough money on it before long. “If I don’t have that, I can forget the whole thing.” Not even a great team changes that, he said. Second on his list is scalability: whether a solution works only in a limited market or whether it would also sell like hotcakes in other countries. A company can certainly survive on the German market alone, he said. But by the time it wants to bring in venture capital investors, if not sooner, what counts is an eye toward Europe and the rest of the world.

The long road through clinical trials and certification

To gauge how far along a startup is, the investment directors look mainly at its trial data and its patents. The paths to market for drugs and for medical devices differ considerably:

According to Hughes, that is why many medtech startups enter the European market first and collect real-world data there, meaning data from routine clinical care, before applying for marketing authorization in the U.S. Since the stricter EU Medical Device Regulation (MDR) took effect in 2021, however, more and more manufacturers have been launching new products in the U.S. first, industry surveys show.

When people think about risk, they usually think of clinical trials, Fakler said: a drug that falls short of the hoped-for efficacy in Phase III, and the whole thing collapses. In his experience, that happens less often in medical technology. A wound scanner, for example, doesn’t have to prove its efficacy over years against a placebo or in double-blind trials, nor does it have to wait a long time to see whether side effects appear. It has to show that it measures the wound correctly, analyzes the tissue, and possibly also detects the bacterial load. Target measures like these, called endpoints in medical terminology, are set before a trial begins. In some areas of medical technology, he said, they can be reached in a relatively short time, and it is comparatively easy to predict whether a trial will succeed.

Lubinski considered regulatory risk overrated. What people underestimate, he said, is the effort: it usually takes a bit longer and costs a bit more than expected. But he couldn’t think offhand of a startup that had failed because of regulatory requirements. “Regulation is something that annoys everybody, but that everybody manages to sort out.” For investors, the extra effort is still a risk, because every delay means a startup has to fund itself for longer.

The moat: How well regulatory hurdles protect against competition

The first question about a startup usually concerns its moat, meaning what protects it from competition. With AI software, such protection is hard to find at the moment, Fakler said. It feels like every morning a new startup pops up doing something similar to the last one. In medical technology, by contrast, competition is relatively transparent, he said.

As an example, he cited cureVision, which has already completed two funding rounds through Companisto. The startup has developed a scanner that measures wounds. The idea came from a hospital that had looked for a solution to a problem and couldn’t find one, he said. For Fakler, that was a kind of pre-validation: if a hospital goes to the trouble of looking for a solution and doesn’t find one, there is evidently demand and little competition. From there, cureVision made rapid progress, he said. The scanner carries the CE marking under the MDR, and after the second Companisto round, an American investor came on board.

For that reason, Fakler saw a moat as more than patents, which a young company may not even be able to enforce when push comes to shove, because it lacks the money for lawyers and court cases. What matters, he said, is whether there is any competition at all. DiaMonTech does have competitors, he acknowledged. But during due diligence, Lubinski presented a very extensive list of all its competitors, which left the impression that the team knew exactly who was active in the market. The risk of being overtaken overnight is low, Fakler said, because every new entrant first has to go through the certification process and possibly clinical trials. This hurdle does not, however, protect against established manufacturers whose products are already on the market. How high it is also depends on the product’s risk class.

Large markets, difficult access

There are people with diabetes and people with slow-healing wounds all over the world. Because patient numbers and health spending in Europe and the U.S. are well documented, the size of such markets is easier to quantify than in other industries, in Fakler’s experience. He saw the main growth drivers as diagnostics and remote monitoring, cardiovascular medicine, and wearables, a trend coming out of the U.S.

Germany accounts for about a quarter of the European medtech market. That means startups have their first market right on their doorstep before they venture into other European countries and the U.S., Fakler said. Certification alone, however, does not mean a startup will gain a foothold in these markets. Getting a product into hospitals, connecting it to their systems, and holding on to market share over time is “real work,” he said.

Who buys and funds health startups

The market is shaped by large corporations with plenty of capital and strong cash flow. Fakler saw that as an opportunity. At a health tech event in Basel, he said, he watched companies such as Novartis and Roche hunting for the latest innovations. The idea was to save themselves some of the early-stage research. Roche’s venture capital fund alone is larger than most European VC funds, he said. According to Roche, the fund has 750 million Swiss francs and is set up as an evergreen fund with no fixed term.

What buyers pay for

As examples from the market, Hughes and Fakler had picked out three exits by German companies, two from biotech and medtech and one from digital health. Hughes drew three lessons from them:

• Platform technologies: Technologies that can be used in many different ways command high prices, he said. One example is the Munich biotech company Tubulis, whose technology platform for antibody-drug conjugates can probably be expanded to dozens of indications. U.S. drugmaker Gilead acquired Tubulis in spring 2026 for $3.15 billion. On top of that, Gilead could pay up to $1.85 billion in milestone payments.
• Strategic gaps: Buyers look for what they can’t develop quickly enough themselves and what strengthens their portfolio.
• Clinical data: What all three companies had in common was clinically validated data, for example on treatment outcomes. Buyers “pay for certainty and not for vague promises,” Hughes said.

