Revenue Isn’t the Signal: What Early-Stage Health Tech Investors Should Be Watching Instead

Founders often ask me some version of the same question: What’s your revenue threshold for investment?

It’s a fair question, but it’s also the wrong one to anchor on.

Revenue is an important data point. But in early-stage healthcare, it is rarely the clearest signal of whether a company will ultimately succeed. What matters just as much — if not more — is everything around that number: how customers adopt the product, how sales actually happen, and whether the company is building something that can scale inside a complex, regulated system.

I tend to answer revenue questions deliberately noncommittally. Not because revenue doesn’t matter, but because it’s not the whole picture.

Why revenue alone falls short in healthcare

In healthcare, early revenue can be misleading.

I often see founders fixate on hitting an arbitrary revenue milestone while overlooking more meaningful indicators of traction. At the same time, I have seen companies with relatively modest early contracts demonstrate far stronger long-term potential because of how those contracts came together and what happened next.

If a company has even one customer who has truly bought in, where they are clearly solving a real unmet need and you can see rapid adoption within that account, that tells me far more than a company that has been operating for two years and crossed a clean revenue line.

Early contracts are rarely perfect. In fact, I often tell founders that their first contract will be the worst one they ever sign. That is not a failure. It is part of the learning curve. What matters is whether the company can learn from that first deal, refine its sales motion, and expand within the same account. That kind of forward motion is a far stronger signal than the absolute dollar value of the initial agreement.

Sales motion is the signal

For early-stage health tech, I care deeply about how revenue is generated, not just how much. I’m usually asking: Are customers coming back? Is there a real pipeline forming early? Are there signs of inbound interest rather than purely outbound selling?

If a company has only been selling for a short time and suddenly has a meaningful customer pipeline, or is seeing cold inbound interest, that tells me something important about product relevance and market pull. Those signals are often missed when we focus too narrowly on top-line numbers.

This matters even more in healthcare because sales cycles are long by default. Healthcare buyers are slow-moving, highly regulated, and risk-conscious. Selling into a hospital, payer, or pharma company is fundamentally different from selling productivity software or fintech tools.

Healthcare organizations operate with thin margins, multiple layers of approval, and legitimate concerns around data privacy, compliance, and patient safety. You’re not “moving fast and breaking things.” You’re steering a very large ship.

That reality is reflected in the data. Research from McKinsey consistently shows that healthcare lags most other industries in digital adoption. While consumer demand for digital healthcare tools has increased, healthcare remains one of the least digitized major sectors, lagging behind industries such as banking and financial services. Even today, a majority of health system executives report that they are not yet delivering on their digital transformation ambitions.

This gap matters. It shapes how products are bought, how long integrations take, and how quickly or slowly real scale can happen.

Adoption, integration, and commitment matter more than speed

Another question I always ask is whether early revenue is actually scalable.

Is the product something that requires months of hands-on, custom integration at every customer site? Or is it closer to a repeatable deployment model? How much effort does it take to onboard a new customer, and what does that say about the future cost of growth?

Customer commitment also matters. If revenue is recurring, have we seen churn? And if so, what kind? Some churn is informative. Losing a customer because they were never the right fit can actually clarify product-market alignment. What matters is whether the company understands why customers stay, why they leave, and what that reveals about the problem being solved.

At the stage where we typically meet companies, product-market fit is rarely obvious or complete. But there are early signs. The most important question I keep coming back to is simple: What is the burning problem for your customer, and do they recognize it as such?

In one case we evaluated, a company had a small number of health system contracts in place. The revenue was promising, but what stood out was how quickly they moved from signed agreement to live integration. Processes that often take months were completed in a matter of weeks. That speed revealed both thoughtful product design and a problem customers were motivated to solve.

A better lens for investors and LPs

For investors and especially for LPs evaluating early-stage healthcare exposure, the takeaway is not to ignore revenue. It’s to contextualize it.

Revenue without adoption, expansion, or repeatability is fragile. Revenue without integration learning is risky. Revenue without customer enthusiasm rarely compounds.

The strongest healthcare companies don’t just close early deals. They learn from them. They improve their sales motion. They deepen relationships inside complex systems. And over time, the revenue follows.

One of the strongest signals an early-stage healthcare company can demonstrate is expansion within a single account. A company still early in its revenue journey with only a few modest contracts in place will stand out if a small five-figure pilot quickly turns into larger repeat contracts with the same team, followed by additional agreements with other departments inside the same organization. That kind of internal pull is often the clearest indication that a solution is mission-critical rather than experimental.

If we want durable outcomes in healthcare innovation, we need to evaluate companies the way healthcare actually works, rather than the way we wish it did.

Revenue is a signal. But in healthcare, it’s rarely the first one that matters.

Photo: SergeyNivens. Getty Images

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