Why the most important innovations are the hardest to fund

 

By: Olivia Arechiga, Co-Founder, Line Axia

 

AI Disclamer – As always, this blog was written by a human, me! ChatGPT helped me edit.

 

“DeepTech” has long been a favorite buzzword in venture capital circles, promising the next frontier of innovation, from quantum computing to advanced materials and synthetic biology.

Yet, when you talk to investors, many will tell you the same thing: they love the idea!… but it is too risky to invest.

@Tina and I saw this first hand during our time at the Sifted Summit in London this past October.

Fundamentally, DeepTech sits at a strange intersection.

It represents both bold and undeniably innovative visions for the future, and at the same time requires immense amounts of capital, over long periods of time. And often times, it ends up being not viable. It’s hugely risky, in other words.

Understanding, and bravely working within that quagmire, is a requisite if you want to build, invest in, or lead a DeepTech company that actually survives the gap between science and market.

 

First, Let’s Define DeepTech

I asked this question to a small group of EU DeepTech founders during a roundtable discussion at the London Sifted Summit: What is the actual definition of “DeepTech”? Is there one? Does it vary by industry or country?

No one had an answer. In fact, this question was met with concrete silence. No one had any definition of their own to provide. I jumped in and suggested it was something like – “You know it when you see it?”

Some may disagree, and no doubt this is a broad definition, but for the sake of brevity, we’ll define it as: technology rooted in scientific or engineering breakthroughs.

The Singapore Global Centre wrote a good definition: “

Deep tech refers to the cutting-edge and often disruptive technologies that are built on profound scientific discoveries, engineering innovations, or advancements in research areas that have the potential to radically transform industries, economies, and lives.”

Unlike SaaS or consumer tech, DeepTech companies aren’t selling an efficiency or an AI chat-bot; they’re really selling possibilities beyond our current reality.

Whether or not you can articulate this possibility with concrete requirements, steps, and most importantly, a timeline, will determine whether your DeepTech becomes a darling of daring investors, or if it dies in an under-funded lab.

 

Why Investors Want DeepTech:

• Massive Potential Upside
  DeepTech companies are often trying to solve big problems, like climate change and healthcare, which means the upside is outsized. If it works, it can reshape entire sectors. It can literally, change the world.
• Defensibility and IP
  The moat is in the science. DeepTech ventures will build patent portfolios or proprietary engineering processes that are years ahead of actual replication or deployment.
• Portfolio Differentiation
  VC’s interested in this type of risk want their investment to be high impact and high return– which is typically what you get when you invest in DeepTech and it takes off.
• Impact and Narrative
  DeepTech is attractive when it’s an impact initiative – helping humanity and solving big problems makes a VC look good. Good headlines bring more opportunity for the VC.

Conversely…

Why Investors Don’t Want DeepTech:

• Technical Risk
  The science can fail. And often does, sometimes spectacularly. (Think the Theranos story).
• Time-to-Market
  While a SaaS startup can iterate and pivot in months, DeepTech ventures can take 10+ years (or longer) to reach a minimum product or a marketable result.
• Capital, Capital, & More Capital
  Prototyping, manufacturing, data analysis, and creating regulatory pathways require incredible amounts of capital. The same components that make it defensible, also makes it incredibly expensive.
• No Clear Exit Sign
  Many DeepTech ventures have uncertain (or non-existent) IPO/capital return paths. The “exit math” doesn’t traditionally fit standard VC time or investment return horizons.
• Operational Complexity
  DeepTech teams need to align scientists, engineers, regulators, and business operators which demands an extremely high level of governance, expertise and oversight that most early-stage companies don’t need.

Here’s a quick real-world comparison of funding a non-DeepTech initiative by VC’s, compared to a DeepTech:

In June 2019, Commonwealth Fusion Systems (CFS) closed a $115M Series A to commercialize fusion energy. That number is already a tell: in DeepTech, “Series A” is often not “fuel to scale”  (like it is in software, by comparison), it’s fuel to survive the middle: pilots, first-of-a-kind engineering, and a regulatory path that sometimes is being built at the same time.

CFS itself notes “ARC” (its first grid-scale fusion power plant) as arriving in the early 2030s. In other words, even after a nine-figure “A,” you’re still staring down a decade-plus gap between promise and market reality.

Now, put that next to a typical software timeline.

Notion was founded in 2013 and first released to the public in 2016 (roughly a three-year path to a shippable product). And when Notion raised $10M in 2019, it was widely described as an “angel round”  i.e., capital coming in when the product already existed and the business case was legible.