In biotechnology, Hughes considers patent expirations at the big pharmaceutical companies the most important driver of acquisitions. He cited reports that, as a result, they stand to lose around $200 billion in revenue by 2030. Some estimates are even higher. Because developing a drug takes 10 to 15 years, he said, it is cheaper and faster for the companies to buy startups.

Business angels and funds at the same table

A question that keeps coming up in the industry, Fakler said, is whether having many private investors makes a funding round unattractive to institutional backers. In medtech, that has not been his experience so far. At cureVision, business angels invested alongside others in both Companisto rounds, he said, and that posed no obstacle for either the institutional backers or the American investor. Fakler mentioned other institutional co-investors such as High-Tech Gründerfonds (HTGF) and Samsung, which invested in DiaMonTech. The biotech startup PerioTrap completed two funding rounds through Companisto together with bmp Ventures.

Institutional investors are very often involved in medtech rounds on Companisto as well, Hughes said. Lubinski described it as a two-way street: the crowd likes to invest alongside a large institutional investor. Conversely, such an investor likes to see that a topic has enough market appeal to win over thousands of Companisto investors.

Because many venture capital investors are active in medtech, Fakler also saw good prospects for follow-on financing. However, there is never a guarantee of another funding round, least of all if a startup misses its milestones.

Why health startups fail

“Risk capital providers don’t like two things: risk and providing capital,” Lubinski joked. When startups fail, he said, it ultimately comes down to financing: “The money’s gone.” Usually something has gone wrong with the technology before that. With each funding round, a startup tries to reach the next milestone. Often it succeeds; sometimes it takes longer, and the money just barely lasts. And sometimes it doesn’t work out. Then the founder has to explain why the milestone was missed and why another investment is still worthwhile.

Time adds to the difficulty. Some funds have to deliver returns to their investors after just five or seven years, Lubinski said. In medical technology, it tends to take more like 10 years. If a company succeeds, the return is larger, he said, but it comes later. Venture capital investors therefore need funds with a correspondingly long term.

The same applies to private investors: their money may be tied up for a decade, and before an exit, an investment is usually difficult to sell. In addition, the percentage stake of existing investors typically shrinks with each new funding round unless they invest more.

To guard against nasty surprises, Lubinski relied on openness. Just as DiaMonTech submits quarterly reports on Companisto, he said, he keeps his large institutional investors informed every quarter or every month. If they learn about delays early, both sides can talk as equals, and a problem is then more likely to be solved. Early in his career as an entrepreneur, he said, he always painted the rosiest possible picture, until at some point it led to conflict. “That doesn’t work so well.”

Why the team matters

Lägel, Fakler, and Hughes agreed on the importance of the team. A founding team has to be able to weather headwinds, Lägel said, for example when capital doesn’t come in as quickly as needed and the founders have to live off their savings for a while. And it has to be able to reinvent itself if the technology suddenly “goes down the drain.” A team like that, he said, is worth entrusting with time and money.

Fakler stressed the ability to execute quickly: Can a team rebuild its product almost from scratch in a short time, or shrink it to a much smaller form factor? Can it withstand a patent lawsuit? Or is it fresh out of university, with no idea what to do when headwinds hit? Hughes pointed to the complexity of the market: a team that meets every requirement is hard to find, he said. If it checks some of those boxes and has a plan for building out its capabilities, that’s already pretty good. But a very good foundation has to be there. Above all, he said, founders need staying power.

Apps on prescription: The sluggish market for DiGA

Germany is “a special country,” Lägel said. In his experience, digital health applications (DiGA) have been slow to take off. These are digital medical devices, usually apps, that doctors and psychotherapists can prescribe and whose costs are covered by statutory health insurance. The Federal Institute for Drugs and Medical Devices (BfArM) adds them to its DiGA directory either provisionally, while their benefit still has to be demonstrated in a trial period, or permanently, if it has already been proven.

When the first DiGA came onto the market, many investors put large sums into them, himself included, Lägel recalled. “Wow, Germany has finally woken up,” they thought. The hoped-for boom never came, and everyone “had to learn that the hard way,” he said. The market is growing again now, but slowly. Lägel attributed this to resistance from the health insurers, who would rather offer their own apps. Still, he said, DiGA are “here to stay.”

