Funding a MedTech startup is not the same as funding a SaaS company. A regulated medical device costs more to build, takes longer to reach revenue, and carries a compliance bill that does not go away after launch. The correct way to finance a MedTech company is to treat regulatory cost as part of the cost of goods sold, plan for an 18–24 month pre-revenue phase before a Notified Body decision, and match the funding instrument to the stage. Non-dilutive grants early, angels and strategic seed later, institutional Series A once clinical and regulatory proof is in hand. Reimbursement is a second, separate multi-year problem that most founders do not budget for until it is too late.

By Felix Lenhard and Tibor Zechmeister. Last updated 10 April 2026.

TL;DR

  • MedTech startups need more capital than comparable SaaS startups because the MDR (Regulation (EU) 2017/745) imposes a cost floor that does not exist in consumer software. Regulatory cost is part of COGS, not a separate line item you can defer.
  • The funding stages for a MedTech startup are grant → angel → seed → Series A → Series B. Skipping a stage is not impossible, but it is almost always expensive in equity terms.
  • In Austria specifically, the main non-dilutive funding sources are FFG, AWS, and BASIS. These programs have historically supported qualifying MedTech projects at meaningful scale. Verify current program terms before relying on specific figures.
  • Investor expectations for MedTech must match reality: 18–24 months of pre-revenue runway is common, and the CE mark is not the revenue trigger. Reimbursement is. Investors who do not understand this are dangerous money.
  • Product-market fit alone does not save a MedTech company. Capital structure can kill a good product. A bad term sheet, a dead cap table, or an exclusivity clause to the wrong investor will end the company as surely as a failed audit.
  • The Subtract to Ship rule for funding: every euro saved during the early regulatory phase buys disproportionate optionality later. Every euro spent on compliance theatre buys nothing.

A story about why financing structure matters more than PMF

There was a company in the food-tech space. Not a medical device, but the lesson transfers cleanly. The product was a shrimp farm built on a novel cultivation approach. The team had achieved something most startups only claim to have: genuine product-market fit. The quality was outstanding. The premium pricing worked. Restaurants ordered, reordered, and paid without negotiating. On the business side, every signal was green.

The company still died.

It died because shrimp farming is capital-intensive, and the founder signed investor contracts that did not match the reality of the cash cycle. The infrastructure required upfront spend that the revenue curve could not cover fast enough. The financing structure collapsed before the market could catch the company. Perfect PMF, wrong capital stack, game over.

Felix has told this story to dozens of MedTech founders who walk in assuming that once the product works and the customers want it, the money will follow. It will not. Not automatically. In a regulated industry where the time from "product works" to "revenue lands" is measured in years. Not quarters. The financing structure is a load-bearing part of the company. Get it wrong and the product does not matter. Get it right and you survive the waiting period long enough for the regulatory and reimbursement work to pay off.

This post is the pillar for the funding category in this blog. It exists because too many MedTech founders treat fundraising as an afterthought to be figured out once the device is ready. By then, it is already too late.

Why MedTech funding is not SaaS funding

Start with the cost floor. A SaaS company can. In principle. Be built by two people with laptops, a cloud account, and enough coffee. A MedTech company cannot. The MDR, Regulation (EU) 2017/745, sets out obligations for every manufacturer placing a medical device on the EU market, and those obligations have a price. Article 10 lists the core manufacturer obligations. QMS, technical documentation, clinical evaluation, post-market surveillance, vigilance, PRRC. And each of these is a cost driver before a single euro of revenue arrives.

The honest way to understand this is to stop treating regulatory cost as a separate bucket and start treating it as part of the cost of goods sold. If your device needs ISO 13485 QMS to exist at all (EN ISO 13485:2016+A11:2021), then the QMS is not an optional compliance overlay. It is part of building the product. The same is true of the technical file, the clinical evaluation, and the post-market surveillance system. These are manufacturing costs in the MedTech sense. They should appear in your unit economics model as COGS, not as a mysterious "regulatory" line item that gets added at the end.

This changes how you think about pricing, margin, and break-even. A SaaS company with a 90% gross margin can sustain unprofitable growth for a long time. A MedTech company with a 40% gross margin. After regulatory cost is correctly loaded in. Cannot. The math is different, the burn is different, and the investor profile is different.

