Welcome to the 74th edition of Deep Tech Catalyst, the channel by The Scenarionist, where science meets venture!
If you're building in MedTech—whether you're engineering a novel therapeutic device or navigating strategic planning from day zero—this episode is for you.
Today, we welcome back Peter Olcott, Deeptech Principal at First Spark Ventures, who returns to Deep Tech Catalyst after our first conversation last year.
What began as a discussion on business models in medical technology quickly evolved into something much deeper: a real masterclass on how to structure, finance, and scale a MedTech company from first prototype to hospital deployment.
So I decided to do something different: design a two-part miniseries focused entirely on the MedTech venture journey—from concept to commercialization.
In this first episode, we explore:
An overview of the core business models in MedTech
What it really takes to bring a capital-intensive device to market
How to engage KOLs (Key Opinion Leaders) and why it matters for VCs
When and how to build market traction before FDA approval
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BEYOND THE CONVERSATION — REFLECTIONS & STRATEGIC INSIGHTS FROM THE EPISODE
What are the Core Business Models in MedTech?
The journey of medical device companies can vary significantly depending on the type of solution they deliver. Some ventures are highly capital-intensive, while others follow more straightforward commercial pathways. Let’s start by zooming out and looking at the broader landscape.
1. CapEx Model
Some medical devices fall into a capital expenditure (CapEx) category. These are high-ticket items, often costing over $1 million per unit. Though the price threshold is somewhat arbitrary, the defining characteristic is the large upfront cost required to purchase the equipment.
Key Features:
Target customers: Hospitals and large clinics
Purchase behavior: Rarely paid in cash upfront—devices are typically financed
Sales dynamics: Long sales cycles with multiple stakeholders involved
Post-sale revenue: Includes service contracts and maintenance agreements to ensure uptime and performance reliability
This model mirrors consumer experiences in industries like automotive. For example, much like a car purchase, hospitals finance the equipment and often bundle it with a warranty and scheduled maintenance.
2. Per-Procedure Model
Another prevalent model centers around single-use or short-use devices, which are tied to specific procedures. These include:
Catheters used in cardiac interventions (e.g., atrial fibrillation)
Implants such as pacemakers and artificial knees
Key Features:
Revenue model: Based on volume—the company earns revenue per unit sold and used
Pricing: Usually ranges from $5,000 to $50,000 per procedure
Customer behavior: Typically purchased as needed, without major upfront investments
This model avoids the CapEx burden, providing a more transactional and repeatable sales cycle, often reimbursed as part of the overall procedural cost.
3. Reusable Device Model
The third category includes reusable medical instruments, such as scalpels and certain surgical tools. These devices are used in multiple procedures but are sterilized between uses.
Key Features:
Cost profile: Generally lower cost, not venture-scale opportunities
Product type: Basic tools with limited IP or defensibility
Market dynamics: Stable demand but less innovation-driven
Inside a Capital-Intensive MedTech Startup
When it comes to bringing a capital-intensive medical device to market, the process is rarely straightforward. Unlike software or low-cost hardware, these ventures often begin not with a prototype or even a lab-tested concept, but with an idea—and a long road ahead.
The Central Role of Key Opinion Leaders (KOLs)
In the MedTech world, Key Opinion Leaders (KOLs) play a pivotal role. These are not just advisors or product testers—they are often instrumental in shaping the direction of entirely new devices. In many capital-intensive medical device ventures, KOL engagement starts well before a working prototype exists.
In the most successful cases, startup teams have partnered early with leading clinicians in their target field, sometimes even before formal product development begins. These clinicians help articulate unmet clinical needs that existing systems fail to address.
This kind of early feedback isn't just technical—it’s strategic.
When top clinicians push for a solution to a clearly defined problem, they’re not only shaping product requirements; they're helping to validate a market thesis before a single unit is built.
Building Trust Between Engineers and Clinicians
For founders with technical or engineering backgrounds, stepping into clinical territory can be intimidating. How do you approach respected physicians and convince them to support your vision?
The answer lies in understanding that the relationship must be mutually beneficial—and strategically aligned from the outset.
One practical way to structure this relationship is to bring KOLs in as early investors.
