A Peek into the Angel Due Diligence Process for MedTech

Written by Eric Sugalski

It’s been just over a year since I joined Robin Hood Ventures as an angel investor. While many investors in the group are far more seasoned, I’ve gained invaluable insights by diving into the due diligence (DD) process for various MedTech investments. Certain key themes surface repeatedly—ones that startups should proactively address in their fundraising pitches and supporting materials.

1. Is the Unmet Need Real?

Sounds obvious, right? But this is the #1 topic in every DD process. The question isn’t whether the founder believes the need exists—it’s whether there’s objective data proving that a critical gap in healthcare demands a solution.

It's common for founders to provide clinician testimonials that highlight the problem and advocate for the solution. But too often, these testimonials are built around confirmation bias—seeking validation instead of honest critique. Have you actively hunted for the “noes”? Are healthcare providers scrambling for alternatives to the standard of care, or is status quo okay for now?

Angel investors will reach out to independent third-party experts in your field. Their goal? To test if the problem is truly a pain point or just an inconvenience. 

2. Is the Market Really There?

Market size is another major scrutiny point in due diligence. If your addressable market isn’t substantial enough, early-stage investors won’t see a viable path to meaningful returns—especially given the risks of MedTech.

Most pitch decks include the TAM-SAM-SOM breakdown, often extrapolated from overinflated industry reports. But top-down estimates aren’t enough. You need a bottom-up approach:

• How many potential customers exist within your initial geography?
• What’s a reasonable price point based on comparable devices?
• How frequently will they use your product per year?

At its core, this is a price (P) x quantity (Q) equation. If your bottom-up model doesn’t align with your top-down projections, investors will flag the discrepancy. Do the math before they do.

3. Is There Willingness to Pay (WTP)?

It’s not enough for your device to be better—it must drive meaningful clinical and economic outcomes. Investors want to know:

• Does your device improve key outcomes for the people writing the checks?
• Do you have data (or at least a clear path to collecting it) to prove this impact?

Even if clinical trial data is forthcoming, your pitch should outline the expected impact thresholds that will overcome resistance to change. Have you secured early indicators of WTP, such as:

• Letters of intent for paid pilots?
• Purchasing department feedback on value analysis models?
• Candid reviews on the severity of the problem and the required improvement?

The more evidence you provide of WTP, the stronger your case.

4. How Likely Are You to Land the Next Round?

Most MedTech startups require a significant ($10M+) funding round to reach a commercial milestone that translates into an exitable point. But later-stage capital is far harder to secure than early angel rounds. Investors will ask:

• Will this angel round get you far enough to attract venture backing?
• Have you socialized your venture with larger investors?
• Have VCs expressed serious interest in leading the next round?

DD teams will want to speak directly with venture groups to verify this interest. If you claim VCs are “watching closely,” make sure that’s more than lip service.

5. Are There Realistic Exit Opportunities?

For most MedTech startups, the endgame is acquisition by a strategic partner. The key question: Is M&A actually happening in your space?

• Are big players actively acquiring smaller companies?
• At what stage of maturity do these acquisitions occur (post-FDA authorization? $XM in revenue?)?
• What are the valuation benchmarks (e.g., 5x ARR)?

When comparing acquisitions, relevance matters. A GI deal isn’t necessarily comparable to interventional cardiology deal just because both devices involve catheters. And if the only exit data you have is 10 years old, that’s a red flag.

Know the timing, valuation trends, and acquisition criteria within your industry to build a credible exit thesis.

6. Are the Deal Terms Attractive?

Overpriced startups don’t even make it to pitch stage—they get cut during screening. Investors scrutinize valuations (for priced rounds) and caps (for SAFEs and convertible notes).

To avoid scaring off angels, reverse-engineer your valuation based on realistic exit expectations. Work backwards:

• What ROI will angels expect at this risk level?
• What ROI will VCs demand in the next round?
• How do these figures align with exit comps?

Build a transparent model that supports your valuation assumptions—savvy investors will run the math, so make sure your valuation is based in reality.

7. Is the Company’s Maturity Overstated?

Almost every startup claims to be further along than they actually are. Smart investors will tear apart your assumptions with technical, regulatory, and clinical experts.

If you claim to be “weeks away” from design freeze but haven’t completed human factors studies, design for manufacturing, or regulatory prep—you’ll get chewed up in DD.

Be realistic. Third-party validation helps. Engage industry experts for an objective assessment of your readiness. Acknowledging your actual stage (and key milestones ahead) builds credibility, while overpromising destroys it.

Wrapping Up

Countless deals die in due diligence, but these seven topics come up over and over again. Investors don’t expect you to have every answer, but the strongest startups:

• Have deeply researched these issues
• Present clear, data-backed responses
• Show a proactive approach to mitigating risks

By tackling these questions before your pitch, you’ll make your MedTech startup far more compelling to investors—and significantly increase your chances of securing funding.