This is absolutely not an apples to apples comparison, but that is the point.

In software, a “Series A” often comes after the market has already confirmed demand. In DeepTech, a “Series A” can show up when you’ve proven something in a lab, but the hardest part is still ahead: building the thing in the real world, under real constraints.

Even the “normal” baseline makes CFS stand out: PitchBook’s 1Q 2019 Venture Monitor put the median early-stage VC financing at $8.2M. CFS wasn’t just raising “more.” It was raising a different category of money for a different category of timeline; and then being judged by investors who are structurally optimized not to thrive through that ugly middle bit.

The paradox then, is pretty obvious.

The same traits that make DeepTech valuable, make it nearly uninvestable.

It’s desired because it’s visionary, defensible, and impactful.
It’s avoided because it’s slow, uncertain, and illiquid.

Many investors want to be associated with DeepTech, but not live through the difficult middle.

I’m sure we’ve all heard the (slightly inappropriate) analogy – “spare me the labor pains, just bring me the baby”.

 

Where DeepTech Investment Actually Breaks Down

The failure point is in translation – between the research and business. This was obvious in the convo at the Sifted Summit with DeepTech founders; my question should have been answerable, if only to be a plug for the founders own DeepTech projects.

A team can build groundbreaking, life-changing tech, but will fail to:

• Define measurable milestones (this is much harder than it sounds)
  • How do you define milestones for something that doesn’t exist yet, and you don’t know if, when, or how it will exist?
• Build governance and timeline structures that can withstand funding cycles
  • Again, building governance for something that has yet to be governed or regulated – where do you start?
• Translate scientific proof into commercial readiness
  • How to make a technological advancement / scientific breakthrough, marketable? Results is the obvious answer, but what if results are decades away?

 

Conclusion

DeepTech is, across the board, worth investing in. The ambition though, requires a longer fuse. We’re talking about true world transformation in some cases – and the patience for this demands more bravery, grit, and discipline from founders and VC’s alike.

DeepTech founders however, need to learn to sell, plain and simple. Marketing without a market plan, without concrete metrics for investor return, pivot points, and governance parameters are all big red flags with VC’s. Most venture investors are optimized for software-style risk/reward: low capital requirements, fast iteration, and relatively short time-to-market.

DeepTech needs to do a better job at making risk more quantifiable, and make the technology more analogous commercially.

Firstly, if every R&D milestone is not directly tied to a business KPI (e.g. cost per unit, performance metric), you’re missing an opportunity as a DeepTech founder.

Secondly (and this one is not going to be very popular), but move away from the story-book “making a better world”. Don’t abandon it outright- but don’t rely on this narrative. Build investor decks that translate science into economics and strategic moat – not a story about saving the world.

As much as “saving the world” speaks to me personally, it’s not going to be the line that moves the investor from a maybe to a yes.

Keeping business mechanisms at the forefront of DeepTech may seem a bit icky, but it’s the only way DeepTech makes it out of the vision stage, and into the hands of those who really need it; which is all of us on this planet who need big breakthroughs in health, science, climate and energy, now more than ever.

 

Fragmentation and the US Healthcare Market

#2 In Our Field Guide for EU Digital Health Founders

By Tina Simpson, JD, MSPH

 

Before the break for the holidays last month, we opened this series with a reflection on how many EU founders misread US market dynamics, misunderstanding not only demand and opportunity, but the structural forces that shape adoption, scale, and success.

They rely, understandably, on the mental models and assumptions of their home countries. Many EU and international digital health founders approach the US as if it were a single healthcare system: large, complex, and imperfect, but ultimately coherent.

This assumption is understandable.

There is one FDA. National programs like Medicare and Medicaid exist. Major hospital brands operate across multiple states. The infrastructure suggests centralization. This leads founders to make several miscalculations and mistaken assumptions.

For example, they assume:

• the only (or best) path into the US market is as a clinical FDA-regulated intervention.
• there is a meaningful nexus between regulatory review and approval and market adoption.
• regulatory approval is “the hard part” and underestimate the commercial and operational challenges of bringing an innovation into a clinical practice.

But as we discussed previously, the U.S. healthcare “system” is better understood as as an ecosystem than as a centrally designed system. It’s Jurassic Park, not We Bought a Zoo. Each requires different skills, strategies, and tools.