While advisory roles are common, the most impactful KOL relationships are those in which the clinicians have real skin in the game.
Core Insight: When multiple KOLs invest personal capital into the company, it’s not just symbolic—it sends a powerful message to potential venture capital investors: the very clinicians who would use and prescribe this device believe in it enough to fund it themselves. Moreover, their presence in the early stage of the company strengthens the vision, enhances the credibility of the team behind it, and underscores the clear articulation of an unmet clinical need.
In the Meantime: Who Is the First Customer of a MedTech Founder?
A common misconception among first-time founders is that their first customer is the hospital or clinician who will eventually buy the product. But in the early days—especially in capital-intensive sectors like MedTech—the real first customer is the investor.
Startups, after all, are built on capital. And in the early stages, that capital doesn’t come from product revenue—it comes from selling equity.
That means the first person you need to convince isn’t a buyer in procurement; it’s a venture capitalist. KOLs become critical in this phase not just for their clinical insight, but for their ability to de-risk the investment story. They help translate a technical concept into a market-ready narrative.
In this sense, the founder’s real job early on is to build a coalition: technical talent, clinical champions, and a capital partner who can bridge both worlds.
Pre-FDA Milestones in Capital-Intensive MedTech
Once the device was finally built and cleared for use, the company faced its next challenge: market adoption.
But here again, the KOLs played a crucial role. These weren’t just passive investors—they were the very people who would go on to champion the product within hospitals, influence peer adoption, and help the company secure its first sales.
This progression—from co-creator to early investor to product advocate—is one of the most powerful dynamics in capital-intensive MedTech. It’s also one of the least understood by founders who focus only on product development.
When executed well, however, it becomes a flywheel: clinical validation leads to capital, capital leads to product development, and product development returns to the clinic with trusted voices ready to vouch for its impact.
The Marketing Clock Starts Early, Pre-FDA
Launching a capital-intensive medical device—especially one that requires FDA approval and multimillion-dollar investment—demands a carefully orchestrated sequence of technical, regulatory, and commercial milestones. What might surprise many first-time founders is just how much of the work begins before the product is approved, or even finalized.
In large CapEx MedTech ventures, you cannot afford to wait for FDA clearance before initiating your commercial efforts.
That’s because sales cycles in this segment are exceptionally long. Hospitals often need to plan significant infrastructure upgrades—such as building or retrofitting treatment rooms—well in advance of placing a purchase order.
In some cases, such as radiotherapy systems, preparing a facility to house the device might require years of planning, budgeting, and construction. That means companies must begin serious marketing activities one to two years before FDA approval.
This marketing phase typically involves a strong presence at industry conferences, where the company invests in professional exhibition booths—not a table in the corner, but a full-scale display capable of standing alongside global players.
Building a booth that appears credible next to these giants may cost $1 million or more per year, which underscores the importance of early fundraising.
Academic Engagement and Sponsored Research
Marketing in this context isn’t just about visibility. It’s also about credibility, which is built primarily through peer-reviewed data. That’s where KOLs—the Key Opinion Leaders—play another essential role.
Most KOLs operate in academic medical centers.
They are often surrounded by residents, junior faculty, and research staff. What draws them to a new technology, beyond clinical relevance, is the opportunity to publish and secure grants.
This alignment creates a natural entry point for collaboration: from day one, the company can co-develop sponsored research projects, support grants, and facilitate early testing—sometimes even when the product still exists only as a benchtop prototype.
This research is critical not only for technical validation, but for generating the independent, peer-reviewed data that VCs, regulators, and hospitals alike will look for as proof of legitimacy.
Pre-Approval Sales Strategy: Building the Funnel Before You Can Deliver
While marketing and research are ramping up, commercial planning also begins well before approval. Because these devices are so large and expensive, you can't manufacture them at scale from day one.
In many cases, CapEx MedTech companies are not shipping hundreds of devices—they’re building three, five, maybe ten units per year.
This production bottleneck creates an interesting dynamic: early access becomes a competitive advantage for hospitals.
Institutions want to be among the first to adopt breakthrough technologies—not only for clinical excellence, but also for institutional prestige.