Second, the time to revenue is longer. A consumer software product can ship the day the code is merged. A medical device cannot ship until it has a CE mark, and for anything above Class I, that means a Notified Body conformity assessment that takes time, money, and substantive evidence. We have written at length about the real timelines in how long does CE mark take. And the honest answer is almost always longer than first-time founders assume.

Third, the investor expectations differ. A SaaS seed round can be pitched on growth. A MedTech seed round must be pitched on a regulatory and clinical pathway, a reimbursement strategy, and a team that can navigate a Notified Body. Investors who do not ask about those things either do not understand the domain or are willing to lose their money. Neither is the investor you want.

The funding stages for a MedTech startup

The standard progression for a MedTech startup maps roughly to the following stages. The names are borrowed from the general startup world, but the amounts, the milestones, and the investor expectations are MedTech-specific.

Stage 1. Non-dilutive grants (pre-seed)

Before taking any equity money, most MedTech founders should look hard at the non-dilutive funding available in their jurisdiction. Grants do not water down your cap table. They are competitive, slow, and paperwork-heavy, but for a capital-intensive project with a clear innovation angle, they are often the single cheapest capital you will ever raise.

In Austria, the main programs are FFG (the Austrian Research Promotion Agency), AWS (Austria Wirtschaftsservice), and BASIS. Historically these have supported qualifying MedTech projects with grants and soft loans running into the hundreds of thousands, and in some cases up to around EUR 1 million for qualifying MedTech products. Caveat: program terms change. Before relying on any specific figure in a business plan, verify the current terms directly with the agency. Program windows, eligibility criteria, and co-financing ratios move from year to year.

Equivalent non-dilutive programs exist in every EU member state and at the EU level (Horizon Europe, the EIC Accelerator, and related instruments). The rule is the same: look at what is available locally before you give up equity. We will cover the specific programs in dedicated spoke posts in this category.

Stage 2. Angels and friends-and-family

After grants, the next layer of capital is usually angels, early family offices, and sometimes friends-and-family. This money is used to build the first prototype, run the initial usability work, and demonstrate enough traction to raise a proper seed round.

Angel investors in MedTech are a specific subspecies. The best ones have operated or exited a medical device company themselves and understand the time-to-revenue reality. The worst ones treat it like a software investment and panic when the first year does not show a hockey stick. We will cover how to identify and approach the right MedTech angels in a dedicated spoke post at angel investors for MedTech.

This is also the stage where founders make the most painful cap-table mistakes. The ones that destroy companies years later. We will come back to this under "common capital structure traps."

Stage 3. Seed (first institutional round)

The seed round is typically where a MedTech startup takes its first institutional capital, often from a specialist MedTech fund or a health-focused early-stage VC. Amounts vary widely, but the purpose is consistent: fund the development to the point where you can run pivotal clinical or usability evidence generation, prepare the technical file, and enter the Notified Body process.

Seed investors in MedTech will ask about classification, intended purpose, the regulatory plan, the clinical evaluation strategy, and the team's ability to execute against a Notified Body timeline. If your pitch deck does not cover these, it is not a MedTech pitch deck.

Stage 4. Series A (regulatory and clinical milestone)

Series A in MedTech is usually raised against a specific milestone: CE mark achieved (or near-achieved), clinical evidence in hand, first commercial customers signed or in LOI, and a credible reimbursement pathway identified. This is the round where the numbers get real. The funding goes into commercial ramp, sales team, and the post-market activities that MDR Article 10 requires manufacturers to sustain.

Stage 5. Series B and growth

Series B is for scale: geographic expansion, second-product launch, deeper reimbursement work, and often preparation for a strategic exit or continued growth. At this stage the company is generating revenue and the funding conversation shifts from "will the regulator let you ship" to "can you grow fast enough to justify the valuation." The regulatory burden does not disappear. It becomes operational rather than existential.

Skipping stages is possible but expensive. A company that raises a Series A without ever having touched angel or seed money will usually give up more equity than it should. A company that tries to bootstrap past the grant stage usually burns founder cash on things the FFG would have paid for. Each stage exists for a reason.

Regulatory cost as COGS, not as a fourth number

This is the single most important frame in MedTech financial planning, and the place where most first-time founders get it wrong.

