Not all great ideas get funded.
Some die quietly in a VC’s inbox. Others flame out in a 12-slide deck that looked perfect in Canva but landed with all the force of a deflated whoopee cushion. The idea might be good. The timing might be great. But if you don’t understand what digital health investors are actually looking for? You’re flying blind.
This article is your lens into the minds of digital health venture capitalists—their filters, their biases, and the green flags they chase. It’s a companion to our Ultimate VC Fundraising Guide, but this one’s a little more surgical.
Let’s break it down.
1. The Team: Do You Belong in This Arena?
Investors don’t just bet on ideas. They bet on people who’ve survived the jungle before—or at least have the scars to prove they’re learning.
What VCs want to see:
- Founders with healthcare experience (clinical, regulatory, or systems-level)
- Technical co-founders with startup experience or execution grit
- Advisors who aren’t just logos—they’re engaged, credible, and ideally on equity
- Chemistry among the founding team (solo founders raise eyebrows unless they’re absolute killers)
“Healthcare is a knife fight in a locked room. If you’ve never been inside, we won’t hand you the knife.” – anonymous health VC
2. The Problem: Is It Real, Urgent, and Financially Painful?
A vague “we want to improve wellness” doesn’t cut it.
You need a clearly defined, painful, and recurring problem—ideally one that a hospital, insurer, or employer is already spending money trying to solve.
Questions a VC will silently ask:
- Who exactly experiences the pain?
- Can you quantify the cost of doing nothing?
- Is this a hair-on-fire problem or a paper cut?
You’re not just pitching a problem—you’re pitching the cost of not fixing it.
3. The Solution: Elegant, Ethical, and Evidence-Informed
Digital health lives in the space between software and clinical outcomes. If your solution is just a prettier dashboard or a new scheduling app, expect scrutiny.
They’re looking for:
- Real clinical relevance
- Integration potential (EHRs, existing workflows)
- Clear user benefits (patients, providers, or both)
Don’t forget the golden rule: If your solution requires everyone in the system to change behavior, it’s probably dead on arrival.
4. The Market: Know Your Beachhead
Every founder loves to quote the $4 trillion U.S. healthcare market.
VCs don’t care.
They want to know:
- What specific vertical are you starting with?
- What’s the actual TAM you can address in the next 3–5 years?
- Who pays: providers, payers, pharma, employers, patients?
Have a wedge. Don’t pitch the whole iceberg.
5. Regulatory & Compliance: Are You a Liability or an Asset?
Investors know that regulation is the mountain every digital health startup has to climb. You don’t need a full FDA dossier on day one—but you do need a map.
Key boxes to check:
- HIPAA, GDPR, or local data protection covered
- FDA pathway understood (even if not executed yet)
- Clinical trials or evidence plans in motion (if needed)
Founders who brush off compliance are red flags. Investors don’t want their portfolio on the front page of Politico.
6. Traction: Show Proof of Life
Traction doesn’t mean hockey-stick revenue. In digital health, it can mean:
- LOIs from clinics or pilot partners
- Clinician endorsements
- Early usage data or retention
- Even letters of support from health systems or researchers
Anything that says, “This thing is real. People want it.”
7. GTM Strategy: You Know How to Sell
One of the biggest turn-offs for health investors is a go-to-market plan that looks like SaaS 101. Cold outreach to doctors? Good luck.
VCs want to see:
- Distribution partnerships (EMRs, networks, payers)
- Advisors who open doors
- A step-by-step wedge strategy to get early adopters
Healthcare is slow, bureaucratic, and political. If you don’t have a plan to navigate that, someone else will.
8. Business Model: Who Pays, and Why Do They Keep Paying?
You don’t need a perfect spreadsheet. But you do need to:
- Understand your customer’s procurement cycle
- Know your gross margins and cost to acquire
- Have a path to long-term recurring revenue
Freemium doesn’t work in health. “We’ll monetize later” works even less.
9. Outcomes: Can You Prove It Works?
Eventually, investors will ask: “Do you make people healthier? Or just busier?”
Gold standard:
- Published outcomes data
- Real-world evidence from pilots
- Economic ROI for stakeholders (lower costs, faster outcomes)
If you’re early: show you’re designing with outcomes in mind.
Final Thoughts: You Don’t Need Everything, But You Need Clarity
No investor expects you to have every answer. What they expect is:
- Self-awareness about what’s risky and what’s real
- Conviction that’s earned, not just performed
- A plan, a wedge, and a reason to believe
That’s how you get a yes—or at least, avoid a fast no.
Want to go deeper? Read our Ultimate Guide to Raising VC and Top 10 Pitch Mistakes.
He has invested in startups including American Well, Neuronation, Mimi, and most notably mySugr – which was recently acquired by Roche. Min-Sung is also a contributing writer for mediums including TechCrunch and Tech.EU and studied Business Economics at Witten/Herdecke, Harvard, St.Gallen, and in Seoul.