The current deal environment is reflected in more gradual investment decisions and reduced check amounts. Investors have increased expectations around robust financials and a deliberate plan to scale and achieve profitability. Valuations are inspected, analyzed, and questioned. According to SVB (Silicon Valley Bank, a division of First Citizens Bank), approximately 12% of reported deals in 2024 were down rounds (Table 1), reaching the highest level in healthtech’s recent history.¹

Why This Is Important

We’ve said it before: startups are the engine that drives innovation in medtech. Many pre-commercial medtech companies are limping along with extension rounds, where startups count on existing investors to delay or avoid a value adjustment. Some existing investors, recognizing this trend, push back and demand a down round and other contingencies before committing.

Startups persist, hoping market forces will change, technology innovation will emerge, or investor confidence will help their organizations make enough progress to reach their valuations before they overshoot their runway. 

These are called insider rounds where existing investors who previously financed the company largely or wholly provide the new capital. Unpriced rounds (when investors supply capital in a swap for convertible securities in place of a direct purchase of equity with the valuation established in a future priced round), insider rounds, extension rounds, and convertible notes all help startups get the funds they need while maintaining their reputations.

However, startups grappling with raising inside rounds are having to look at mergers and acquisitions, reducing their burn rates, and negotiating down rounds as their runways shorten. 

Change and uncertainty will be with us for the short term.

Advocacy Groups

Fortunately, we have powerful advocacy groups scanning the future for us—AdvaMed and MDMA, as well as more regional organizations such as MassMEDIC, Octane, Medical Alley, and many others. AdvaMed has been vocal about the possible tariffs on products from Canada, Mexico, and China.² On Feb. 1, the association’s President and CEO Scott Whitaker stated:

“We have shared with the Administration our concerns about the potential impact tariffs could have on the medical technology supply chain that American patients depend on for their care. In light of that risk, an exemption was provided for most medical devices during President Trump’s first term with respect to the tariffs on China, and we are advocating for a similar approach this time. We will closely monitor for any effects the tariffs may have on this critical supply chain and share that information with the Administration.”

“Our industry is heavily regulated: FDA decides what products can be put on the market, and then Medicaid, Medicare, and the VA largely determine the reimbursement for procedures using medtech products. This means tariffs impact American companies similarly to an excise tax, which would lead to less R&D/innovation, layoffs, higher prices for the above-mentioned payors and patients, or all of the above. Additionally, moving manufacturing from one facility to a different or new facility requires FDA approval, which makes it difficult in the short term to adjust production to the U.S.”

“The increased costs posed by tariffs, and their functioning essentially as an excise tax in practice, could resurrect the climate of concern the medical device excise tax created for nearly a decade.”

“During the President’s first term with respect to the tariffs on China, a carve-out was provided for much of the medtech sector, given the risks to the U.S. hospital supply chain. We maintain that the potential supply chain disruption and its downstream effects on patients remain a risk, should tariffs be implemented. Shortages of critical medical technologies are a real concern in our initial modeling.”

“Tariffs could hold back the innovation potential of the U.S. medtech industry. R&D spending would likely be the first and most direct casualty, threatening America’s medtech innovation leadership. And increased tariffs may even have the unintended consequence of boosting the competitiveness of medtech industries of other nations.”

“We hope these critical facts resonate with the Administration, and we will continue to make our case on behalf of the patients our companies serve.”²

Well said, Mr. Whitaker. 

Robbie Marcus, a J.P. Morgan analyst, said Mexico is the largest source of approximately 40% of medical devices imported into the U.S. He stated, “We still think medtech may garner an exception to the tariffs given the critical need.”³ One can only hope. Managing the 25% tariffs (currently paused at the time of this writing) will be a nightmare for medtech companies, especially small- and mid-size organizations that lack the infrastructure to cope with pricing shifts.⁴ 

Hopefully, 2025 will be a better place for medtech than 2024, and we will turn a corner. In 2025, the two most important technologies in medtech are artificial intelligence (AI) and machine learning (ML). These technologies enable enhanced diagnostics, personalized medicine, and robotics and smart surgical platforms (which improve surgical precision and accessibility). With AI and precision medicine in their arsenal, medtech is stepping into 2025 with a powerful focus on patient-centered transformation (Table 2). The focus on patient-centered care is stronger than ever with the rise of precision medicine. Following are some examples.

Administrative

Virtual assistants focus on patient engagement, intake, scheduling, and medication adherence. They may even help with post-visit follow-up. They often take the form of a chatbot or generative AI nurse. 

Revenue cycle operations facilitate billing, coding, prior authorization, or other revenue cycle use cases. These solutions can be leveraged by both payers and providers. 

Note-taking and EHR documentation transform patient-clinician conversations into clinical notes to reduce the burden of documentation on providers and improve the accuracy of notes and billing. 

Data structure, analytics, and interoperability connect, clean, standardize, and structure data from many disparate systems like medical documents and claims. This enables users to leverage data to drive healthcare outcomes.

Clinical

Patient Diagnostics—Analytics and tests focus on diagnostic tests, diagnostic analytics, and personalized medicine. In addition, these companies may enable the delivery of treatment plans, risk screenings, and diagnoses based on EHR and other clinical decision-support tools. 

Platform companies with use cases that span multiple categories. 

Remote monitoring is engaged in monitoring patient biomarkers or treatment-related variables outside of the clinic. 

Patient stratification enables patient risk assessment and identifies potential care needs for patients. They may also triage patients based on a risk assessment to provide the right level of care.

The Medi-Vantage Perspective

This year will be a pivotal moment in the medtech industry, an opportunity to move beyond the traditional approach of the past in medical device development. R&D and marketing managers can embrace a future in medtech that will change more in the next five years than it has in the past century. Our doctors know how patient care is changing. We only have to ask.

References

1. tinyurl.com/mpo250501
2. tinyurl.com/mpo250502
3. tinyurl.com/mpo250503
4. tinyurl.com/mpo250504 

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Maria Shepherd has more than 20 years of experience in marketing in small startups and top-tier companies. She founded Medi-Vantage, which provides marketing and business strategy for the medtech industry. She can be reached at mshepherd@medi-vantage.com. Visit her website at www.medi-vantage.com.