EventGrid Subscription Webhook validation handshake failure

Question

I am setting up a new project where I need to setup EventGrid Topic subscription pointing to an API url of my Development API Management instance which is internal only. It uses commercial CA certificates as advised in here. I am getting following error when I try to create a subscription through terraform. I feel it is not able to reach the internal only url as the policy is set in APIM to validate the SubscriptionValidation POST request. I am able to test the APIM API policy by sending a POST request from my pc connected to internal network.

Is my assumption correct that we need to make our APIM instance external or is there any other way where I can still validate the url keeping APIM instance internal only?
Status: "Failed"

│ Code: "Url validation"

│Message: "Webhook validation handshake failed for https://my-dev-apim-url/api Http POST request failed with response code Unknown. For troubleshooting, visit https://aka.ms/esvalidation.