A Business Plan for a Medical Device Startup Fails When It Ends at Regulatory Approval

A business plan for a medical device startup has to run well past regulatory approval, because approval is where the hardest stretch begins. Most founders plan the regulatory pathway in detail and leave payment, evidence, and the commercial team for later.

Paul Grand of MedTech Innovator calls the gap that opens the valley of death.

Key Takeaways

• Paul Grand, CEO of MedTech Innovator, calls the years after regulatory approval the valley of death, when a cleared device has too little evidence to convince buyers or investors.
• Grand says reimbursement and payment planning belong at the whiteboard stage, before the first study is run.
• A diagnostic for a disease with no available treatment is, in Grand's words, usually a recipe for disaster.
• Mark McKenna says Prometheus Biosciences used a long-range plan as its guiding post for everything it did internally and externally before a $10.8 billion sale to Merck.
• Grand says founders are not often honest with themselves, so a plan needs outside review before an investor runs it.

Watch the full episode on YouTube

What Does a Business Plan for a Medical Device Startup Need to Cover After Approval?

A business plan for a medical device startup should cover the regulatory pathway, the payment pathway, the evidence buyers will demand, and the commercial team. Approval is one milestone in that plan, and it's the easiest one to prepare for.

In my experience working with medtech founders, the plan ends where the regulatory work ends. The timeline shows submission dates and clearance in detail. Everything after it collapses into one revenue line.

I once sat on a panel called the valley of death. My version of it was founders who start thinking about commercialization and marketing a few months before launch. By then, the work's already late.

I interviewed Paul Grand, CEO of MedTech Innovator, on an episode about avoiding the biggest startup mistakes. Grand said about 82 of its startups had joined an alumni call that morning, and one founder remembered the team crying the day approval came.

Years later, that founder was building a commercial sales organization and missed the days when approval was the only thing to think about. Grand described where the real danger sits:

"The big valley of death is companies that have gotten regulatory approval. And they had just enough to get there, meaning both financially and evidence-wise. Maybe they got just enough evidence to get regulatory approval, if they needed evidence."

Then the market asks to be convinced. Grand listed what buyers want to hear, that the device works, that it works in the workflow of other people, and that it's worth paying for.

That's a spec for the plan, and a plan that stops at clearance answers none of it.

FDA clearance is the starting line, not the finish line. Clinical validation ≠ commercial traction, and the distance between them is the traction gap.

For the full sequence, read the medtech commercialization strategy guide.

Reimbursement and Evidence Belong in the Plan at the Whiteboard Stage

A medical device business plan should treat reimbursement and clinical evidence as design inputs from the first draft. The payment pathway decides which studies to run, which buyer to approach first, and how much capital the company needs before revenue starts.

On the same episode, Grand put the timing this way:

"The example I said a minute ago, which I'll repeat, is reimbursement, payment, however that's going to work. You need to, you should be doing that at the whiteboard stage."

The alternative is the founder who finishes the studies and then asks how anyone will pay. By that point the studies may have answered the wrong question.

Grand described that founder directly. The device is invented and the studies are done before anyone asks how people will pay for it.

Grand's read of the market is that buyers look for payment that is understood or provable, with a real path to achieving it. Investors increasingly want the payment pathway validated before they commit.

He also named the clearest version of a plan that skips the whole journey:

"There's disconnects like developing a diagnostic for which there's no therapeutic. There's no treatment, but we're going to diagnose disease that there's nothing to do about. That's usually a recipe for disaster. That's a big disconnect."

A diagnostic proves a test works. A business plan has to answer what the physician does with a positive result. If the honest answer is nothing, the plan describes a technology demonstration.

For the payment side of that question, read what reimbursement knowledge does for a medical device rep.

A Medical Device Startup Business Plan Tells the Team What to Ignore

A medical device startup business plan works as a filter. It tells the team which indications, partnerships, and ideas are core and which are distractions, so a small company doesn't spend its runway chasing whatever looks most exciting that week.

Small teams get offers constantly, such as a new indication, a distribution deal, or a hospital that wants a custom version. Without a written plan, each one looks like momentum.

A plan turns each offer into a question the team can answer in minutes, because it already says what's core.

In my experience working with medtech founders, the ones who say no quickly are the ones with a plan to point at. The plan carries the argument so the founder doesn't have to win it every time.

I interviewed Mark McKenna, the former CEO of Prometheus Biosciences, on an episode about Prometheus's $10.8B exit to Merck, a deal Merck confirmed at about $10.8 billion. I asked how Prometheus separated shiny objects from additive opportunities. McKenna said:

"The key for us was having a long-range plan that was our guiding post for everything we wanted to do internally and externally. And I think that you got to have that compass to say, hey, this is exactly where we want to go. This is core and non-core."

