Over the past few years, we’ve seen a noticeable shift in how venture capitalists operate – behaving more like private equity (PE) in their reduced appetite for risk, increasing demands for operational exits, expanded timelines and a mindset of proven profitability > potential. What do these challenges mean for Medtech founders and CEOs? How should they position themselves to stand out in today’s more rigorous funding environment? Those who understand the shifts explained within this blog and adapt accordingly will be the ones who win in this increasingly complex market.
Why venture capital (VC) and private equity (PE) are getting closer
Extended exit timelines
IPOs and acquisitions have slowed, making traditional VC exits harder to achieve. Startups are staying private for longer, forcing VCs to rethink their investment horizons.
Pressure for returns
With too much capital chasing too few deals, VCs are under pressure to justify their fees and deliver liquidity to LPs, leading them to adopt more active, value-creation approaches.
Key trends reshaping the investment landscape
Rise of secondaries and buyouts
Secondary market for private assets hit record highs in 2024, with buyout transactions surging 39% YOY outpacing traditional growth investments.
Sectoral focus and resilience
Economic uncertainty has made VCs more risk-averse, prioritising sector that can weather downturns.
Adoption of PE tools
VCs are using evergreen fund structures, direct investments and flexible capital deployment, behaving like diversified asset managers.
Operational excellence: the new VC requirement
With VCs behaving more like PE – emphasising risk management, value creation and operational rigor – companies seeking funding must adapt their approach to attract capital.
Demonstrate operational excellence
Show robust business processes, strong unit economics, and a clear path to profitability that VCs now demand.
Highlight scalability
Detail how your company can scale efficiently, with specific plans for margin improvement and cost-control traits PE investors value.
Building resilience in uncertain times
Sector alignment
Position your company in favoured sectors: technology, healthcare, fintech and climate tech.
Economic resilience
Illustrate how your business can withstand economic shocks by diversifying revenue streams.
Active partnership
Be ready for investors who want a hands-on role in driving operational improvements.
Strategic exit planning and governance
Clear exit strategy
- Articulate multiple exit scenarios (IPO, acquisition, secondary sales)
- Show appeal to both strategic buyers and financial sponsors
- Present realistic paths to returns with extended timelines
Enhanced governance
- Establish strong governance frameworks
- Implement transparent reporting systems
- Proactively share performance metrics and risk factors
- Meet increasing LP demands for better oversight
Tech-driven alignment with investor priorities
Leverage technology and data
Use AI and analytics to demonstrate data-driven decision-making in both product development and business operations, meeting VCs increasing expectations.
Align with LP and VC priorities
Understand evolving priorities like ESG, climate impact or deep-tech innovations and tailor your pitch to show alignment with these institutional mandates.
Positioning your company for success
The modern VC landscape is marked by risk aversion, operational focus and demand for liquidity.
Companies that demonstrate resilience, operational excellence and strategic alignment with investor priorities will be best positioned to secure funding in this new era.
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