Israeli medical technology startup Carmel Biosensors died this week.

Noga Technologies (TASE:

NGTC

), which has troubles of its own, advised the Tel Aviv Stock Exchange that all the startup's 35 employees had been turfed out, although the company was keeping hold of its intellectual property.

Carmel Biosensors was developing hypersensitive biological sensors to measure physiological parameters specifically, the level of various substances in the body, such as hormones, drugs, glucose, anesthetics, blood gases, and so forth. The measurements were taken using stickers affixed to the skin.

The company had been managed by Jonathan Adereth, formerly the president of Elscint and now a partner in the Innomed venture capital fund, which is run by Jerusalem Global.

What buried Carmel Biosensors was a disagreement over its valuation, Adereth told TheMarker this week. Throughout two years, the company had tried to raise about $10 million from American investors. But the investors balked at the startup's auto-assessment of $30 million, pre-money.

Existing investors threw the startup a $3 million lifeline, but it couldn't last forever.

But it transpires that more than conflicting valuations were at stake. A source near the company told TheMarker that there were three reasons Carmel couldn't raise the money, and none had to do with its valuation.

The first reason was that its technology didn't work, the source claimed. Although it was considered promising, time passed, and results from trials with the glucose detectors failed to satisfy the backers.

Another reason was the company's amateurish business sense. The company entered into draconian contracts with Swiss drug giant Roche, which would have wound up with much of Carmel's income. The American investors looked at Carmel's business plan, and couldn't see where profit would be coming from.

The third, and primary, reason was weak public relations. Glucose testing is a dead sexy market for American investors, with an eye on the nation's rising population of diabetics. But it's like a beauty content, where dazzling PR and deep pockets are supposed to make up for the fact that the contestant isn't really that smart. At the bottom line, the little startup from Haifa didn't stand a chance.

Adereth, by the way, is far from disgusted with diagnostic technology. A month ago he crossed the road over to the sponsors. He teamed up with several Israeli venture capital funds to invest $2.2 million in UCG, a startup working on image processing for medical uses. He's on the UCG board and has plenty of bitter experience he can use to help this endeavor avoid the fate of the previous one.