In a standard startup financial model, there are three main cost numbers: cost of goods sold, operating expenses, and investment in growth. Founders who come from software will instinctively put regulatory under "operating expenses". Or worse, under a new "regulatory" line that is treated as an optional extra. This is wrong, and it is wrong in a way that has killed companies.

The correct treatment is this: if the MDR says you must have a QMS to place the device on the market, the QMS is part of producing the device. If the MDR says you must have a technical file, clinical evaluation, and post-market surveillance system to keep the device on the market, those are also part of producing the device. They belong in COGS. They affect gross margin. They determine whether the business model is viable at the price point you have in mind.

We have seen the consequence of getting this wrong more than once. A founder builds a model with a software-style 85% gross margin, raises on that model, and then discovers eighteen months later that the real margin. After regulatory, after PMS, after vigilance, after the annual Notified Body surveillance audit. Is closer to 45%. The fundraising story no longer holds. The burn rate looks out of control. The next round has to be raised in a hurry at a punishing valuation, or it does not get raised at all.

The fix is to build the model honestly from day one. Load regulatory cost into COGS. Accept the lower gross margin. Price the device accordingly, or go back and reconsider whether the business model actually works. This is uncomfortable work because it often reveals that the startup-friendly pricing assumed in the first business plan cannot actually fund the regulatory obligations the device will incur. And that is exactly why it needs to be done before fundraising, not after.

Tibor's line on this is blunt and worth sitting with: "If you can't afford regulatory, you can't afford a MedTech project." This is not a motivational quote. It is a hard financial test. If your honest unit economics. With regulatory fully loaded into COGS. Do not produce a viable business, the right decision is to stop the project, not to pretend the regulatory cost will go away.

The Austrian funding ecosystem as an example

Every country in the EU has its own flavour of non-dilutive funding. We are based in Austria, and the Austrian ecosystem is a useful concrete example because the programs are well-defined, the processes are transparent, and the amounts are meaningful for a MedTech startup.

The three main levers in Austria are:

FFG. Österreichische Forschungsförderungsgesellschaft. The national research funding agency. Runs a range of programs covering basic research, applied research, and industrial development. For MedTech, the relevant programs typically sit in the applied research and pre-clinical development space. Grants are co-financed (the company contributes a share), and applications are evaluated by expert panels.

AWS. Austria Wirtschaftsservice. The national promotional bank. Runs loan guarantees, soft loans, and equity-style instruments aimed at early-stage companies that are beyond pure research and moving toward commercialisation. For MedTech, AWS can bridge the gap between the research phase and the first equity raise.

BASIS. A program specifically oriented toward innovative projects with strong market potential. Has historically supported MedTech projects at meaningful scale, in some cases up to around EUR 1 million for qualifying products. Verify current program terms before relying on this figure in any plan. Windows open and close, eligibility criteria shift, and what was available last year may not be available this year.

The general principle transfers beyond Austria: before you raise equity, find out what your national research agency, your national promotional bank, and your regional innovation programs will fund. The time cost of applying is real, but the cost of giving up equity to cover work that the state would have funded is larger.

A note of realism: grants are slower than founders expect. Application cycles run in months, not weeks. Reporting requirements are substantial. Some founders conclude that grants are not worth the time, and for certain fast-moving situations that is a defensible call. For most capital-intensive MedTech projects, it is not. The grant money is there; the paperwork is the price of admission.

Investor expectations and the 18–24 month runway reality

Every MedTech founder should assume. And every MedTech pitch deck should reflect. That there will be an 18–24 month pre-revenue phase where the company is building the device, running the regulatory work, assembling the clinical evidence, and working through the Notified Body conformity assessment. This is not pessimism. This is the median, and many projects take longer.

The runway math follows from this. If you are raising a seed round to take the company through the CE mark milestone, the round needs to cover at least 18–24 months of burn at the realistic burn rate. Not the optimistic one. If you raise 12 months of runway for an 18-month milestone, you will be raising the next round in crisis mode, and that is the worst possible time to raise.

We have seen a very specific failure pattern repeat. A founder comes in confident that MDR work will take "about two months." The team builds a plan and a budget around that assumption. Two months becomes six. Six becomes twelve. The founder runs out of money and has to raise a bridge round at an unfavourable valuation. Then another bridge round. Then another. Two years later the company is still mid-certification and the cap table is so crowded that a proper Series A is no longer plausible. The original error. A timeline assumption that was off by roughly an order of magnitude. Compounds into a funding death spiral. The original device might have been a perfectly good product. It does not matter. The company cannot get there from here.

