Market Dynamics Squeezing Healthcare Startups: 12 Investor Perspectives on Funding and Execution

Healthcare investors are asking seed-stage companies to prove what only Series A companies needed to demonstrate a few years ago. 

Şükran Tümay and Gavin McCartney interviewed 12 private equity investors, venture capitalists, portfolio company CEOs, and healthcare operators to understand how these changes affect portfolio companies. What they heard points to a specific problem: the bar for accessing capital keeps rising while the timeline to exit keeps stretching, creating acute pressure on early-stage companies that need expensive data generation before they can demonstrate the market traction investors now demand. 

The Traction Problem

An early-stage healthcare investor focused on MedTech, digital health, and AI describes how investor expectations have compressed: 

“What a traditional Series A company needed to demonstrate to investors and strategics is traction. And that’s now being asked of seed companies.” 

For regulated healthcare products, this compression creates an impossible bind. Companies need to generate substantial clinical data before they can show market traction. But the same investor explains that getting capital to generate that data has become nearly impossible: 

“The generation of data is very expensive and difficult. No one really wants to fund it.” 

The numbers explain why. Phase III clinical trials can cost upwards of $350 million, while FDA application fees alone reached $4.3 million in 2025. Early-stage companies find themselves in a catch-22: they cannot raise capital for data generation without proof, but they cannot generate proof without capital for the studies. 

Recent funding data shows capital flowing into healthcare, but access depends entirely on what stage a company has reached. Investors put $10.7 billion into AI-powered health tech through 2025, already 24% higher than all of 2024. Biotech venture financing grew 70.9% from Q2 to Q3 2025, reaching $3.1 billion. Yet one advisor working with MedTech and health tech companies on commercial strategy across multiple markets observes that this capital remains out of reach for companies at certain stages: 

“The quality bar to getting funded changes depending on the availability of cash.” 

The money exists. The challenge lies in meeting the requirements to access it. 

Customer Selection Determines Survival

The traction requirements create downstream effects on every other business decision, starting with customer selection. Years ago, an early-stage investor advised one portfolio company CEO about their go-to-market strategy: 

“If you sell to the NHS, you die. So, let’s do something different.” 

The investor was explaining a basic survival principle for early-stage healthcare companies: sales cycles that extend 12 to 24 months deplete runway before revenue arrives. The company shifted towards partnerships with pharmaceutical companies like Boehringer Ingelheim. This pattern holds whether selling to public health systems in Europe, hospital networks in the US, or provincial health authorities in Asia. Companies that pick the wrong initial customer run out of money before closing their first deal. 

Academic Mindset Versus Commercial Reality

The traction requirements also expose a mindset gap. Deep-tech healthcare companies often spend years perfecting their science before attempting commercialisation. One investor working with biotech diagnostics describes the pattern: 

“These companies need more urgency. They’ve been working on their technology for four or five years, perfecting every detail. I constantly try to help them step back, get a helicopter view, and move faster. It’s about speed of execution and developing a commercial perspective.” 

This perfectionism shows up in hiring and team behaviour. One CEO working with drug discovery services describes what happens when companies prioritise technical excellence over commercial pragmatism: 

“They want everything to be perfect rather than saying ‘it works, let’s get it out the door, we can iterate as we go.’ Finding people with that mentality of prioritisation and understanding commercial priorities is a challenge.” 

The consequences get worse when companies lack commercial leadership. One executive who worked in pharmacovigilance and healthcare services across Asia and Europe saw this play out at a company trying to sell into large pharma: 

“Commercial is the hardest part. Our clients were large pharma companies, and selling new technology to them is really difficult. The sales cycles are extremely long. We didn’t get the right commercial leader; the CEO was a CFO. In a private equity setting, you need to see impact in six months.” 

Without commercial expertise, companies waste their most valuable asset: time. 

Partnership Development as Forward Investment

The compressed traction timelines make relationship building essential. Companies cannot wait until they need partnerships to start building them. One investor working with early-stage companies explains what separats companies that secure follow-on funding from those that struggle: 

“In terms of leadership skill, we need people who are going to be out there building bridges, cultivating relationships. That includes on the investment side, but also strategic partnerships, forging connections with clients and stakeholders. That’s a key component I look for in the leaders I support at the earlier stage.” 

The investor emphasises that this capability matters more than technical credentials: 

“That’s really essential, particularly in the current market where fundraising is challenging at an earlier stage. You need proactive people. That to me is the key skill. Everything else is secondary.” 

The pressure to exit makes this even more critical. Leading PE firms now deploy advisors during due diligence to address people concerns before deals close. With private equity investors carrying a sizeable backlog of high-quality assets and improved market conditions creating a pathway for renewed public-market activity in 2026, firms cannot afford to discover leadership gaps after closing. One investment banker advising pharma and healthcare companies on M&A describes the situation: 

“Many private equity funds are now fully invested, with portfolios holding a large number of companies approaching exit timelines. As a result, firms are increasingly bringing in experienced operating partners to support value creation across their portfolios, even where investment teams are highly experienced.” 

What This Means for Portfolio Companies

The patterns these 12 investors describe point towards specific capabilities that separate successful portfolio companies from struggling ones: 

• Customer selection discipline: Choose initial customers that provide validation without consuming runway. Avoid long sales cycles that deplete capital before revenue arrives. 
• Commercial timing over scientific perfection: Balance scientific rigour with market windows. Ship at 92% validation rather than spending three more years reaching 99%. 
• Commercial expertise from day one: Install appropriate commercial leadership early, whether through full-time hires or fractional arrangements, rather than treating it as a post-funding concern. 

Healthcare portfolio companies work within real constraints that won’t change. Regulatory pathways take years. Clinical trials move at their own pace. But within those constraints, some companies find ways to grow while others burn through capital without gaining traction. The difference shows up in how they pick their first customers, how they balance perfecting the science against getting to market, and whether they build relationships before needing them. Good science gets companies in the door. What happens after that depends on whether leadership understands the commercial side of the business. Stanton Chase works with private equity firms and healthcare companies worldwide to find executives who can operate in both worlds. 

About the Authors

Şükran Tümay is a Managing Partner at Stanton Chase London. She specialises in the Consumer Products and Services and Life Sciences and Healthcare sectors and has extensive experience in cross-border executive search throughout Europe, the Middle East, and Central Asia. Şükran is a Co-Active Coach and an alum of the CTI Leadership Community. She is passionate about supporting women and actively works with charities which aim to empower women in improving the trajectory of their lives by helping them identify their values and create awareness of their skills. Şükran is also accredited in psychometric and behavioural assessments.     

Gavin McCartney, a Partner at Stanton Chase London, serves as the Global Sector Leader for the Health and MedTech sector. He brings extensive experience managing executive search assignments for clients at global, regional, and local levels, conducting searches across Europe, US, Africa, the Middle East, and Latin America. Gavin’s international executive search expertise includes working with multicultural teams in the life sciences and healthcare industry. He handles mandates ranging from C-suite to VP and director positions across various functional areas.