Why MedTech Portfolios Underperform: What Investors and Analysts Often Miss

A Measurement Problem—Not a Talent or Technology Problem

By Andjela Azabagic

As an investor or board member in healthcare and medical technology, you are not just funding innovation—you are underwriting uncertainty.

Across my career bringing healthcare products to market and advising both established companies and early-stage ventures, I’ve seen a recurring pattern: technically strong products stall not because they lack clinical value, but because they are evaluated and governed using the wrong metrics at the wrong time.

This is not a product failure.

It is a portfolio management failure.

Innovation Requires a Longer Runway—Especially in Healthcare

One of the most common sources of value leakage in healthcare portfolios is the premature application of mature-stage KPIs to early-stage products.

Revenue expectations.

Utilization targets.

Sales velocity benchmarks.

These metrics are appropriate once product–market fit exists. Applied too early, they distort signal, compress learning cycles, and push leadership teams into defensive behavior—often leading to unnecessary pivots, leadership churn, or early write-offs.

From an investor perspective, this is particularly costly because it masks true risk. Products that are still in discovery are judged as underperformers, while teams are incentivized to optimize optics instead of fundamentals.

Capital is deployed—but insight is not gained.

A Portfolio Lens: Not All Assets Are Meant to Scale Yet

The BCG Growth Matrix remains one of the most useful mental models for healthcare investing—not as a static categorization, but as a dynamic governance tool.

Early-stage healthcare products—especially AI-enabled diagnostics, workflow tools, and clinical decision support platforms—should be treated as learning assets, not revenue engines.

They sit in the quadrant where uncertainty is highest and upside is asymmetric.

Expecting near-term commercial performance from these assets is equivalent to demanding dividends from R&D. The result is predictable: leadership teams manage to numbers instead of managing to insight.

For investors, the implication is clear:

If you don’t distinguish between discovery-stage and scaling-stage assets, you will systematically misallocate follow-on capital.

FDA Clearance Is Not De-Risking—It’s Permission to Begin

A critical misconception in healthcare investing is the belief that regulatory clearance meaningfully de-risks commercialization.

It does not.

FDA clearance removes one barrier, but it does not create clinical trust, operational fit, or purchasing momentum. I have seen repeatedly that products without a strong key opinion leader (KOL) reference site struggle to sell—regardless of technical merit.

From a portfolio standpoint, the real de-risking events occur when:

• Clinical value is validated in the target population

• Workflow integration friction is materially reduced

• A repeatable adoption narrative emerges

These are learning milestones—not revenue milestones.

What Strong Portfolio Companies Do Differently

The strongest healthcare companies I’ve worked with—across AI imaging, diagnostics, and digital health—optimize for capital efficiency through clarity, not speed.

They prioritize:

1. Early clinical validation as a capital-preserving move

A modest retrospective study with the right academic partner often unlocks disproportionate downstream value—improving adoption, strengthening enterprise sales conversations, and increasing confidence at the next financing milestone.

For investors, this is one of the highest ROI uses of early capital.

2. Workflow integration as a pre-commercial risk reducer

Products that require post-clearance architectural rework consume far more capital than those stress-tested in real clinical environments early. Alpha deployments with sponsor users surface issues when they are still cheap to fix.

This is not execution detail—it is risk management.

3. Leadership that can translate signal into strategy

The most valuable product leaders are not those who chase features, but those who can interpret market feedback, align internal teams, and articulate a focused positioning narrative that compounds over time.

From a board perspective, this capability often matters more than technical sophistication.

4. Fewer bets, deeper conviction

Broad roadmaps dilute capital and confuse the market. Focused execution creates learning velocity. For early products, depth beats breadth almost every time.

The Portfolio-Level Implication

Most early healthcare products do not fail because they lack potential.

They fail because they are governed as if they are already proven.

For investors, this has direct consequences:

• Premature write-downs of assets that have not yet been properly tested

• Misinterpretation of weak early revenue as lack of market demand

• Capital inefficiency driven by reactive pivots rather than informed decisions

The best healthcare portfolios separate learning risk from scaling risk—and measure them differently.

The Bottom Line for Investors

Early-stage healthcare innovation requires learning-oriented governance, not scaling-oriented scorecards.

When boards and investors align KPIs to stage-appropriate objectives—clinical validation, workflow fit, reference adoption, and clarity of positioning—capital is deployed more intelligently and upside is preserved longer.

In healthcare, patience is not passivity.

When paired with precision, it is a disciplined investment strategy.