The honest timeline question is covered in how long does CE mark take, and the honest cost question in CE marking cost breakdown for startups. Both posts should be read before any serious fundraising conversation.

There is also the rule of thumb that Felix repeats to almost every founder he coaches: estimate your real investment and time requirement honestly, then double it. This sounds flippant. It is not. It is a Bayesian correction for the systematic underestimation that first-time founders apply to regulated projects. The doubling is the corrected estimate.

PMF and financing are both required. Neither substitutes for the other

There is a comforting belief in the startup world that if you achieve product-market fit, the money will follow. In an unregulated industry, sometimes it does. In MedTech, it does not always. And when the capital structure is broken, PMF cannot save the company.

The shrimp-farm story we opened with is the cleanest example. Perfect PMF. Premium pricing that worked. Infrastructure costs that the investor contracts could not sustain. The product was right. The company died anyway.

The inverse is also true. A MedTech company with a well-structured cap table and correct funding can survive a long period without PMF, using the runway to iterate, re-scope, and find the real use case. A company without a well-structured cap table cannot, no matter how good the product eventually becomes.

The practical implication: when you are raising, you are not just optimising for the amount of money. You are optimising for the terms, the investor fit, the time-to-next-round, and the cap table shape that will still be viable three rounds from now. "Just take the money" is not a strategy. It is how founders end up stuck.

For the MedTech-specific view on PMF. Including why you cannot test technology with customers the same way SaaS does, but you can verify the market. See product-market fit in MedTech startups.

Common capital structure traps

There are patterns that kill MedTech startups repeatedly. The specifics change; the patterns do not. Four of the worst:

The dead equity trap. A founder and a co-founder each take 40% of a new company. No vesting. No good-leaver / bad-leaver clause. No buy-back mechanism if one of them stops working. Two years later the co-founder is no longer contributing and cannot be removed, and the cap table shows 40% dead equity. Equity that produces nothing and blocks new investment. The company becomes effectively un-investable. A standard vesting schedule with clear leaver clauses would have cost nothing at formation and saved everything later.

The exclusivity trap. A founder enters negotiations with a prospective investor and signs an exclusivity clause covering the entire negotiation period, often several months. The investor fails to deliver. Either cannot close, or reduces the terms at the last minute. And the company has burned runway it cannot replace, because during the exclusivity it could not talk to anyone else. We have seen this specific trap drain a company to near-bankruptcy. The clause felt reasonable at signing. It was catastrophic in execution. Exclusivity should be granted rarely, for short windows, and only to counter-parties whose ability to close is established.

The 2-month MDR delusion. Closely related to the runway discussion above. A founder genuinely believes MDR work is a two-month sprint, raises accordingly, and has to keep raising bridge rounds as the reality unfolds. Each bridge dilutes further, each round is negotiated from a weaker position, and the company never catches up. The fix is upstream: an honest regulatory plan before the first round.

The regulatory underfunding trap. The first round covers product development and some go-to-market, but does not properly fund the QMS, the technical file, and the PMS system. The team assumes they can "do that later, cheaper." They cannot. Compliance work done in a hurry, under pressure, at the end of a funding cycle, is more expensive than compliance work done deliberately with adequate time. Tibor has watched more than one company hit this wall.

Each of these traps is avoidable with reasonable counsel and a calm negotiation. None of them is avoided by founders who are in a hurry, because the hurry is exactly what creates the traps in the first place.

The Subtract to Ship angle. Every euro saved early costs hundreds later

The Subtract to Ship framework applied to funding is counterintuitive but important. The usual founder instinct is to save money on the early, unglamorous compliance work and spend money on the things that feel like progress. The pretty UI, the impressive booth at the trade show, the marketing website. This is precisely backwards.

Every euro saved by cutting corners on the foundational regulatory and quality work. The honest intended purpose definition, the clean classification rationale, the properly scoped QMS, the lean but complete technical file. Tends to cost many multiples of that euro later, when the corners-cut become non-conformities, rework, re-audits, and missed deadlines. Tibor's phrasing: every euro you try to save in the beginning costs you hundreds or thousands later. This is not hyperbole. It is pattern-matching on years of audit experience.

