Building Venture-Backable Companies in Regulated Industries
Building venture-backable companies in heavily regulated industries raises tough questions for founders and investors alike. Can innovation survive long approval timelines? Is venture funding realistic when regulations slow growth? And how do startups stay alive while waiting for clearance that may take years? These questions sit at the center of a new episode of Build Mode, where founders working in healthcare and death care explain why regulation doesn’t kill innovation—it reshapes it. Their stories offer practical insight into how startups can scale responsibly while navigating legal, ethical, and political constraints.
Credit: Getty ImagesWhy Regulation Scares Investors—but Also Creates Opportunity
Regulated industries often scare off early-stage investors because timelines are long and uncertainty is high. Healthcare, biotechnology, and end-of-life services come with compliance costs that can stretch a startup’s runway to the breaking point. At the same time, regulation creates high barriers to entry that can protect companies once they succeed. For venture capitalists, that trade-off can be attractive when founders show discipline and long-term thinking. The Build Mode conversation highlights how regulation filters out short-term thinking and rewards companies built for durability. When done right, compliance becomes a competitive moat rather than a roadblock.
Innovation Doesn’t Stop—It Just Slows Down
One of the biggest misconceptions about regulated spaces is that rules prevent innovation altogether. In reality, regulation often changes the pace rather than the direction of progress. Founders must design products with compliance in mind from day one, which can reduce costly pivots later. This approach demands patience, detailed planning, and strong communication with regulators. According to Build Mode host Isabelle Johannessen, successful founders treat regulation as part of product development, not an external threat. That mindset helps teams stay focused during long stretches without public wins.
Enspectra Health and the Long Road to FDA Clearance
Gabriel Sanchez, CEO and co-founder of Enspectra Health, knows firsthand how slow regulatory progress can be. His company has developed a medical device designed to reduce the need for invasive dermatologist skin biopsies. Achieving FDA clearance took nearly a decade, a timeline that would crush many early-stage startups. Sanchez explains that survival depended on realistic milestones, transparent investor communication, and constant iteration within regulatory limits. Rather than rushing approvals, Enspectra focused on building trust with regulators and clinicians. That patience ultimately strengthened the company’s credibility in a high-stakes healthcare market.
How Founders Keep Teams Motivated During Long Timelines
Long approval cycles can drain morale, especially when progress feels invisible to outsiders. Sanchez shared that maintaining team motivation required celebrating internal milestones that never made headlines. Clinical validation steps, regulator feedback, and technical breakthroughs became moments of momentum. Clear mission alignment also played a critical role, reminding employees why the work mattered beyond short-term growth metrics. In regulated industries, emotional resilience becomes as important as technical skill. The Build Mode discussion underscores that leadership during uncertainty defines whether a startup survives or quietly dissolves.
Earth Funeral’s Challenge: Regulation by Legislation
Not all regulatory challenges come from federal agencies like the FDA. Tom Harries, co-founder of Earth Funeral, faced a very different barrier while building an alternative end-of-life service. Earth Funeral transforms human remains into soil, offering a sustainable alternative to burial and cremation. When the company launched, its process was legal in only one U.S. state. Expansion depended on legislative change rather than regulatory approval. This meant convincing lawmakers and voters who were often uncomfortable with rethinking death traditions.
Winning Public Trust in Emotionally Charged Markets
Earth Funeral’s story highlights a unique challenge: public perception can be as powerful as policy. Even when a service is safe and environmentally sound, emotional resistance can slow adoption. Harries explained that education and transparency were essential to changing minds. Community outreach, respectful messaging, and collaboration with local leaders helped normalize the concept. Unlike FDA timelines, legislative progress can shift quickly—or stall indefinitely—based on public sentiment. For founders, that unpredictability requires flexible expansion strategies and deep cultural awareness.
Venture-Backable Companies Need Regulatory Strategy Early
A key takeaway from Build Mode is that regulatory strategy must start at the idea stage. Investors increasingly expect founders to understand the approval or legislative landscape before raising capital. Clear regulatory roadmaps signal maturity and reduce perceived risk. Founders who ignore compliance until later often face costly delays that erode trust. By contrast, companies like Enspectra Health and Earth Funeral integrated regulation into their business models from the beginning. That foresight made them more resilient and ultimately more attractive to long-term investors.
What Investors Look for in Regulated Startups
From an investor perspective, regulated startups require a different evaluation lens. Speed matters less than execution quality, leadership credibility, and mission clarity. Investors want founders who can manage uncertainty without overpromising outcomes. The Build Mode episode reinforces that transparency builds stronger investor relationships, even during slow progress. Startups that communicate setbacks honestly are more likely to retain support. In regulated spaces, trust becomes a form of capital.
Regulation as a Test of Founder Conviction
Building venture-backable companies in regulated industries is ultimately a test of conviction. Founders must believe deeply in their mission to endure years of scrutiny and limited visibility. Regulation exposes weak commitment quickly, but it also amplifies the impact of those who persist. Whether saving lives through medical innovation or redefining how society approaches death, these startups prove that progress is possible. The path is longer, harder, and less glamorous—but the outcomes can reshape entire industries.
Why Regulated Innovation Still Matters in 2025
As 2025 unfolds, heavily regulated industries remain some of the most urgent areas for innovation. Healthcare inefficiencies, environmental concerns, and aging populations demand new solutions. Episodes like Build Mode remind founders that regulation is not a stop sign—it’s a filter for serious builders. Venture-backable companies are still being built where rules are strict and stakes are high. For founders willing to plan carefully and wait patiently, regulation may be the very thing that sets them apart.