 

I use the term ‘ecosystem’ intentionally; and I want to pause and ensure that this Jurrasic-tinged theme hits home before we proceed further. Classifying it as an ecosystem captures the unexpected diversity and adaptation to local conditions that emerges in the absence of centralized authority and intentional design. In the absence of that centralized authority and vision, there is no external force smoothing out variation, aligning priorities, or reallocating resources toward a shared objective. Variation is not mitigated, but amplified.  

Consequently, in in the US ecosystem, local conditions exert disproportionate influence over what gets adopted, funded, scaled or abandoned. What thrives is not what is universally optimal, but what is well-adapted to its specific environment; or, more accurately, what is perceived as the most urgent issues for local decision makers. What succeeds in California may fail in Texas. Resources flow differently. Competitive pressures differ. Regulatory and political constraints diverge.

This is the crux of why the distinction between a system and an ecosystem matters.  Because there is no centralized organizing force fragmentation and localization are not temporary features to be engineered away. They are defining characteristics of the U.S. healthcare market, and they are the first things that a founder must wrestle with when considering market entry.

What follows in this article (the second in our Field Guide) is an exploration of the practical consequences of that reality.

If the U.S. healthcare market is an ecosystem rather than a system, how does that shape the structure of the market itself? How does fragmentation manifest in practice? And why does this variation, while often experienced as a barrier, also create opportunity for founders who understand how to navigate it?

In this installment, we continue to challenge prevailing mental models by examining how:

• The U.S. healthcare market is not a monolith, but a network of overlapping regional markets and systems;
• Fragmentation is a structural feature of the environment, not a bug; and
• This fragmentation creates both real barriers and strategic openings for the savvy navigator.

Let’s get started.

The Illusion of (Immediate) Scale

For many EU founders, the immediate appeal of the U.S. market is its scale: one regulatory checkpoint theoretically provides access to over 330 million people. This vision of access to a single massive market is tantalizing. It is also misleading.

This is because the U.S. healthcare market is not a monolith. I want to pause here a moment, because it can be tempting to glibly pass over that statement. I mean, of course the U.S. healthcare market isn’t a monolith (who said it was?)– the US itself isn’t a monolith. But what I want you to appreciate is the diversity and fragmentation that exists because there isn’t a centralized system setting the agenda, and allocating resources. Once again, the US healthcare market is an ecosystem – not a system.  It is a patchwork of competing actors, rules, and incentives, knitted together by shared interests, history, and federal funding. Fragmentation is a profound, pervasive and protected feature of this environment.

It is not simply and accidental or bothersome byproduct. Therefore, the more accurate, and more actionable, way to think about the United States is not as one market, but as a loose confederation of (at least) fifty distinct regional markets, each with its own stakeholders, infrastructure, regulatory environment, and healthcare needs.

Medicaid: A Case Study in Fragmentation and Diversity

To illustrate just how fundamental fragmentation is in the US healthcare “system”, it is useful to start with Medicaid.

The choice of Medicaid (as opposed to private insurance – which actually dominates the US landscape) as a case study is intentional. Of all the U.S. health programs, Medicaid most closely resembles the centralized, government-administered health systems familiar to European founders. It was created by federal legislation, is publicly funded, targets a defined population, and is overseen by a federal agency. On paper, it looks like the kind of national program that would impose uniformity across the system.

It does not.

Instead, Medicaid is fifty different programs under one statute. And, as commonly cited by Medicaid operators, and regulators: “If you know one Medicaid program, you know one Medicaid program.

Let’s back up: Medicaid is a public program created by federal legislation in 1965, funded by government (both federal and state contributions), and designed to provide comprehensive coverage to a specific population (in this case, low-income Americans). It’s administered by a federal agency (the Centers for Medicare & Medicaid Services) responsible for establishing baseline program requirements and conducting oversight of the states’ administration and performance. On paper, it looks like a national program with consistent standards and centralized administration. In practice, it demonstrates exactly why thinking of the “the US Medicaid Market” as “one market” is fundamentally misleading.

As a jointly administered (and funded) federal-state partnership, states have primary authority for the design and administration of their individual state Medicaid programs. The result is that there are more than fifty different Medicaid programs (one for each state, plus territories and the District of Columbia). These programs differ significantly across multiple dimensions:

Eligibility criteria: Who qualifies for coverage varies significantly by state.

Some states have expanded Medicaid under the Affordable Care Act to cover adults earning up to 138% of the federal poverty level; others restrict eligibility restricted to only low-income children, pregnant women, and the disabled.

