Medtech Due Diligence Looks Past Revenue to Ask Who Buys This Company

Medtech due diligence is the process an investor or acquirer runs to verify a device company's clinical, technical, and commercial claims before committing capital. In medtech, that process goes further than revenue and traction.

It asks a question most founders never prepare for: who is the eventual buyer, and does this company fit what that buyer wants.

Key Takeaways

• Eric Heinz of Heinz Ventures says medtech is too complicated for a generalist investor to diligence alone, which is why specialized partners matter.
• Heinz says 90% of venture-backed medtech companies exit through M&A, which is why diligence increasingly checks exit-path fit, not just whether the product works.
• A founder can go through an informal diligence process with an adviser months before a formal raise and come out with a specific list of gaps to close.
• A MarketCraft client on track for $6-7 million in revenue still struggled to close a round, because strategics and VCs kept waiting for someone else to move first.
• IP work and product development compete for the same early capital, which is why diligence gaps often trace back to underfunding, not bad decisions.

Watch the full episode on YouTube

Medtech Due Diligence Runs Deeper Than Diligence in Other Industries

Clinical and regulatory risk is where medtech due diligence has to go deeper than most other venture categories require. A generalist investor evaluating a consumer product can lean on market comps and growth metrics.

A medtech investor has to understand whether the clinical claims hold up and whether the regulatory pathway is real.

I interviewed Eric Heinz, founder of Heinz Ventures, on an episode about how medtech founders build strategic value toward an M&A exit. He named why generalist diligence fails in this category:

"Because medtech is so complicated, you really need a partner to do an adequate due diligence and understand the risks of the investment you're looking at."

Heinz pointed to a specific failure mode this causes. An LP or early-stage investor gets into a deal because a friend got into it first, without doing the diligence themselves. In a straightforward consumer category, that shortcut might not matter much.

In medtech, it's how capital ends up concentrated in deals nobody vetted.

How Founders Can Run Their Own Diligence Process Before Any Term Sheet

The strongest preparation often starts months before any formal raise, informally, with someone willing to name the gaps before an investor ever does.

Most founders wait for a lead investor to run this process during a live raise, when the clock is already working against them. By then, fixing a gap costs more than it would have earlier.

Heinz described spending a year as a pro bono adviser to a company before writing a check, specifically to run them through his own diligence process early:

"I ran them through my diligence process and shared with them a couple deficiencies that I said: Guys, you need to fill these gaps before I or any other external investor could put money into the company."

He expected the founders to push back. Instead, they treated the list as a punch list and spent the next year closing it. A year later, Heinz became their formal adviser, and eventually their lead investor on the pre-seed round.

The diligence conversation that matters most often happens before a formal process exists.

90% of Medtech Exits Going Through M&A Changes What Diligence Checks

A question that rarely comes up in categories where an IPO is realistic now sits at the center of medtech due diligence: who is the eventual buyer, and does this company fit what that buyer looks for.

Most medtech venture exits never reach a public market. The company either gets acquired or stalls, and few founders plan around that reality from day one.

A founder who can't name a category of likely acquirer is building toward an exit path nobody has priced in.

In medtech specifically, that question has weight behind it. Heinz says 90% of venture-backed medtech companies exit through M&A. He explained why that number shapes his diligence process:

"From a venture capital perspective, you really want to understand what your exit strategies are, and that's one of the areas I look at closely when I'm doing due diligence on a company we're looking to invest in."

He described this as a particular problem for AI-driven medtech tools, where the technology risks displacement within months and the eventual strategic buyer is genuinely unclear.

Without a visible path to a specific category of acquirer, Heinz said it becomes difficult to build conviction about how and when the investment exits. That's a diligence question most first-time medtech founders never prepare for.

Revenue and Interested Strategics Still Don't Guarantee a Deal Closes

A deal with real revenue and inbound interest from strategic acquirers can still stall, because medtech due diligence doesn't end once the numbers look good.

I described a MarketCraft client on track for six to seven million dollars in revenue, with real technology and strategics already circling, on the same episode with Heinz:

"Everybody we talk to, whether it's a strategic or a VC, says: Hey, yeah, like we're really interested, but when you get a term sheet, let us know and then share that term sheet with us."

Heinz connected that pattern to an earlier-stage version of the same capital problem. Companies need money to hire patent attorneys and start IP work, or to fund product development, at the exact stage when investors are asking for more evidence before committing.

Founders can't close the gaps diligence identifies without capital, and investors won't release capital until the gaps are closed. An investor willing to assess the opportunity and make a decisive call, either way, is what moves a stalled deal forward.

What This Means for Medtech Founders

In my experience working with medtech founders, the founders who get through due diligence fastest are the ones who ran their own version of it against themselves months earlier.

Before any formal process starts, find someone with real medtech investing or M&A experience and ask them to name your gaps honestly.

Also ask the question most founders skip: if this company gets acquired, who's the buyer, and have you started that relationship yet.

Market engineering, the category design, messaging, and narrative work that shapes how investors and strategic acquirers understand your market, is what makes that question answerable before diligence ever starts.

This connects to the buy side of the same process. What acquirers look at in the commercial function before a medical device acquisition covers the diligence checklist from the other side of the table.

Frequently Asked Questions

What is medtech due diligence?

Medtech due diligence is the process an investor or acquirer uses to verify a medical device or diagnostics company's clinical, technical, regulatory, and commercial claims before committing capital.

It requires evaluators who understand clinical and regulatory risk, which generalist investors often can't assess on their own.

What do investors look for in medtech due diligence?

Investors look at clinical data, IP position, regulatory pathway, and commercial traction, and increasingly at exit path. With 90% of venture-backed medtech companies exiting through M&A, investors specifically evaluate whether a company fits what a realistic strategic acquirer would want.

Why does medtech due diligence take longer than in other industries?

It takes longer because the risks are more specialized. A generalist investor can't always evaluate clinical validity or regulatory pathway alone, so medtech diligence often requires bringing in a partner or adviser with direct industry experience before a deal can move forward.

How can founders prepare for medtech due diligence before a formal raise?

Find an adviser with real medtech investing or M&A experience and ask them to run an informal diligence pass before a formal fundraise starts. Treat the gaps they identify as a punch list to close.

Where to Go From Here

If you're doing this yourself. Check the Exit Positioning Score to see how your company would read to a strategic acquirer running diligence today.

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 preparing for a raise or an exit conversation, the audit flags the gaps a diligence process would find first.

Listen to Eric Heinz's Full Story

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

About Eric Heinz

Eric Heinz is the founder and Managing Partner of Heinz Ventures, a venture fund investing in pre-seed and seed-stage medtech companies. He brings 25 years of experience from Medtronic and Intuitive Surgical, including corporate development and M&A, to evaluating early-stage medtech investments.

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.