I'm joined by Monica Vajani, Executive Director of the MedTech Accelerator at mHUB, as we explore the broken early-stage funding model, the evolution of value-based care's impact on medical device purchasing, and why Chicago is becoming a powerhouse for hard tech innovation.

Living Through the Value-Based Care Revolution
→ Monica witnessed firsthand the transition from physician-driven purchasing decisions to complex value analysis committees requiring clinical evidence and cost justification
→ The fundamental disconnect: hospitals take on financial risk through value-based care models, but medical device companies still sell based on static clinical trial data from months or years ago
→ Value analysis committees are overwhelmed, making decisions without real-time outcomes tracking, leading them to focus on simple cost reduction rather than innovative solutions that truly improve patient outcomes

The Brutal Truth About MedTech Funding Today
→ The early-stage funding model is broken - companies need realistic ballpark figures like pharma's 4% success rate metrics to understand their actual chances of reaching market
→ If you're developing a Class III neurology device requiring a 50-patient safety and efficacy trial, you're looking at approximately $30 million in capital needs that most founders drastically underestimate
→ The funding environment has hollowed out: angels aren't stepping in like before, VCs are moving later stage, and 80% of the market is fighting for 40% of available capital

Why Fractional Expertise Beats Full-Time Hires Early
→ Hiring one or two full-time people with four to five airtight fractional consultants in regulatory and commercial is a better model than three full-time employees with narrow experience
→ Companies waste equity on multi-year relationships with full-time COOs who may not work out, when fractional experts with proven playbooks can deliver quick wins
→ The marketplace for fractional talent exists because companies are in analysis paralysis and aren't willing to commit full-time, but need specific expertise immediately

The Insurance Company Reality No One Wants to Face
→ Hospital margins are squeezed, device reimbursement is flat or declining, but insurance companies keep growing revenues - something has to give at this tipping point
→ The average person stays on an insurance plan for just 2.5 years, creating perverse incentives where payers optimize for short-term metrics rather than long-term patient outcomes
→ The explosion in hospital administrative staff directly correlates with healthcare spending as a percent of GDP, with most growth stemming from prior authorization requirements that should be eliminated for 50-60% of care items

Chicago's Secret Weapon for Hard Tech Innovation
→ mHUB has created over 7,000 jobs and their 700+ companies have generated over $2 billion in revenue while raising nearly $2 billion in capital - these are not small numbers
→ The Illinois state government will match any venture dollars raised, and the ecosystem from universities to medical systems to high net worth individuals actually plays nice together
→ Unlike coastal hubs, Chicago offers a "get shit done" environment where the right connections are just a phone call away, with 80,000 square feet of prototyping facilities and labs at mHUB

What Accelerators Get Wrong (And Right)
→ Too many accelerators are self-serving pitch practice sessions rather than investing actual capital and meeting entrepreneurs where they are with specific expert introductions
→ mHUB's model: invest in companies, then reduce time to find the exact regulatory, reimbursement, and commercialization experts needed rather than overwhelming founders with generic networking
→ The hyper-focus on demo days and events without high-commitment, high-performance environments fails to develop entrepreneurs who need targeted help, not generic playbooks

The Prior Authorization Solution That Will Never Happen
→ A bilateral disarmament where 50-60% of care items are exempted from prior authorization requirements would simultaneously reduce hospital administrative costs and insurance company processing burdens
→ United Healthcare is currently 180 days out on processing claims - eliminating unnecessary prior auth would speed payments and ease the cash crunch on hospitals
→ Instead of rational policy reform, we're heading toward an AI hellscape where agentic systems appeal to each other endlessly while both sides maintain bloated administrative layers

Best Quotes:

"There's so many companies out there developing net new solutions. At some point, we're not going to be walking around with 70 devices on our bodies."

"Being an entrepreneur does not mean you have to take a company, raise funding, and do all that. Only a few people know how to do that, and even those people need luck."

"The biggest mistake in MedTech is thinking you can throw out a bunch of activity, but if you're not really driving towards outcomes, you have to reevaluate what you're doing."

"We should be able to say, here's how much money it's going to take, here's the percentage of success for people in your type of role - so you can think about other opportunities like licensing deals or partnerships."

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FIND SPENCER JONES ON SOCIAL
Spencer's LinkedIn - https://www.linkedin.com/in/medtech-innovation/
XO Medtech LinkedIn - https://www.linkedin.com/company/xo-medtech/

FIND MONICA VAJANI ON SOCIAL
Monica's LinkedIn - https://www.linkedin.com/in/monica-vajani/
mHUB Website - https://www.mhubchicago.com/

Episode Timestamps:
0:00 - Introduction to Monica Vajani and mHUB's MedTech Accelerator
2:00 - Monica's decade in clinical cardiac sales at Abbott and Medtronic
5:11 - The evolution from physician-driven to value-based care purchasing
8:24 - Why value analysis committees are overwhelmed and defaulting to cost
12:43 - The broken early-stage MedTech funding model
14:54 - Consolidation cycles and when innovation breaks off from big companies
17:52 - Why not everyone should be running a company
21:20 - The $30M reality check for Class III device development
24:44 - Fractional experts vs full-time hires for early stage companies
29:37 - Hospital margins, insurance growth, and the coming tipping point
32:29 - The average 2.5 year insurance plan tenure problem
33:54 - The explosion in hospital administrative staff since the 1990s
37:19 - What makes Chicago special for hard tech innovation
40:40 - mHUB's economic impact: 7,000 jobs and $2B in revenue
42:01 - What accelerators should do: invest and reduce time to experts
44:53 - How to get involved with mHUB's next accelerator cohort