Covered Services: The types of medical services covered beyond federal minimums vary substantially.

Some states cover dental and vision for adults, others don’t. Behavioral health benefits, transportation services, and coverage for emerging technologies like telehealth or remote patient monitoring, differ wildly.

Delivery models: Most states rely heavily on managed care organizations (private insurers contracted to manage Medicaid populations), but some states directly administer the programs within a more fee-for-service infrastructure.

The number of managed care plans, their market share, and their sophistication varies dramatically. California has a dozen major Medicaid managed care plans with sophisticated value-based care capabilities; Wyoming has a predominantly fee-for-service model with limited managed care penetration.

Reimbursement rates: What providers are paid for the same service varies across states, affecting which providers participate in Medicaid and their capacity (or willingness) adopt new technologies or care models.

Tailored Innovation: States rely on federal waivers to test new payment models, delivery approaches, or coverage expansions.

Some states are actively experimenting with value-based care, social determinants of health interventions, or technology-enabled care delivery. Others maintain more traditional fee-for-service approaches with limited innovation initiatives.

This means that a digital health solution serving Medicaid beneficiaries in California may be irrelevant or even incompatible with the Medicaid program in Texas or Florida – even though the patients may share the exact same need.

Beyond Medicaid

The state-level variation extends beyond Medicaid:

Commercial insurance is regulated at the state level. State insurance departments approve plan designs, set rate review processes, and establish consumer protection requirements.

What constitutes an allowable benefit design, how plans can be marketed, and what consumer protections exist vary by state.

Provider licensing and scope of practice regulations vary by state. What services nurse practitioners can provide independently, whether physicians can practice telemedicine across state lines without additional licensing, what mental health professionals can prescribe, all of this varies.

A digital health solution that relies on a particular care delivery model (nurse practitioners providing primary care, or licensed clinical social workers managing behavioral health) may not be viable in all states without substantial modifications to workflows.

Telehealth policies vary by state. Reimbursement parity (whether insurers must pay the same for telehealth as in-person visits), what modalities are reimbursable (live video, store-and-forward, remote patient monitoring), and what settings qualify all vary.

A telehealth-enabled solution may have strong reimbursement support in one state and face significant barriers (or indifference) in another.

Even Medicare (a wholly federal program with nationally standardized eligibility, benefits, and payment rules) exhibits meaningful regional variation, with variation in implementation, coverage interpretation, and market dynamics.

What this Means When Developing a Market Entry Strategy

For EU founders, this reframing from “the U.S. market” to “U.S. markets” has several critical implications.

Let’s start with the good news: by recognizing and respecting market fragmentation and diversity, market entry becomes more manageable. Instead of needing a strategy to penetrate a 330-million-person market, you are forced to focus on specific geographic markets where your solution has the strongest product-market fit, where you have relationships or local knowledge, or where regulatory and market conditions are most favorable.

You don’t need to “enter the U.S. market.” You need to succeed in small subsections: Ohio, or the Mid-Atlantic region, or among specific safety-net providers in major metropolitan areas.

This is a fundamentally different strategic position, and it requires different analysis. It means asking:

• Which states have the regulatory environment that supports (or at least doesn’t inhibit) your solution?
• Which have the payer mix that aligns with your value proposition?
• Which have provider networks or health systems (or lack thereof) that present natural entry points?

Variation creates opportunity—if you choose strategically. Different states are at different stages of healthcare transformation, have different budget constraints, and different appetites for innovation. A state struggling with a particular challenge—rural access, maternal health outcomes, chronic disease management, opioid epidemic response—may be actively seeking solutions and willing to pilot new approaches.

Massachusetts (Boston-area, most notably), for example, has been a consistent leader in healthcare innovation, with a sophisticated payer landscape, strong academic medical centers, and a history of piloting new payment and delivery models. The same goes for Washington State, which has the longest history experimenting in population health and managed care models. Both states are actively testing solutions that better integrate behavioral health, as well as integrating social determinants of health.

On the other end of the spectrum, Mississippi has a less sophisticated payer landscape and agenda, but as it faces profound rural access challenges, bu is likely to be more  receptive to solutions that address fundamental access gaps or enable specialists to operate remotely from hub facilities.

Understanding which states have the political will, regulatory flexibility, and budget capacity to support your type of solution becomes the key part of market selection.

This isn’t about finding the “best” state—it’s about finding the right state for your specific solution at your specific stage of development. Are you targeting early adopters with sophisticated infrastructure, or are you solving fundamental access problems in under-served markets? Different states represent different strategic opportunities.

