Healthcare startups don't die from small markets. They die on a Tuesday.

I have read hundreds of healthcare decks. Almost all of them die the same way, and it is never the way the deck warns you about.

The deck warns you about the market. It opens with a number in the trillions. It walks you through a clean reimbursement slide where the code already exists, the payer already pays, and the patient already shows up. The whole pitch answers one question: is this market big enough? In healthcare, the answer is almost always yes. The market is enormous. That is the easy part.

Then the company dies anyway. Not in year one, on the splashy launch. In year three, on an ordinary Tuesday afternoon, when the thing that was supposed to work simply does not.

Healthcare fails on operations, not on market size

Here is what I learned watching deals up close, first at Fortune 500 scale and now writing checks of my own. Healthcare almost never fails on market size. It fails on operations.

It fails on the workflow that does not fit the clinic. The product demos beautifully, then a nurse has to click through it forty times a shift between patients, and she stops. It fails on the reimbursement code that arrives two years late, after the runway is gone. It fails on the care model that hums in a 50-patient pilot and shatters when volume triples, because the founder confused a pilot with a business.

None of that shows up on the market-size slide. None of it. You cannot find it in a TAM chart. You find it by asking how the work actually gets done.

Generalist funds miss this. They underwrite healthcare the way they underwrite software: market size, clean slide, strong founder, go. Then the company hits the operational wall every healthcare company hits, and the fund acts surprised. They were never surprised by the market. The market was always there. They were surprised by the Tuesday.

I founded Sonnerie VC to underwrite the Tuesday.

An operator's lens is a specific skill

I do not mean that as a slogan. I mean it as a job.

Before Sonnerie, I spent years in corporate development and M&A, including a transaction valued at around 26 billion dollars. At that altitude, nobody underwrites on a slide. You take the operation apart. You ask who actually touches each step, where the money actually moves, and what breaks first when you push on it. That is the same lens I bring to a seed-stage healthcare company. The dollar figures are smaller. The discipline is identical.

So when I diligence a company, I am not really evaluating the market. I am evaluating the operation. I ask a short list of unglamorous questions.

Who actually touches this workflow? Not the buyer on the slide, the human being who has to use the thing on a busy floor.

How does the money actually move? Not the reimbursement code in theory, the cash in practice: who bills, who pays, how long it takes, what gets denied.

What breaks first at scale? Every model has a part that fails when you triple the volume. Find it before you wire the check, not after.

And the one that matters most: what is true on an ordinary Tuesday afternoon? Not in the pilot. Not in the press release. On a normal day, with a tired staff and a full waiting room and nobody watching. That is where the business actually lives.

If the answers are vague, the slide does not save it. If the answers are sharp, the small market does not sink it.

Complexity is the moat

Here is the part most investors get backwards. They treat operational complexity as a risk to avoid. I treat it as the entire opportunity.

Think about what complexity actually does. When a market is operationally hard, the pool of investors who can honestly underwrite it collapses. Most funds cannot tell a real operation from a confident founder with a good slide, so they do one of two things. They overpay for the story, or they walk. Either way, they leave.

That exit is the moat. Not for the founder alone, for the investor who stayed. Scarcity of competence is scarcity of capital chasing the same deals. The harder the operation is to evaluate, the fewer people can price it, and the better the entry for the few who can.

Easy markets do not have this property. A clean reimbursement story with an obvious workflow attracts every generalist with a checkbook, and the price reflects it. The hard ones stay quiet because almost nobody can read them. I would rather be one of five investors who genuinely understands a company than one of five hundred who likes the slide.

A bet that only makes sense up close

Take BMI Organ Bank, a representative Sonnerie investment. The work is kidney regeneration for transplant. The ambition could not be larger, and the market need could not be more obvious: people die on waiting lists every day.

But the market was never the question. Of course the market is there. The question is whether the operation behind the ambition is real. Can this team actually execute the science, the regulatory path, the manufacturing, the slow grind from a working result to something a transplant program can use on a Tuesday? That is not a market call. That is an operations call. And you cannot make it from a slide. You make it by getting close enough to see how the work actually gets done.

That is exactly the kind of bet that rewards an operator's lens and punishes a market-size one.

A message to founders

If you are building in healthcare, here is how to pick investors. Watch which questions they ask in diligence.

The ones who only ask about market size are telling you something. They will be useful right up until the first hard Tuesday, and then they will be surprised, and a surprised investor is worse than no investor.

The ones worth having ask the hard operational questions early. They want to know who touches the workflow, how the money moves, what breaks at scale. Those questions are not skepticism. They are the investor pressure-testing the exact thing that will decide whether you live or die. That pressure is a gift. Take the money from the people who ask it.

Healthcare startups do not die from small markets. They die on a Tuesday. Back the Tuesday, and the rest takes care of itself.

Common questions

Why does Sonnerie VC focus on operations instead of market size?

Because market size is rarely what kills a healthcare company. The markets are almost always enormous. What kills companies is execution: a workflow that does not fit the clinic, reimbursement that arrives late, a care model that breaks when volume triples. We underwrite the operation because that is where the actual risk and the actual return live.

Why is operational complexity an advantage rather than a risk?

Because complexity shrinks the pool of investors who can honestly evaluate a deal. When a market is hard to read, most funds either overpay for the story or walk away. That scarcity of competence is the moat. The harder a company is to underwrite, the better the entry for the few who can actually do it.

What should founders look for in a healthcare investor?

Watch the diligence questions. Investors who only probe market size will be surprised the first time operations get hard. The ones worth having ask who touches the workflow, how the money moves, and what breaks at scale. Hard operational questions early are a sign the investor understands what will really determine the outcome.

Related reading

• Wall Street has Bloomberg. Main Street has a rule of thumb.
• I left billion-dollar deals to price ten-million-dollar businesses.
• What I learned about M&A pricing after running 1,000+ valuations.

Go deeper

If the decision is live and the operation is hard to read, work with me, or read more of how I think about it.

Tomasz Felpel is an investor, founder, and advisor in private markets and healthcare, based in New York. He founded Value Alpha, an AI-powered private-markets valuation platform, and Sonnerie VC, an early-stage healthcare venture firm. Previously he led corporate development and M&A at Fortune 500 scale. Columbia Business School EMBA. Read the full story.