Last week I ended up at a fancy venue hired by a hopeful medtech company trying to impress potential investors with delicious food and an emotional story about their life-saving device. Pitching has become performance art. Founders deliver sharp decks, polished demos, bold promises of “AI-powered transformation,” impressive market sizes, and superior outcomes. What all these startups usually have in common is a near-fanatical belief in the importance, capabilities, and value of their product – and perhaps they are on the right path! In the U.S., for example, charitable giving to religion commands the largest single slice, surpassing the combined total directed to healthcare and education. This pattern of prioritizing conviction and tradition over rigorous empirical scrutiny can feel analogous in medtech pitches for venture capitalists (VCs): amid the allure of the story and the beef Wellington on the plate, it takes deliberate effort to shift focus to the harder question of whether solid clinical evidence shows the device can meaningfully improve patient health or healthcare economics. But since such data are often thin or absent altogether, nothing spoils the appetite!
In medtech and digital health, incentives favor speed and compelling narratives over rigorous proof – because the system rewards it. For many VCs, this is not a flaw; it is the core gamble.
A Numbers Game Over a Science Contest
Most investors model medtech and digital health portfolios as inherently high-risk, with a 90%+ failure rate baked into the strategy. The playbook is straightforward: place enough bets to capture a few 10x–50x winners that more than offset the quiet failures, down-rounds, and write-offs. When the portfolio math holds, there is limited financial incentive to invest extra time in deeper diligence that might only modestly trim losses.
This approach is rational from a pure return perspective and it is one of the reasons why so many “breakthrough” devices and platforms reach market with minimal clinical data. The FDA’s 510(k) pathway requires only “substantial equivalence” to an existing cleared device, not fresh proof of clinical benefit. For AI-enabled tools, a 2025 JAMA Network Open cross-sectional study of 903 FDA-approved devices found that clinical performance studies were reported for only about 56% at approval, while roughly 24% explicitly stated none had been conducted.
Digital health operates in an even grayer zone – frequently unregulated or lightly measured -where engagement metrics and convenience narratives often stand in for outcome evidence. A 2022 analysis of venture-backed digital health companies found average “clinical robustness” scores near the bottom of the scale, with no meaningful correlation between evidence strength and funding raised.
Capital chases the story, not the proof and the story has kept the casino profitable. U.S. digital health venture funding reached $10.1 billion across 497 deals in 2024, and climbed further to $14.2 billion in 2025 amid AI enthusiasm.
The House Takes a Cut – Society Pays the Biggest Tab
The model delivers for top-decile funds that land the winners. For others, the costs mount:
- Founders invest years and millions in products that stall at reimbursement committees or value-analysis reviews due to unproven impact.
- Health systems and payers expend resources on pilots that rarely scale.
- Clinicians face “solution fatigue” from tools that increase friction rather than reduce it.
- Patients encounter devices that are likely ineffective or subject to recalls. A 2025 JAMA Health Forum study of 950 AI-enabled devices linked a lack of clinical validation to higher recall odds (OR 2.8), with many recalls occurring within the first year of clearance.
Even successful companies suffer indirectly: the flood of overhyped failures creates noise, slowing adoption for genuinely strong innovations.
This creates a high-waste equilibrium. Talent, capital, and clinical attention scatter across too many long shots instead of concentrating on ventures with clearer evidence trajectories. Similar dynamics appear globally—under Europe’s MDR/CE marking, in emerging markets with fragmented oversight—amplifying misallocation of health-innovation resources worldwide and hindering progress toward universal health goals.
Incremental Diligence Can Raise the Yield Without Killing Upside
No one expects VCs to demand full-scale trials at the seed stage; that would stifle innovation. But healthy scrutiny, focusing on the core clinical claim, the relevant comparator, and a realistic evidence ladder, can lift portfolio quality and odds without sacrificing velocity.
Experienced investors already distinguish between weak proxies (“enthusiastic KOL quotes” or small pilots) and stronger signals (“pre-specified endpoint, powered effect size, prospective data plan in the target population”). The latter does not ensure victory—even solid studies can falter—but good-quality evidence substantially increases the likelihood of clearing commercialization hurdles: reimbursement, workflow fit, and competitive moats.
Robust evidence is not merely a cost; it becomes a differentiator in a crowded market, signaling credibility to acquirers and payers who write the largest checks.
Better Selection Benefits the Whole Table
If more capital flowed to companies after reasonable scrutiny—prioritizing those with defensible paths from technical feasibility to measurable clinical or economic value—the waste would remain high (this is venture capital), but societal yield would rise:
- More products that demonstrably change decisions and outcomes.
- Fewer stalled pilots and recall headlines.
- Faster, more confident adoption by health systems globally.
- Stronger long-term returns for funds that consistently back higher-probability winners.
The VC gamble is likely to continue, but why not tilt the odds slightly less random? Investors who view targeted diligence as an edge rather than a drag may discover that cutting obvious long shots compounds the advantage over time. In a deck-saturated market, separating signal from hype is not pedantry – it is a competitive advantage.
While the system will not transform overnight, every fund that chooses to “look under the hood” and pose clinically relevant questions nudges the ecosystem toward higher-quality innovation. This favors founders building real solutions, benefits investors seeking durable returns, and, most critically, serves patients and health systems that live with the consequences.
This op-ed is part of the Evimeter project funded by Arnold Ventures
About Dr. Leeza Osipenko
Dr. Leeza Osipenko is the founder and CEO of Consilium Scientific. She is a Senior Visiting Fellow at the London School of Economics and Political Science (LSE Health). Leeza is an expert in Health Technology Assessment. Her academic work focuses on examining the status quo of clinical research through quality improvement, transparency, and methodological rigour.