Proof points are portable, but expansion requires adaptation. Success in one state creates a case study and proof of concept that can be leveraged elsewhere.

Demonstrating impact with California Medicaid creates credibility when approaching New York or Illinois. But expansion to other states is genuine expansion and not scale – it requires understanding local market dynamics, building new relationships with different payers and providers, and often adapting the product or business model to local regulatory and operational requirements.

In short: this is not “land and expand” in the traditional agile-software sense, where success with one customer creates a reference and the product scales horizontally with minimal adaptation. This is market-by-market expansion, each requiring its own go-to-market strategy, partnership development, stakeholder engagement, and often product adaptation. Your success in one market proves your capability and creates a foundation, but it doesn’t automatically unlock neighboring markets.

Resource allocation decisions become clearer. When you think of the US as one market, the resource requirements feel overwhelming: you need a national sales team, relationships with national payers, presence across the country. However, when you think of the US as fifty markets, you can make deliberate choices about where to focus limited resources and develop the relationships (and generate proof of impact) where it matters most.

You might choose to focus on three target states in your first 18 months, building deep expertise in those markets, establishing strong customer relationships and proof points, and achieving product-market fit before expanding. This approach is both more reflective of the realities and demands of the US system, while also being a much more realistic and capital-efficient path than trying to achieve national scale from day one.

So how do you choose which markets to target? Consider analyzing several dimensions:

• Regulatory environment: Which states have the licensing, scope of practice, telehealth, and insurance regulations that enable (or at least don’t prohibit) your solution? Some states are regulatory leaders that welcome innovation; others maintain more restrictive approaches.
• Payer landscape: Which states have the payer mix (Medicaid expansion status, managed care penetration, commercial market structure, Medicare Advantage presence) that aligns with your value proposition? If your solution is designed for value-based care arrangements, you need markets with sophisticated managed care infrastructure.
• Provider infrastructure: Where are your target customers (health systems, independent practices, FQHCs, specialty providers) concentrated? What is their level of technological sophistication? What is their capacity to adopt new solutions?
• Market need: Which states are struggling with the specific problem you solve? Where is the pain point most acute? Where does your solution address a recognized state priority (rural access, maternal health, chronic disease, behavioral health)?
• Competitive dynamics: How saturated is the market for your category of solution? Are there established competitors, or is this relatively white space? Where do you have differentiation?
• Your capabilities: Where do you have existing relationships, local knowledge, or operational presence? Which markets can you realistically serve given your current team, capital, and go-to-market capacity?

The goal isn’t to find the “best” state in absolute terms, but to identify the first beachhead.

You want a market where you can gain traction, prove impact, build relationships, and establish proof points that can be leveraged for expansion. Understanding that the U.S. represents fifty+ distinct markets rather than one monolithic system is the first critical reframing for EU founders. It makes market entry more manageable, turns fragmentation from an obstacle into a strategic opportunity, and enables more focused and efficient resource allocation.

This reframing shifts the question from “How do we enter the US market?” to “Which US markets should we enter, and in what sequence?” It means being deliberate about market selection, realistic about the resources required for expansion, and strategic about building proof points that can be leveraged over time.

Knowing you’re targeting “California” or “the Mid-Atlantic region” is only the beginning.

To actually succeed in those markets, you need to understand how they’re organized operationally which means understanding the payer-driven dynamics that govern how care is purchased, delivered, and valued. Different payer types have different incentives, purchasing processes, quality metrics, and definitions of value. And any successful digital tool needs to adapt to those dynamics. That’s what we’ll explore in the next article.

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About the Author Tina Simpson is a healthcare strategist and co-founder of Line Axia, a consultancy that helps European digital health companies navigate U.S. market entry. Having worked on both sides of the Atlantic, she specializes in translating across healthcare ecosystems, 90s adventure films, and regulatory jargon.

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If this article resonated with you—or if you found yourself thinking “wait, that’s exactly the conversation we need to have internally”—let’s talk. Line Axia works with European digital health companies navigating U.S. market entry, helping founders recognize blind spots before they become expensive mistakes.

As always, this post was written by a human being! Not AI. ChatGPT was used for final grammar edits and spellcheck.

Earlier this year, I met a friend for lunch in London. He had recently exited a leadership role at a successful digital health startup, one that had built a loyal user base, secured NHS contracting, and by all European measures, succeeded. But the company had plateaued. It wasn’t going to expand beyond its domestic market, and for a venture-backed startup, that was a problem.

