Where top VCs are investing in medical and surgical robotics

The medical and healthcare categories have been leading robotic innovation for decades. Look no further than Intuitive Surgical, whose da Vinci robot has been performing surgery since it received FDA clearance in the early 2000s. These days, the SRI spinoff is currently valued at more than $60 billion.

There’s a lot of money to be made for established companies and still areas to be explored for young startups, both on and off the operating table. The venture community has been betting big on companies developing everything from new surgical robots, assistive robots for medical facilities, robotic medical aid devices or otherwise. 

Medical device and robotics startups raised roughly 600-700 rounds of venture capital in 2019, according to data from Pitchbook and Crunchbase, with most deals occurring at the early stage (over 25% of rounds occurred at the seed stage). With our 2020 Robotics+AI sessions event now just one week away, we’re diving back into another robotics sub-sector to see where robotics VCs are actually writing checks. 

Just as we did with warehouse robotics last week and construction robotics the week before, we asked four leading VCs who are actively investing in medical and surgical robotics to share what’s exciting them most and where they see opportunity in the sector:

Rohit Sharma, True Ventures

Which trends are you most excited about in surgical/medical robotics from an investing perspective?

Delivering a successful robotics solution in the field of medicine entails perhaps the toughest set of requirements for robotics across precision, vision/perception, and collaboration with trained experts in a highly structured environment. From an investment perspective, we look for early and deep insights in at least one of these domains combined with innovation that makes these challenges easier while recognizing the key human-interaction piece which is so unique to this domain.

For example, solutions that predict, anticipate, and guide an expert surgeon’s skilled hand movements, and therefore lessen the fatigue involved, are as useful as complete replacement for that particular surgical step. Also, while we might imagine the actual surgery to be the primary focus, let’s not minimize the importance of the precise choreography of people and processes that are required for preparation, staging, and post-surgical procedures to ensure consistent and positive outcomes. 

We believe multiple parts of the eventual automated operating room will be driven by intelligent software and machines that are in service of trained teams of nurses, techs, surgeons and anesthesiologists.

How much time are you spending on surgical/medical robotics right now? Is the market under-heated, overheated, or just right?

The ‘overnight’ success of market leaders like Intuitive Surgical (founded 1995) or Auris (founded 2007, acquired 2019) has drawn more attention to this field in the past two years. There may be a temporary overheating of the early-stage market, but we expect the noise to die down soon and return to a steady rate of talented founders who are focused on creating the right kind of value for the ecosystem. 

What is your view on the role of assistive robotics in places like nursing homes and hospitals?

Any automation, software, or robotics solution that increases the time nurses and physicians can spend with patients is a move in the right direction. If a solution can return time to nursing and physician staff in the hospital, it can become a much larger value-creator than any kind of replacement solution.

We already see the leading hospital networks and clinics utilizing mobile robotic solutions that dramatically decrease the number of administrative tasks nurses do daily, such as fetching and restocking supplies or moving equipment. Assistive robotics for administrative staff, nurses, and physicians or surgeons will continue to be a focus area for us.The area requires the most complex software that must constantly learn from its surroundings and sensors to multiply productivity for medical professionals.

What are your thoughts on how the market for exoskeletons will break down between job sites and medically assistive?

One possibility: exoskeletons in consumer applications may lead the way given that the requirements could be easier to attain within non-medical activity support, such as assisted walking, hiking, and mobility.

The challenge with exoskeletons continues to be with their batteries and actuating mechanism materials, in terms of weight versus performance requirements. Medically assistive, role-specific solutions, such as single-joint mobility, may arrive first and find earlier traction in the market, as opposed to whole-body assistive operations.

It’s interesting to note that the peace dividend of scooter wars or micro-mobility will broadly result in a positive boost to this space. Small form-factor, efficient motors, batteries, and actuating mechanisms or sensors are more plentiful than ever as a result of the investments in the micro-mobility markets.

How do you think about the difficulty of bringing products to market in Surgical / Medical Robotics versus other verticals (due to FDA and other health regulations)?

Regulatory requirements are better developed in the surgical and medical robotics space than warehouse or construction robotics. That’s positive for startup founders in the sense that they know what they must navigate in order to get to market. Stringent regulations in this market are a welcome factor as the potential health and perceived impact of poorly designed solutions, in absence of guiding regulators, will hurt everyone in this market. 

Are there startups that you wish you would see in the industry but don’t?

We don’t yet see a sufficient number of new software innovation in this space yet. While PCs/servers, cloud, and smartphones have dominated the field of software to date, autonomous machines and robots for medical applications require fundamentally different computation, networking protocols, and distributed sensor and control systems. I hope to see more founders focused on the software behind these machines.

Peter Hebert, Lux Capital

Which trends are you most excited about in surgical/medical robotics from an investing perspective?