Lägel recommended the DiGA report published in April 2026 by the National Association of Statutory Health Insurance Funds (GKV-Spitzenverband). According to the report, people with statutory health insurance used around 1.6 million DiGA from September 2020 through the end of 2025, either on a doctor’s prescription or with their insurer’s approval. Statutory health insurers paid a total of around €400 million for them, less than 0.1 percent of what Germany spends on health in a single year. When it presented the report, the association objected that most DiGA enter routine care without proven benefit and that, in their first year, they have to be paid for at prices set by the manufacturers themselves.

Even so, the market has potential if a startup does everything right, Lägel said. He pointed to Kaia Health, whose sale Hughes had presented as one of the three exits. The Munich company started out in 2016 with an app for back pain, which was permanently added to the DiGA directory in 2023. The health services research institute Lägel was involved with at the time contributed to that, he said. Kaia also developed other applications and was sold to its competitor Sword Health in early 2026 for up to $285 million. Lägel summed up what “doing everything right” means: start in the German market and then expand internationally.

What artificial intelligence is changing

At DiaMonTech, AI is part of everyday work: writing emails, creating technical documentation, summarizing regulatory requirements. But you always have to check its output, Lubinski warned. The AI tends to make “a few stupid mistakes” and then defends them “vehemently.”

AI is “a great help,” Lägel said, but you have to be able to tell “where it’s messing up.” Startups and investors could throw their old plans out the window, he said, because many tasks can potentially be handled more efficiently with AI and AI agents than with additional staff. In health care, he expects this to take longer than elsewhere, but to free up resources that are sorely lacking today and relieve the system of “stupid bureaucracy.”

Fakler said startups are already using AI in diagnostic imaging, for example to analyze X-ray and CT images. That saves resources. AI can also find new biomarkers, meaning measurable characteristics in the body that point to a disease, he said. When you analyze blood or plasma, you normally find only what you are looking for. An AI might discover patterns that no one has looked for before, and that could lead to new medical devices.

The speakers’ outlook

Lägel took hope from what he described as a shift in recent years: medicine is increasingly treating the causes of diseases rather than merely relieving symptoms. That began with hepatitis C, he said, and extends through gene and cell therapies and mRNA to new approaches in cancer treatment.

At the same time, Lägel saw AI driving an upheaval that is also changing investing. Investments in pure software could turn out to be “complete junk,” he said. Anyone who keeps investing in software, including in health care, has to pay close attention to how fast a startup is growing and winning customers. Investments in medical technology and biotechnology, by contrast, which many investors have tended to shy away from until now, are something people will “come to appreciate enormously.” They take more time, upfront funding, and patience, he said, but offer “a lot of safety.” That does not make medtech and biotech investments low-risk: these startups can fail too, often because they run out of money along the long road. A total loss is possible.

Lubinski expected more wearables that capture more biomarkers with more sensors, along with AI that runs locally in the background so the data can stay on the device. Instead of just showing your current heart rate or blood glucose level, it could connect the data and issue warnings such as “You’ll get sick in a week.” Medicine, he said, is thus moving away from the snapshot taken at an annual checkup toward continuous monitoring that allows a faster response.

Fakler hoped that diseases considered all but incurable for decades could soon be cured. He pointed to personalized cancer vaccines, which are tailored to the changes in an individual patient’s tumor and are currently being tested in clinical trials. AI could enable big leaps in this area over the next few years, he said.

Hughes expected AI to continue gaining ground in diagnostics and saw personalized medicine coming more into focus as a result.

The bottom line

In the speakers’ assessment, medtech and biotech startups operate in large, comparatively easy-to-size markets with high barriers to entry, and deep-pocketed corporations are actively looking for innovations they can acquire. The price is time: trials, certification, and reimbursement procedures are lengthy, and it can take about 10 years to reach a potential exit. The masterclass suggests a short checklist: Who pays for the product, and is there a clear path to reimbursement? Is the benefit measurable? Is the business scalable, including beyond Germany? Does the team have regulatory and clinical experience in addition to scientific expertise? And will the money last until the next milestone?

Often, these questions can be answered only with access to trial data and financial figures and by talking to the founders. At Companisto, an investment team reviews startups against criteria like these before they raise capital on the platform. Investors nonetheless bear the risk themselves: even carefully vetted startups can fail.

Anyone who wants to invest in health startups should therefore commit only money they can spare for the long term, spread it across several investments, and be prepared for the long haul. After all, whether a product ultimately wins over doctors, patients, and health insurers often doesn’t become clear for years.

Note: This article is based on the Companisto masterclass of May 20, 2026. Market assessments reflect the speakers’ views at the time; supplementary figures come from publicly available sources (as of October 2026). DiaMonTech, cureVision, and PerioTrap have run funding rounds through Companisto; mentioning them is not a recommendation to invest in these companies. This article is for general information only and does not constitute investment advice. Investing in startups involves considerable risks and can result in the total loss of the capital invested.