Over fancy fish and chips, we exchanged notes. I was curious about his perspective; I wanted to understand the European founder experience, particularly when it came to evaluating U.S. market entry. He shared his reflections on building in Europe; I offered some (admittedly unsolicited) armchair analysis of how his former company might have approached the U.S. market differently.

Two important things from that conversation have stayed with me:

First: The US is on every market expansion roadmap – but most maps lack a key or legend.

For EU and UK digital health founders, U.S. market entry isn’t just an option; it’s baked into the funding trajectory and expectations from the start. It might not be explicitly stated in pre-seed rounds, but it’s absolutely part of an investor’s calculus. To reach the scale and returns that venture funders expect, the U.S. remains the holy grail: a massive market with one centralized regulatory system and a robust appetite for technical solutions to address systemic inefficiencies.

Nothing surprising there.  Here’s the kicker: while U.S. market entry is an expected milestone, the actual mechanics of that market aren’t well understood, even by the most sophisticated and experienced founders.

My lunch companion perfectly illustrates this phenomenon. During our conversation, he reflected on his one lingering regret: they should have pursued the U.S. market. They hesitated, he explained, because the regulatory pathway was too demanding and uncertain. They weren’t eligible for 510(k) clearance, and the full FDA De Novo process meant indeterminate cost and timeline risk. So, they deferred, missing the momentum from their last funding round. They should have entered the U.S., he said, and the mistake was one of timing.

I wasn’t convinced. I was familiar with his application, a digital therapeutic for mental health management. It had clear potential as a patient engagement and self-management tool, which meant natural appeal to U.S. payers and providers managing risk-based or capitated populations. I asked whether they had considered piloting the intervention in the U.S. as a supportive tool, positioning it (at least initially) outside the clinical intervention framework. This approach,  often overlooked by European founders, would have enabled his team to build an evidence base (not clinical trial evidence, but ROI evidence), develop relationships with payers and providers, and establish U.S. market traction without waiting for FDA clearance.

He didn’t hesitate: “No. Ours is a clinical intervention. We needed FDA clearance, and that would have taken two years.”

His forceful and unequivocal response was a bit of a conversation stopper: it also, however reflected a crucial misunderstanding of the US healthcare market. He assumed that how his product worked in the EU and its business model would be the same in the US.

Specifically, in Europe, his product’s background as a clinically validated intervention to treat a given condition was the company’s greatest asset. Its designation as a clinical intervention was core to the company’s identity and its business model. But that rigid adherence to a clinical-only identity became a limitation in the U.S. market. It blinded his team to a critical opportunity: the ability to pivot and adapt the application to serve the pain points of their (actual) US clients- healthcare payers.  By framing their solution so rigidly, they locked themselves into requiring FDA clearance, which meant they never entered the market at all.

Why Are European Founders so disposed to make this mistake?

This isn’t an isolated case, but a pattern I see among European founders. Not because they lack sophistication, but because their experience and success in home systems have trained them to think in ways that don’t translate to the U.S. context.

When European founders look at the U.S. market, they assume it works like their home markets, just faster and more expensive. They apply a European lens to an American ecosystem, and that lens fundamentally distorts what they see.

Let me explain: In Europe, the go-to-market sequence is orderly, hierarchical, and technocratic:

Basically, it works like this:

Regulation → Reimbursement → Adoption

Certification by a Health Technology Assessment (HTA) body or notified body (which grants CE marking, the European equivalent of FDA clearance) unlocks the pathway to reimbursement. Clinical evidence and comparative effectiveness analyses drive evaluation. National contracting and scale follow. The process is long, but it’s predictable, repeatable, and institutional.

This model creates rational assumptions that founders internalize and carry forward:

1. Regulatory approval (and reimbursement approval) is the primary barrier to market entry and adoption
2. Clinical evidence and rigorous academic validation are the currency of legitimacy and market success

These assumptions make perfect sense in Europe. They are, in fact, correct for European markets. But when founders apply this same framework to the U.S. market, they fundamentally misread the landscape.

The core misunderstanding is this: the U.S. does not have a healthcare system; it’s a healthcare ecosystem. It’s a fragmented, overlapping network of stakeholders, payers, providers, and value chains—each with different incentives, priorities, risk tolerances, and decision-making processes. There is no central gatekeeper. There is no single payer and that means there is no single pathway to adoption. The difference between a centralized system (with all its challenges and deficits) and an ecosystem built around private market principles is the difference between We Bought a Zoo and Jurassic Park.  (Welcome to Jurassic Park, indeed) There is no unified “market entry” in the way European founders conceptualize and experience it, in their home-European markets.