The next generation of surgical systems will be digital platforms – in product architecture, they will bear greater resemblance to the modern technology stack (hardware/software/data) than traditional medical devices. This is creating attractive new investment opportunities, as start-ups will be advantaged to build novel and highly valuable products at the intersection of core technology + medical devices. J&J’s acquisition of Auris for up to $6B is just the start of the convergence between two previously distinct technology communities. 

How much time are you spending on surgical/medical robotics right now? Is the market under-heated, overheated, or just right?

The big game is really getting started in medical robotics, as deep-pocketed giants move in to attack a near monopoly position. But most of the action will be the largest platform companies (think J&J/Auris, Intuitive Surgical, Medtronic) battling each other with rival systems in the market. Expect to see a number of tuck-in acquisitions to drive differentiation and new digital features with billions in market opportunity on the line. 

What is your view on the role of assistive robotics in places like nursing homes and hospitals?

While there is undoubtedly long-term societal benefit from assistive robotics in applications like senior-care, we believe it is too early today from an investment perspective. 

How do you think about the difficulty of bringing products to market in Surgical / Medical Robotics versus other verticals (due to FDA and other health regulations)?

Medical robotics are not for the faint of heart – the FDA is obviously a critical gating factor, but other daunting challenges include large capital requirements, IP moats assembled over decades by some of the largest and most litigious healthcare companies, massive complexities in technology integration, and the difficulty of accessing a fragmented market dominated today by scale vendors. 

Any other thoughts you want to share with TechCrunch readers?

While it could be cost-prohibitive to launch a brand new surgical robotics platform today, expect to see new healthcare robotics platforms created in markets the giants aren’t yet playing (but will be in the coming years). Lux recently funded a new stealth company with broad ambitions, but a particularly clever market approach… stay tuned for more details!

Haomiao Huang, Kleiner Perkins

Robotics in healthcare is still very early, despite a few big exits in surgical robotics. The biggest reason I say this is because surgical robots today are still more about “mechanization” rather than “automation” – tools that enable surgeons to operate on patients in novel ways rather than able to intelligently perform tasks themselves. If you think about the “iron triangle” of healthcare — cost, quality, access to care — robots aren’t moving the needle any of these yet.

It will take time for the tech to mature to a point where automation can make an impact in the operating room. Surgeons and patients are rightly conservative where human lives are at stake. But you can see other areas where intelligence and automation can have an immediate impact. Look at Viz.ai for example, which uses AI to detect large vessel occlusion strokes and guide stroke teams in their workflows. This lets them deliver higher quality care through reduced time to treatment, reduces costs associated with long-term disability, and improves access to specialists by identifying strokes earlier.   

And there are many non-surgical, non-specialized tasks that robots can take over in healthcare in the near future. For example, before and after every surgery there’s a lot of manual labor just sorting, preparing, and packaging surgical tools. This could be automated by highly dextrous pick-and-place systems like the ones that Dexterity.ai is building. And despite their best efforts many healthcare offices still have reams of paper forms and legacy records. Digitizing and managing these will require systems like Ripcord’s document scanning robots. Automating these “back office” functions will also dramatically reduce the cost of health care by reducing labor costs, expand access through that cost reduction, while improving quality by reducing errors.

Just as the surgeon with scalpel in hand is only a small part of any given healthcare system, so surgical robotics are only the tip of the iceberg when it comes to robotics and automation in medicine.

Duncan Turner, SOSV & HAX

Surgery robots differ significantly from many people’s definition of a robot. They don’t make decisions; they are an incredibly sophisticated tool to help a surgeon perform a better task with higher accuracy. Auris has done a phenomenal job of improving outcomes and recovery times for surgery while also saving cost. We are super excited about these robots getting much smaller to allow surgeons to perform entirely new procedures with sub-millimeter accuracy (i.e. in brains and lungs). Shape memory alloys and biomimetics will push the envelope here. When it comes to investment, we are actively looking at tele-health applications of robotics to fill the gap of qualified healthcare professionals. For example, a robot that can perform a first screening in an emergency situation. This will improve outcomes and could increase access in developing or remote areas. Without being too prescriptive, robots could also be used to complete basic physical examinations for GP’s and dentists to improve productivity. 

In healthcare, the most underserved space where we believe robots will play a critical role is in assistive living. We recently invested in Labrador Systems who will launch an exciting platform technology soon. Robots can not only reduce the financial burden of care but also help people feel comfortable with privacy. We would love to see more in the space. We are very active in Japan where there is a massive need for such technology. It is a strategic investment area for our operations there. 

We invest heavily in exoskeletons and certainly see a space for them in the future of healthcare. In particular, two portfolio companies, Nuada and Japet, began life focussed purely on healthcare but found traction in the industrial space, helping them to scale while regulatory bodies approved their technology. We think successful exoskeleton companies should be able to manage both of these markets (not one or the other). While exoskeleton robots will get immediate traction in helping humans perform more like robots (executing repetitive tasks); ultimately, most of these types of jobs will be replaced by automation. Therefore, the healthcare market is a better future market.