What a difference a few months make. From lofty highs earlier this year, the decline in the stock market combined with economic uncertainly has sapped the frothiness from private markets, leading to a pullback in investor funding.

According to a story in the Wall Street Journal, venture-capital funds raised $132 billion to invest in startups in 2021, nearly double the amount from 2019 and six times the total raised a decade ago, when the number of funds was about a third of what it is today.

Valuations have since come back down to Earth, including those in the medical technology sector. In late 2021 and early 2022, we saw valuations for medtech companies of 10x to 12x two-year revenues. Today, in our experience, valuations are averaging a more reasonable 4x to 6x two-year revenues. Companies can still realize a premium, although it is a much smaller one.

While the funding environment has become more challenging—and more stringent—we believe that medtech companies that are truly disruptive and have technology that is minimally invasive will continue to find financing. There is capital sitting on the sidelines, but founders and CEOs should realize that investors are digging into their due diligence. Here are three crucial factors investors are currently looking for that companies should keep in mind if they are seeking financing.

Companies need to demonstrate a realistic timeframe for cash flow breakeven. The “wow” factor and potential size of the market matter much less now than solid fundamentals. Investors are exhibiting some skepticism regarding projections and are looking for companies with achievable goals. They want to see the burn rate, a clear path to the breakeven point and a realistic time frame of how long it will take to get there.

A good number for companies to focus on is cash flow breakeven or positive in two years, and they should determine how much capital they will need to reach that point. Companies should factor into their analyses that transactions are taking longer to complete.

Devices should have FDA approval. Regulatory approval is critical for investors. If companies do not have FDA approval yet, they will need to document the steps and the projected timeline of their processes before approval is granted.

Companies need a convincing story. Medtech companies need to present the need for and efficacy of their products. As a founder or CEO, do you have a convincing story to help get your device or technology to market?

It is important to remember that there are still investors, such as family offices and high net worth individuals, who continue to seek private market investments as diversification or a hedge against the volatility of the public markets. The financing process is just taking longer and has become more exacting. Medtech companies that can offer more steak with less extraneous sizzle should be able to attract the support they need to continue their work on developing and bringing innovative new technologies into the market.