The Subtract to Ship position is not "spend less." It is "spend correctly." Subtract the work that does not trace to a specific MDR obligation. Keep the work that does. Fund it properly. Cut the compliance theatre that looks like work but produces no regulatory value. That is the lean MedTech financial discipline.

Reality Check. Where do you stand?

  1. Have you built your unit economics with regulatory cost loaded into COGS, not sitting outside it as an optional line?
  2. Do you know the honest 18–24 month (or longer) pre-revenue timeline for your specific device class, and is your current runway consistent with that timeline?
  3. Have you exhausted the non-dilutive funding options in your jurisdiction before raising equity?
  4. Does your current cap table have vesting and leaver clauses that would protect the company if a co-founder left tomorrow?
  5. Have you signed. Or are you being asked to sign. Any exclusivity clauses with investors whose ability to close is not established?
  6. If an investor asked you to explain your reimbursement pathway separately from your CE mark pathway, could you?
  7. If your honest regulatory cost made the business model unviable, would you be willing to stop the project. Or would you keep going anyway?
  8. Do your current investors understand that CE mark is not the revenue trigger, or are they expecting revenue the day the mark lands?

Frequently Asked Questions

How much does it cost to fund a MedTech startup to CE mark? It depends heavily on device class, complexity, and clinical evidence requirements, but for a typical Class IIa software-enabled device, founders should plan for a total investment that materially exceeds a comparable SaaS company. Often by a factor of several. And a timeline of 18–24 months or more before revenue. The CE marking cost breakdown for startups post covers the specific cost buckets. The single biggest forecasting error is assuming that regulatory cost is a small addition rather than a material share of total burn.

Can I bootstrap a MedTech startup? For a pure software, low-class, low-clinical-burden device, partial bootstrapping is possible up to a point. For anything involving hardware, higher classification, or meaningful clinical evidence, bootstrapping to CE mark is very difficult. Most MedTech founders use a combination of non-dilutive grants plus equity rounds rather than pure bootstrapping.

What is the difference between funding MedTech and funding SaaS? The cost floor is higher because regulation is not optional. The time to revenue is longer because the CE mark gates market entry. The investor expectations are different because MedTech investors should understand regulatory, clinical, and reimbursement timelines. And reimbursement is a separate multi-year problem on top of regulatory. SaaS companies do not have an equivalent.

Do I need a MedTech-specialist investor, or can I take generalist money? You can take generalist money if the generalist investor genuinely understands the MedTech timeline and cost profile. You cannot take generalist money if the investor is expecting SaaS-style growth patterns. The distinction is whether the investor asks about classification, clinical strategy, and reimbursement in the first meeting. If they do, they understand. If they do not, they will eventually panic.

What is the single most common funding mistake MedTech founders make? Treating regulatory cost as a separate, deferrable line item instead of loading it into COGS and accepting the real gross margin from day one. Every other funding mistake in this post flows from that original modelling error.

Is reimbursement a fundraising concern or a post-launch concern? Both, and ignoring it pre-launch is expensive. Reimbursement pathways in most EU markets take years to establish and have their own evidence requirements that may influence clinical study design. Investors at Series A and beyond will ask about reimbursement explicitly. A CE mark without a reimbursement strategy can mean a product that is legally on the market but commercially stuck.

Sources

  1. Regulation (EU) 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices. Article 10 (manufacturer obligations), Article 2(1) (definition of medical device). Official Journal L 117, 5.5.2017.
  2. EN ISO 13485:2016 + A11:2021. Medical devices. Quality management systems. Requirements for regulatory purposes.
  3. FFG. Österreichische Forschungsförderungsgesellschaft, program information. https://www.ffg.at. Verify current program terms directly with the agency before relying on specific figures.
  4. AWS. Austria Wirtschaftsservice, program information. https://www.aws.at. Verify current program terms directly with the agency before relying on specific figures.
  5. BASIS program information. Verify current program terms and eligibility criteria directly with the administering authority before relying on specific figures.

This post is the pillar of the Funding, Business Models & Reimbursement series in the Subtract to Ship: MDR blog. Authored by Felix Lenhard and Tibor Zechmeister. If the funding conversation for your specific device and jurisdiction exceeds what a pillar post can cover. And at some point it will. A sparring partner who has seen the pattern repeat across dozens of MedTech companies is the shortest path to a cap table you can live with three rounds from now.