McKenna described clusters of core indications that Prometheus pursued, then validated its science against them. The plan decided the order of work before any single opportunity could.

For the full deal, read the Prometheus Merck acquisition breakdown.

Honest Assumptions and Investor Timelines Decide Whether a Business Plan Holds Up

A medical device business plan holds up when its timelines match what experienced operators expect, and when its investors can wait that long. Optimistic best-case schedules and investor hold periods that don't match the company's real timeline break plans quickly.

Grand described MedTech Innovator's review process. Founders sit with mentors from large strategics who have seen the same mistakes repeatedly. A mentor might tell a founder an assumption is wrong, a timeline will take twice as long, or a price point will never get paid.

Grand named Edwards, J&J, and Dexcom among the large strategics that supply those mentors. A founder rarely hears that a timeline will take twice as long from inside the company, which is why the review sits outside it.

The same discipline applies to who funds the plan. Grand said founders should ask investors early what their hold time can be.

Some investors have to return capital in three years, and one of them is a poor fit for a company seven years from a meaningful milestone.

That investor's needs will shape the company whether the founder planned for them or not. For the fundraising side, read how medical device startup funding closes faster when category work happens pre-seed.

On the same episode, Grand explained why the outside review matters:

"Founders are not often honest with themselves. They might look at the most optimistic, best-case kind of scenario. And if everything goes well and according to the plan, here's the timeline."

Run that check on your own plan before an investor does.

What Does This Mean for Medtech Founders Writing a Business Plan?

In my experience working with medtech founders, the business plans that hold up treat regulatory clearance as the midpoint of the story. The regulatory pathway is one chapter, and the company has to survive all the chapters after it.

Build the payment pathway, the evidence plan, and the commercial team into the first draft, the same way the regulatory strategy gets built in. Then ask someone who has done it before to break the timeline.

That's the test of a good plan. If a founder can't say what the company does the month after clearance, who pays for it, and what the evidence has to show, the plan isn't finished.

At MarketCraft, we call this market engineering. The market work runs alongside the regulatory work, so the company reaches clearance with buyers who already recognize it. Great companies don't wait for markets to form. They engineer them.

A plan written that way also gives investors something to test. They can see which assumptions carry the company, which ones are validated, and which ones still need a study or a pilot.

For how to sequence that commercial work from Series A to acquisition, read how to sequence a medical device go-to-market strategy.

Frequently Asked Questions

What should a business plan for a medical device startup include?

It should include the regulatory pathway, the reimbursement and payment strategy, the clinical evidence buyers and investors will ask for, and a commercial plan for the years after clearance.

A plan that stops at approval covers the easier half of the company's life and skips the stretch Paul Grand of MedTech Innovator calls the valley of death.

Why do medical device startups struggle after FDA clearance?

Many founders plan the regulatory pathway rigorously and treat approval as the end goal.

After clearance, buyers and investors ask for evidence that the device works in their workflow and is worth paying for, and a small team has to build a commercial organization from nothing. Grand calls that gap the valley of death.

Does a medical device business plan need a reimbursement strategy?

Yes. Grand says the market looks for payment that is understood or provable, with a real path to achieving it, and that reimbursement belongs at the whiteboard stage before the studies are done.

A device with no route to payment struggles to find traction, however strong the clinical case is.

How does a business plan keep a medical device startup focused?

A long-range plan separates core work from distractions. Mark McKenna of Prometheus Biosciences described using one as the guiding post for everything the company did internally and externally, including which indications to pursue.

Without that filter, a small team tends to chase every idea and spend its time running in circles.

Where Should You Go From Here?

If you're doing this yourself. Read the medtech commercialization strategy pillar to see the commercial work that should sit beside the regulatory plan. Then listen to The State of MedTech for the founders who built it.

If you want it engineered with you. MarketCraft takes on a small number of medtech teams each quarter, starting with The Market Engineering Audit. For founders writing a business plan, it checks whether the commercial half is as developed as the regulatory half.

Listen to Paul Grand's Full Story

Paul Grand's full conversation with Omar Khateeb is available on The State of MedTech. Watch on YouTube. Subscribe wherever you listen to podcasts.

About Paul Grand

Paul Grand is the CEO and founder of MedTech Innovator, an accelerator for medical device, digital health, and diagnostics startups. He started it in 2013 as a program inside RCT Ventures, the venture fund where he worked as a managing director.

Learn more at medtechinnovator.org.

About the Author

Omar Khateeb is the founder of MarketCraft and host of The State of MedTech, the number one podcast in the medtech industry. He works with medtech founders and commercial leaders on market engineering, commercialization strategy, and revenue growth.

Visit marketcraft.ai or subscribe to The State of MedTech for weekly conversations with the people building the future of medical devices.