The complexity of the US healthcare landscape and complexity deserves its own deep dive, which we’ll cover in a future article. For now, suffice it to say: it’s a lot.

Regulation matters enormously in the U.S., but it is not what drives adoption; that intangible “traction” that founders and funders obsess over. This is surprising to most Europeans, because, unlike in European systems, regulators in the U.S. are not the payers or clients. The FDA’s role is to ensure the safety, integrity, and effectiveness of products; but it has no role in reimbursement, utilization, or market success.

This presents a necessary, fundamental shift in the “go-to-market” mind map for European founders. European founders tend to prioritize regulatory approval as the critical milestone, investing enormous resources and time into achieving it, only to discover that FDA clearance doesn’t open doors the way CE marking (certification that a medical device conforms to EU safety and performance requirements) does in Europe. By the time founders realize adoption requires an entirely different playbook (one focused on demonstrating ROI, building payer partnerships, integrating into provider workflows, and navigating a byzantine reimbursement landscape) they’ve burned resources and momentum.

The challenge, and the mistake my friend and his team likely made when evaluating whether to enter the US market, is recognizing these blind spots upfront. Instead of doubling down on strategies tailored to the European model, successful entrants identify where U.S. market dynamics differ and adapt their approach early. This means rethinking not just when to pursue regulatory approval, but whether it’s necessary at all for initial market entry.

Inverting the Sequence: How the US Market Actually Works

For many non-medical devices (specifically solutions that support clinical decision-making or workflows, facilitate patient management and engagement), the sequencing in the US often looks like this:

Adoption → Evidence → Reimbursement → (Maybe) Regulation

Here’s a critical distinction that European founders often miss: not all digital health tools require FDA authorization. Indeed the U.S. regulatory framework was never designed to treat every digital health tool as a medical device. The FDA regulates “Software as a Medical Device” (SaMD), when the software performs a clinical function: diagnosing, treating, or making autonomous clinical decisions. Many tools that support clinicians, help patients manage chronic conditions, facilitate workflow, or promote general wellness either fall outside the device definition entirely or sit within the FDA’s doctrine of enforcement discretion polices. In practice, this means a wide range of adjunctive tools can be deployed without FDA authorization under the agency’s policy of “enforcement discretion”, because clinical judgment, not the software, remains the locus of control.

This discretionary space is not an accident; it reflects a broader U.S. tradition of light-touch professional regulation, where physicians retain autonomy and are expected to interpret and contextualize supportive tools. The result is a large market of solutions that augment care rather than replace it. European founders, coming from systems where regulatory designation tightly maps to reimbursement and adoption, often misinterpret this as a loophole. It isn’t. It is a feature of the U.S. system: a system that relies more heavily on clinician judgment, tort liability, and market forces than on centralized gate-keeping.

Of course, as software becomes more central to care delivery and AI systems assume more determinative roles, the line between supportive workflows and the autonomous provider will continue to blur. The scope of FDA regulated products will continue to expand, but it is important to keep in mind that, even with expanded regulatory reach, not all regulatory process and pathways are the same or will involve the same rigor as the archetype De Novo review (tailored to pharmaceuticals and traditional medical devices). The agency is developing a more structured, software-specific regulatory framework. This evolving framework reflects intentional, risk-based philosophy that allows low-risk and adjunctive tools to evolve quickly without unnecessary burden. This more nuanced regulatory architecture seeks to adapt to modern care workflows while preserving core free-market principles: promoting speed, innovation, and real-world use. This evolving but still flexible space remains a viable and often faster pathway into the U.S. market.

Why this is consistently missed by EU Founders:

This is a hard concept for EU founders to grasp, let alone spend capital pursuing. You send your product to market… without regulatory approval. Develop partnerships, generate evidence of impact (whether on operational processes, patient outcomes, or cost savings), develop and execute business plans and generate revenue without any sign-off from an administrative body. This is the inverse of the European system(s). It feels risky, unstructured, and perhaps even illegitimate (it’s not). Instead it reflects the diversity of the US ecosystem – a market characterized by decentralization, free-market principles, and where money (and evidence of ROI) talks.