Startups can use this to their advantage by creating exclusivity around early machines. Hospitals may sign letters of interest, compete for delivery slots, and agree to premium pricing for priority access.
Rather than discounting early units, many startups actually charge a premium for the first systems—framing it as both a commercial and reputational milestone for the buyer.
What ultimately convinces early adopters is not just the product—but the ecosystem around it: respected doctors, scientific validation, professional presentation, and the sense that this company is here to stay.
Putting It All Together: From Zero to First Sale
So what does the full pre-approval journey look like in practice?
Initial KOL engagement: Clinicians invest, co-develop research, and help shape the product thesis.
Sponsored research and grants: Data is generated to support clinical claims and build credibility.
Conference marketing and booth investment: The company positions itself in the public eye alongside global players.
Early sales development: Letters of interest (see below) are gathered, with customer prioritization taking shape.
Backlog formation: Because production is initially constrained, a waiting list of customers builds up, creating both urgency and validation.
Throughout this process, founders are not just building a product. They are laying the foundation for market trust, scientific legitimacy, and commercial readiness—so that when FDA approval does arrive, the first customer isn’t waiting to be found… they’re already standing in line.
From Letters of Interest to Deposits: Pre-Sales in CapEx MedTech
A Letter of Interest (LOI) is typically non-binding. It signals intent but does not obligate a hospital or customer to make a purchase. In many industries, especially at early stages, LOIs are useful to gauge demand and refine the offering.
But in capital-intensive MedTech, they’re often not enough.
As companies approach regulatory milestones—particularly FDA clearance—the dynamics shift. What starts as interest quickly needs to evolve into financial commitments, especially when production capacity is limited.
From LOI to Deposit: Signaling Real Demand
Unlike LOIs, deposits are a stronger form of market validation. Deposits can be collected from hospitals before FDA approval, also one year in advance. This wasn’t just a marketing tool—it was a critical funding milestone. Deposits provided proof that top-tier institutions were willing to commit capital in exchange for early access to the device, even before it was commercially available.
This dynamic mirrors what Tesla famously did in its early days: collecting deposits well in advance of delivery to validate demand and raise the capital needed for production.
In the MedTech world, this same strategy allows startups to show booked revenue before shipping a single product.
With a growing backlog of committed customers and millions of dollars in pre-orders, the company can then use this traction to raise a large institutional round, often to fund factory development and commercial scaling.
Standardizing Contracts: What Hospitals Expect in CapEx Transactions
One of the lesser-known realities in CapEx MedTech is that contract structures are surprisingly standardized. Hospitals have been buying CT scanners, MRIs, and PET machines for decades. The commercial terms for these transactions, pioneered by big players, are well established.
When startups enter this space, they must conform to these expectations. That means creating contracts that include specific, detailed components, such as Customer Acceptance Testing (CAT).
Customer Acceptance Testing (CAT)
Before a hospital will pay in full, the device must pass a pre-agreed set of acceptance criteria. These are negotiated at the time of contract signing and are typically tied to performance specifications of the machine—what it does, how it operates, tolerances, speed, reliability, and so forth.
Once the machine is installed and these specs are met, the hospital completes payment. Until that point, most contracts require an initial deposit, which may be refundable if the device is not delivered or fails to meet acceptance standards.
In effect, these are performance-contingent sales contracts, designed to protect the buyer but also create a clear, binding revenue path for the seller—once quality is proven.
Why Reliability Matters More Than You Think
Passing acceptance testing is only part of the equation. Once installed, the machine enters a service obligation period, during which the company is required to guarantee uptime.
Hospitals rely on these devices for critical procedures. If the machine is down—even for a few hours—it can disrupt schedules, delay treatments, and affect reimbursement flows.
That’s why contracts typically include financial penalties for excessive downtime. In some cases, companies are required to pay the hospital an hourly compensation rate if the machine is inoperable beyond an agreed threshold.
This creates an enormous incentive to ensure mechanical and operational reliability. Parts that break too often or systems that fail under clinical load can destroy margin, damage reputation, or—worst-case—sink the company entirely.
That’s it for today—but we’re just getting started!
Join us next week for Part 2, where we dive deeper into margins, sales dynamics, and financing strategy!
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