The build-to-buy model is becoming a recurring theme in medtech boardrooms, strategic planning sessions, and early-stage funding conversations. But for all the talk of structured deals designed to streamline acquisitions and accelerate innovation, questions remain about whether this model actually delivers on its promise. At LSI USA ‘25, a panel of industry leaders gathered to unpack the build-to-buy approach, exploring its potential benefits and its all-too-frequent pitfalls.

Definitions and Divergence

Moderator Joe Mullings kicked off the conversation with a foundational question: What exactly qualifies as a build-to-buy?

According to Addie Harris, there are two main flavors. “You have your pure innovation build-to-buy, and then you have fill-a-gap-in-our-portfolio build-to-buy,” she said. In the first model, strategics provide funding to incubate innovation in a specific area, often with early academic or startup collaborators. In the second, companies know exactly what they want built and contract a partner to deliver it.

Josh Makower noted that the first scenario is almost more of a “build-to-invest” structure. “There are partnerships, but those don’t necessarily lead to a buy at the end,” he said. Harris emphasized that what unites both models is clarity of ownership. “The entity putting the money in is the one who gets the toys at the end.”

The Economics and Risks of Structured Deals

Theoretically, build-to-buy structures help align incentives and distribute risk. Strategics get access to off-balance-sheet R&D. Startups receive funding and validation. But when the buy doesn’t happen, things get complicated.

From an investor’s perspective, said Andrew ElBardissi of Deerfield Management, these deals can be hard to justify. “You’re capping your upside while still carrying 100% of the downside,” he said. “You have no control over the changes that happen inside the strategic, and that’s a lot of risk to assume without certainty.”

Makower agreed, pointing to real-world examples where companies banked on a buyout that never materialized. “People change, strategies change. Sometimes you end up with a champion at a strategic who didn’t even choose the deal, and they might not even like it,” he said. “You have to structure it so that there’s an easy out, and that out is very friendly.”

Why the Clock Kills More Deals Than the Competition

Timing emerged as one of the biggest threats to the success of build-to-buy models. 

Ramin Mousavi likened the model to a long engagement. “You enter into an agreement where the wedding is down the road. But the more you get to know each other, the more you find things you don’t like,” he said. “And the more successful you are, the worse it feels, because in an open market, you’d likely get a better deal.”

Makower was candid: “I don’t know many build-to-buys that have actually consummated in the end.”

When the Deal Becomes the Risk

There’s also the question of integration. For startups, success doesn’t end with the acquisition; it’s just the beginning of another challenge. “You have to think through the org charts, who’s on the team, what motivates them,” said Harris. “Culture is everything. If you don’t protect the team and retain what made the startup work, the value evaporates.”

Makower noted that R&D costs for digital platforms continue long after launch. “If you’re not retaining the people who got their payout in the build-to-buy, you lose critical capability,” he said. “It’s never just the technology.”

Mousavi added that speed is often undervalued. “Highly coveted talent won’t stick around if they’re bored. You can’t just throw money at it and expect that to be enough.”

Certainty Is the Currency That Builds Trust in Build-to-Buy Deals

What emerged clearly from the panel is that the most successful build-to-buy models aren’t improvised or aspirational; they are built on contractually defined certainty.

“The easy solve for this dynamic is certainty,” said ElBardissi. “If you provide certainty that a company will get acquired when specific milestones are achieved, then everyone’s interests are aligned.”

This means spelling out exactly what triggers the acquisition and removing ambiguity about what happens if things don’t go as planned. In Harris’s most successful build-to-buys, acquisition was guaranteed upon milestone achievement, and if the strategic pulled out, they walked away without ownership of the IP or assets they’d helped develop.

“Everybody has to show up to the table with their best behavior,” she said.

Reputation Still Matters in the Small World of Medtech

The panel also explored the broader ripple effects of failed or poorly handled deals. “Strategics understand their reputation is on the line,” said ElBardissi. “This is not a one-off industry. Behavior travels fast.”

But Harris pushed back slightly. “Have you been inside a strategic lately?” she said. “Underinvestment, leadership churn, misaligned incentives…it’s more common than people think. Sometimes people manage their career, not the project they’re working on.”

Makower brought the conversation full circle. “This is not a money business, it’s a people business,” he said. “Relationships and trust are the through line. When strategics are involved and offer real collaboration without excessive control, it can be incredibly helpful. But you have to go in with your eyes open.”

Key Takeaways

The build-to-buy model will continue to shape the medtech landscape, especially as strategics seek more cost-effective innovation pathways. But as this panel made clear, success requires more than capital. It takes trust, defined milestones, transparent governance, and a shared willingness to stick with the deal even when it gets difficult.

As Makower put it, “Don’t start one of these unless you believe there’s a market for it.” And if you’re placing a long bet on a strategic partner, make sure you’re also building a way out.

Looking for more insights like this? Join us at our next medtech event in Dana Point, CA, next March 16th–20th.