The Hard Truth About Healthcare Startup Funding (And How to Beat the Odds)

By: N. Adam Brown, MD MBA - Founder, ABIG Health

Many healthcare startups are full of brilliant ideas, but many never make it past the early stages. Not because their technology isn’t good, or because the problem they’re solving isn’t real, but because scaling in healthcare is a different beast altogether.

Long sales cycles, a complex regulatory landscape, and an industry that resists change make meaningful growth an uphill battle. The startups that make it don’t just have a great product—they have a strategy.

Let’s break down the most common growth barriers and how to get ahead of them before they wreak havoc.

1. The Wrong Funding Strategy Can Sink You Before You Start

Funding isn’t just about raising money—it’s about raising the right money. The source, structure, and timing of investment capital will shape your company’s trajectory, and the wrong approach can limit critical early momentum.

Many startups run into trouble because they don't fully understand what investors expect or how their capital decisions will play out long term.

Consider these common missteps:

• Not all investors understand healthcare. If your backers expect hockey-stick growth in a sector defined by regulation and cautious adoption, you’re setting yourself up for painful conversations down the road.

• Equity dilution sneaks up fast. Founders eager to scale often give up too much ownership too soon. While it may seem attractive initially, it makes later rounds more expensive and limits how much say you have in the business.

• Non-dilutive funding is overlooked. Grants, strategic partnerships, and revenue-based financing can extend your runway without forcing you to trade equity for short-term relief.

The solution

Founders need to work with investors who prioritize real-world impact, clinical validation, and a clear path to profitability. Diversification of funding sources is also key to maintaining flexibility and control.

2. Regulatory Blind Spots Can Hinder Growth

The regulatory environment in healthcare isn’t something you can afford to ignore. Startups that delay compliance planning often end up stuck in approval limbo, unable to launch or expand.

Here’s where these companies commonly trip up:

• Regulatory delays. The FDA and other governing bodies don’t operate on startup timelines. If you wait too long to engage with regulatory consultants, you could face costly redesigns and extended submission cycles.

• Reimbursement isn’t automatic. Insurers and Medicare don’t just start covering new services. Without an early strategy for coding, coverage, and payment approval, payers may not see the value in your solution.

• Global expansion isn’t plug-and-play. What works in the United States won't necessarily translate to the EU or Asia. Each market has particular compliance requirements that may conflict, contradict, and require significant adaptation.

The solution

Bring in regulatory expertise early. Map out approval and reimbursement pathways alongside product development, not as an afterthought.

When compliance is woven into the fabric of the business from day one, it becomes a competitive advantage and not a problem whose solution is repeatedly put on the back burner.

3. A Slow-Moving Industry Means Positioning Is Everything

Healthcare is a high-stakes industry where credibility matters more than speed. A solution with promise is essential, but founders still need to prove its value to inherently risk-averse decision-makers.

Startups must keep these factors in mind:

• Healthcare isn’t a "build it and they will come" industry. You need a compelling narrative that speaks directly to those who hold the purse strings.

• Hospital sales cycles can stretch years. Budget cycles, pilot programs, complex procurement processes, and consensus-driven purchase decisions all take time. Sales cycles in healthcare last an average of 125 days—though some may span years.

• Complete buy-in is essential. If doctors, nurses, and frontline staff don’t see the value in a product, adoption will stall—even if hospital executives love it. Conversely, executives may have concerns about the broader implications of a product (such as ROI) that is otherwise well supported by frontline staff.

The solution

Show both financial decision-makers and frontline clinicians how your product respects hospital priorities. It’s also important to involve key stakeholders early, address executive concerns, and ensure clinicians see real, day-to-day benefits.

Above all, make your solution so compelling that it survives the slow-moving hospital sales cycle long enough to secure buy-in.

4. Lack of Industry Connections Will Keep You Stuck in the Early Stages

Relationships drive healthcare. In other words, it doesn’t matter how good your product is if you can’t get it in front of the right people. Many founders come from tech or research backgrounds but lack the industry connections needed to land key partnerships and early adopters.

To avoid this roadblock, remember that:

• Warm introductions matter. Cold outreach has a low success rate in healthcare, and while you can warm it up by addressing pain points and emphasizing benefits (not features), having an advisory board or investors who can open doors makes a huge difference.

• Partnerships accelerate credibility. Tapping into existing healthcare platforms, electronic health records (EHRs), or payer networks can speed up adoption far more than trying to go it alone.

• Early champions shape your reputation. A few well-placed advocates can be the difference between lackluster growth and explosive adoption. One review found that champions drive the adoption of healthcare solutions because they are experts in their field and leaders in their organizations. They also actively promote new tech by demonstrating benefits and addressing concerns.

The solution

Build a network of advisors, investors, and partners who can introduce you to decision-makers. Attend industry events, leverage LinkedIn, and prioritize relationship-building at every opportunity.

Scaling Requires Strategy, Not Just Innovation

Scaling in healthcare isn’t about moving fast—it’s about moving deliberately. 

In practice, the companies that make it have a plan as well as a disruptive product. They secure the most appropriate funding, liaise with regulators early, position themselves effectively in the market, and build relationships that accelerate adoption.

If you want to traverse this landscape with confidence, you need a strategy that accounts for the various complexities of funding, compliance, and adoption.

Connect with me today for a strategy session to discuss how we can leverage ABIG’s expertise to maximize your chances of securing investment.

References

https://rockhealth.com/insights/q1-2024-digital-health-funding-great-reset-expectations/

https://pmc.ncbi.nlm.nih.gov/articles/PMC11007964/

https://focus-digital.co/average-sales-cycle-length-by-industry/

https://scytale.ai/resources/top-10-compliance-tips-for-startups/