This post is the first in our three-part series, Gearing Up for HTLH USA 2025, where our team of attorneys will share insights on intellectual property, equity, and exit strategies and how these issues intersect in the transactional context.

Physicians are driving much of today’s health innovation. From new devices and digital tools to AI and novel care models, clinical insight often sits at the center of meaningful change. But transforming that insight into a company that lasts requires more than a promising idea. It takes thoughtful corporate structuring, careful equity planning, and a model that can withstand both investor diligence and healthcare regulatory scrutiny.

Below are some of the themes I’ll be covering at HLTH, with a focus on the practical decisions physician founders, and physician advisors, face early on.

Equity: Setting the foundation

One of the most common and most avoidable mistakes is giving away equity too early, or on vague, undocumented promises.

Founders should adopt standard vesting schedules (for example, four years with a one-year cliff). If one founder is part-time, consider milestone-based vesting or even separating responsibilities between the company itself and an advisory arrangement.

Advisors should also have clarity. Scope, time, and deliverables should be spelled out, and equity should vest over time or be tied to specific milestones. Avoid open-ended promises, perpetual exclusivities, or equity that looks more like a referral bonus than payment for bona fide services. When possible, use cash for short-term or one-off needs and reserve equity for long-term contributions.

When planning for future hires, size your option pool based on the next 12–18 months rather than a five-year horizon. Investors will expect this discipline.

Finally, in healthcare, whether for founders or advisors, compensation must reflect fair market value for bona fide services, not based on referrals or clinical volume. Agreements should be written with the expectation that they may one day be scrutinized by regulators.

Funding: Protecting your future self

At the earliest stages, SAFE agreements with both a valuation cap and discount are common, but avoid stacking multiple side-letter SAFEs that make ownership unclear. Convertible notes may make sense if you prefer interest accrual and a maturity date.

When moving into a priced round (Seed or Series Seed), clean preferred stock with a 1× non-participating liquidation preference and standard protective provisions remains the market norm. Be explicit about whether the option pool is calculated pre- or post-money. This makes a material difference in dilution.

Milestone-based tranches can be helpful, but only if the milestones are objective and the amounts released are enough to actually fund the work needed to reach the next inflection point.

Keep your cap table simple, accurate, and updated. Investors often care as much about clarity and order as they do about the headline valuation.

For advisors, this means asking the right questions before saying yes to an equity grant: What type of equity is it (restricted stock vs options)? What is the vesting schedule? What percentage of the fully diluted cap table does it represent? And how will future rounds affect your stake? You don’t need to model every scenario, but you should know what you’re really being offered.

Diligence: Corporate, Investor, and Regulatory Essentials

When diligence begins, investors and buyers are testing for several things, including: the integrity of your corporate structure, the clarity of your deal economics, and the resilience of your regulatory model.

Corporate (structure and governance)

• Entity and records: Formation documents, bylaws/operating agreement, and board consents should be consistent and current.
• Cap table: Reconciled against executed grants and option agreements, with standard vesting and a 409A valuation if options are being issued.
• People arrangements: Written agreements with founders, advisors, and consultants that define scope, term, and compensation. Avoid perpetual exclusivities and revenue share promises that complicate future deals.
• Commercial contracts: Pilots should have defined pricing and clear success metrics. Long exclusivities, broad MFNs, or perpetual rights can all erode future leverage.

Investor (round design and economics)

• Round mechanics: For pre-priced rounds, stick to SAFEs or notes with a clear valuation cap and discount. For priced rounds, clean preferred stock with a 1× non-participating liquidation preference and standard protective provisions is the baseline.
• Milestones and tranches: Use objective metrics tied to the release of enough capital to reach the next value inflection. Avoid subjective or vague triggers.
• Financial clarity: Investors will test whether your unit economics, staffing model, and forecasts connect pilot results to scalable revenue.
• Data room: Centralized, version-controlled, and annotated where necessary to explain anomalies.

Regulatory (can it scale without tripping rules?)

• If delivering care or adjacent services:
  • Corporate practice of medicine and fee-splitting rules: clinical authority resides with the professional entity; MSO fees are fixed or objectively measurable, not tied to clinical volume.
  • Licensure, supervision, and billing must align with state and federal requirements. Keep short written policies on coding and remediation.
• If tech/AI without direct care:
  • Privacy and security: document HIPAA applicability, BAAs, role-based access, and a current risk assessment with tracked remediation.
  • Claims and positioning: ensure outcome claims are substantiated and reviewed so marketing stays aligned with regulatory limits.
• Payments and referrals: Any clinician compensation must reflect fair market value and bona fide services, not referrals or volume. Written agreements and operations should match.

For advisors, diligence cuts both ways. Before accepting a role, review the company’s governance, team, and mission. Make sure indemnification is in your agreement, confirm they have insurance that covers advisors, and insist on prior written approval for use of your name or likeness. Your reputation is as valuable as any equity grant.

Crossing into care

When a product evolves into direct care delivery, the correct structure becomes essential.

The physician-owned PC/MSO model remains the most widely used framework. Clinical authority, hiring and supervising physicians, controlling medical records, must reside with the PC. The MSO provides administrative support such as billing, technology, and marketing (subject to state limits).

MSO fees should be fixed or tied to fair market value. Percentage-of-collections models tied to volume create regulatory risk and reduce enterprise value in diligence.

Even a lightweight compliance program, with targeted policies, short training modules, and spot audits on high-risk processes, pays for itself in reduced exposure and increased investor confidence.

Common questions

• What’s the biggest mistake physician founders make? Over-promising equity while neglecting governance, documentation, and structure.
• What’s the biggest mistake physician advisors make? Accepting roles without clarifying scope, bandwidth, or protections, or tying compensation (directly or indirectly) to referrals.
• When should a company be formed? As soon as IP, data, people, or pilots are in play. Waiting complicates ownership and rights.
• What’s market for founders and advisors? Founders vesting over time; advisors with milestone- or vesting-based equity, modest FMV cash, and never economics tied to referrals.
• How do you avoid CPOM and referral issues? Use a PC/MSO structure, set MSO fees at FMV, and align governance and operations with your agreements.

Bottom line

Strong companies aren’t built on ideas alone, they’re built on structure. Many physicians first engage with innovation as advisors, but stepping into the founder role raises the complexity and the stakes. Whether you’re advising or founding, getting equity right, raising the right capital, aligning with healthcare regulations, and preparing for diligence are what turn promising insights into sustainable businesses.

If you’re attending HLTH USA 2025, I look forward to the conversation. Bring your questions, and we’ll keep it practical.