This brings us to a universal truth in business: know your customer. You won’t get far whether selling donuts or digital health unless you tailor your offering to your actual clients and their context and priorities. In the U.S., the State is often not the client (even though they’re often the ones picking up the check in the end). If you don’t prioritize developing traction and credibility with the actual prospective clients and payers, FDA approval by itself gets you nowhere commercially.

My friend’s company had a solution that could have provided immediate value to U.S. payers managing chronic disease populations. By piloting it as a patient engagement tool (as support to a patient’s care team, outside the direct clinical intervention framework) they could have:

• Built relationships with U.S. payers (who are desperate for tools that improve outcomes and reduce costs)
• Generated evidence of impact in the U.S. healthcare context
• Established a revenue base to fund the regulatory approval process (if needed)
• Learned what U.S. stakeholders actually need and prioritize (which might have been different from initial assumptions) and adapted their offering to meet these needs
• Positioned the company for acquisition or partnership

Instead, by defining their solution as exclusively clinical, they made FDA clearance a prerequisite, which meant they never entered the market at all. To return to the Jurassic Park analogy, when you are navigating an ecosystem predicated on free market principles, sometimes your best move is to think different and come from the side.

Addressing Blind Spots and the Genesis of the Series

Our conversation also raised another challenge, one that compounds these blind spots: the pressure on founders to always appear certain.

Founders are conditioned to project confidence, expertise, and conviction. Admitting uncertainty, especially about something as fundamental as “how does this market actually work?” feels like a weakness. In pitch meetings, investor updates, and competitive conversations, there’s enormous pressure to have all the answers.

This creates a trap.

Founders can’t admit when they’re operating from flawed assumptions because doing so would undermine confidence in their ability to execute. So, there is a tendency to double down on the mental models they know, even when those models don’t fit the new context. And even when founders hire experts (regulatory attorneys, market consultants) those professionals tend to focus on specific technical questions rather than challenging foundational assumptions at the risk of stepping on toes.

This is particularly acute when it comes to the U.S. healthcare market because it’s so genuinely confusing. Even Americans who work in healthcare struggle to explain it coherently. How do you ask “stupid” foundational questions, like “Why doesn’t the U.S. have universal healthcare? How does the absence of a national health system translate to different market priorities? Who actually decides what gets reimbursed? Why do payers and providers seem to have conflicting incentives?” when you’re supposed to be the expert positioning your company for U.S. expansion?

The answer to identifying and resolving cultural blind spots is to ask these questions, to be vulnerable, to admit what you don’t understand. But the founder experience rarely creates space for that kind of vulnerability. That’s why I’m writing this series.

After my lunch with my friend, I realized that what European founders need isn’t just a guide to U.S. regulatory pathways or reimbursement codes or an explanation on how to approach hospitals and health systems. Those resources exist.

What’s missing is an accessible explainer of the foundational mental models and cultural assumptions that shape the U.S. healthcare market – and how it applies to (and sometimes directly challenges) the EU founder. This series is designed to be that resource: a space to understand not just what the U.S. market requires, but why it works the way it does. Consider this series a safe space for “stupid questions;” or, to continue the Jurassic Park theme, your pocket Jeff Goldblum, a companion who can interpret the tremors, identify the pivots and when, frankly you “must go faster.”

We’ll cover:

• Why the U.S. isn’t “one market” and what that means for your strategy
• How U.S. stakeholders define and measure “value” (and a glossary to translate industrial jargon)
• Understanding US value-based care and other transformation models (and the role of digital solutions).
• Why European traction and clinical evidence don’t automatically translate to U.S. regulatory approval or market success
• An overview of the FDA approval process, and the evolving approach to regulating Software as a Medical Device.

The goal is not to overwhelm you with complexity (as always, our objective is to studiously untangle complexity), but to help you see the U.S. market clearly, and therefore to move forward confidently, hopefully bridging the best of two worlds.

In the next installment of our series, we’ll dig into what “the U.S. is not one market” actually means and how this impacts your market strategy.

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About the Author Tina Simpson is a healthcare strategist and co-founder of Line Axia, a consultancy that helps European digital health companies navigate U.S. market entry. Having worked on both sides of the Atlantic, she specializes in translating across healthcare ecosystems, 90s adventure films, and regulatory jargon.

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If this article resonated with you—or if you found yourself thinking “wait, that’s exactly the conversation we need to have internally”—let’s talk. Line Axia works with European digital health companies navigating U.S. market entry, helping founders recognize blind spots before they become expensive mistakes.

As always, this post was written by a human being! Not AI. ChatGPT was used for final grammar edits and spellcheck.