Seeking investment? – The relevance of the 4Cs from an investor’s perspective

4C Investors' perspective

Written by Lea Renz

Medical Life Sciences and Marketing Enthusiast with M.A. in Media Studies

26 Sep, 2023

Questions about the 4Cs and their interrelations play a central role in the development of a plausible business model in the healthcare sector. Obviously, networked 4C knowledge is also a key advantage in fundraising. We spoke to Christian Kraft, Director M&A and External Innovation at Aesculap AG, and Dr. Katharina Severin, Investment Manager at High-Tech Gründerfond (HTGF), and asked them what they consider when making investment decisions with regard to the 4Cs.

The phase  matters

Depending on the phase a startup is in, investors look at different aspects, says Christian. In the ideation phase, the focus is on the problem-solution fit. For the 4Cs, this means answering questions in the C1 area: Who are the future customers – patients or doctors? Am I really solving a problem for this target group? And how do I get access to them? Katharina agrees that startups in the very early stages should first focus on the commercialization strategy: “Even strong patent protection is of little use if medical staff do not accept the product or patients have concerns.”

C1 | Commercialization
C2 | Certification
C3 | Clinical Studies
C4 | Copyright

In the incubation phase, teams should then be able to demonstrate a product-market fit, Christian continues. In addition to a concrete market access strategy, this includes a fundamental understanding of C2 and C3 issues in the medtech sector. Knowledge of the regulatory hurdles of the certification process and clinical evaluation, as well as a plan to overcome them, are critical at this stage. Investors also want to see teams question their internal capabilities in this area. They need to be clear about whether they need additional skills, for example in regulatory affairs or quality management, and if so, whether they want to build them in house or bring them in from outside.

When it comes to product launch and scale-up, manufacturing and distribution processes need to be identified. According to Christian, it is also important for teams to think ahead at this stage: How can we develop the solution further? Do we need new intellectual property rights? And how can we enter related or new markets? Aspects of all the 4Cs come together at this stage.

In summary, depending on the phase, investors like Katharina and Christian expect a business model with varying degrees of sophistication: from proof that you are dedicated to solving a problem worth solving, to proof that you will actually solve that problem, to proof that someone – be it patients themselves, health insurance companies, care institutions or hospitals – is willing to pay for the solution.

How to prove success without sales?

While young companies in other industries can quickly demonstrate their first revenues, this can take several years in the healthcare industry. Still, investors want to see evidence of a startup’s chances of success before they invest. But how can this be done when there are no revenues? The experience of the MII Startup Coaches shows: Every milestone achieved is proof of success and can be important in building potential investors’ confidence in the team and its capabilities. This can include “small” steps such as


  • approval of a clinical trial by the BfArM and a positive vote by the ethics committee,
  • receiving public funding through programs such as Startup BW Pre-Seed or Invest BW,
  • a successful patent application, or
  • a successful QMS audit according to ISO 13485.

Investors in the medtech sector are well aware that the “big milestones” cannot be achieved so quickly. At the time of HTGF’s initial investment, startups typically have not conducted clinical trials or even received CE mark approval for their medical device, explains Katharina. In addition to the clinical relevance of the problem to be solved and the proof of concept, HTGF considers other relevant aspects when making investment decisions in order to assess the success of a startup:

Robust roadmap

First and foremost, startups need to have a realistic view of what they will need to do to achieve company and product certification (C2) and to demonstrate clinical efficacy (C3). Pricing, margins, achievable revenues, and the size of addressable markets should also be known (C1).

Clinical study plan

The type of clinical trial required (C3 for C1 and/or C2) with the number of patients, the clinical endpoints and the duration allow an estimate of the investment required and are therefore ultimately also parameters that venture capitalists can use to calculate the expected financial requirements and whether, in the case of a positive development, it is a financially attractive investment.

KOL network

Recognized Key Opinion Leaders (KOL) are a critical success factor for medtech startups, and the appropriate contacts should be established as early as possible. They provide feedback on the usability of a product (C2) and its potential applications (C2 and C1). They participate in clinical trials (C3) as study physicians and share their experiences with their colleagues. Once the product is on the market, they are important advocates and play a key role in raising awareness (C1). In all phases, the input and recommendation of strong KOLs is an important success factor for companies.

IP strategy

IP protection (C4) is critically examined during due diligence. Due to the high initial costs for certification (C2) and the possibly necessary clinical study (C3) for reimbursement (C1), it is important to secure a long-term USP through strong IP protection. Even a later sale to larger medical device manufacturers will only be successful if there is good patent protection with an attractive remaining patent term. Without a convincing patent strategy, it is difficult for a medtech startup to raise venture capital.

Networked 4C knowledge as means to investment

As Christian’s and Katharina’s insights make clear, consideration of the 4Cs, and especially a networked understanding of the challenges and opportunities they present, are critical to the success of medtech startups. Experienced investors will pay particular attention to this and expect founders to have clear answers to 4C-related questions. The development of a business model that is plausible from a regulatory and entrepreneurial perspective, including a realistic roadmap, is therefore a prerequisite for successful investment rounds. The 4Cs interact in different ways. To name a few examples: The planned market access – from different reimbursement options to the self-pay market – influences the clinical and/or health economic evidence to be provided. The MDR or IVDR risk class of a product determines the level of regulatory effort and thus the time and capital required to reach the market. In turn, the time to market should be considered in the IP strategy.

For Katharina, it is clear that “without a clear understanding of the 4Cs, a medtech startup will most likely not be able to raise venture capital. And Christian also emphasizes that focusing on the 4Cs early on helps avoid long and costly iteration phases, allowing the solution to be brought to market more quickly.

To get startups ready for investors like Katharine and Christian, we at MII have made the networked understanding of the 4Cs the starting point of all our offerings. Together with you, we will develop a holistic business model that works for the healthcare industry – one that is plausible from a regulatory perspective and promising from an entrepreneurial perspective!

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