Our organization has emerged as one of the top search firms in the surgical robotics / digital surgery space.

I have logged thousands of intimate conversations with CEO’s, Presidents, VC’s, VP’s, Regulatory and Clinical rock stars. We have had great debriefs after their big wins and maybe more importantly, after their big fails. As an investor, I have personally invested hundreds of thousands of dollars in startups and have won really big and I have also lost.

I have helped navigate thousands of careers in the medtech space and have been involved with thousands of successful placements with hundreds of startups. As a businessman with 27 years as a leader in search and as the founder of the medical device industry’s #1 search firm, I always aim to share my perspective.

I get quite a few emails inquiring “What I think?” about the surgical robotic space as a career move, either for those already in the space and also for those considering the choices they should make as they enter the space.

The medical device game has a cadence to it. It has a predictable set of patterns. If you know how to look for them and you have a large enough data set, you can forecast what is likely to occur.

In my 3 decades of putting together medical device startups, I have seen the best get over the line and I have seen the worst train wrecks of all time. I have learned a lot.

Surgical robotics and digital surgery is going to continue to emerge as one of the primary domains in the medical device space over the next 10-15 years.

These two industries will continue to evolve and the market will continue to have the big players entering into it. In addition to Intuitive, Johnson & Johnson, Stryker and Medtronic already having major activity in it, I would look for GE, Siemens and Philips all to enter it in some fashion over the next 5 years.

The medical device game has a cadence to it. It has a predictable set of patterns. If you know how to look for them and you have a large enough data set, you can forecast what is likely to occur.

Money Makes the World Go Round

One of my early comments should be an overlay for every observation I make.

Technology is great but the money to develop these systems has to come from somewhere.

Where will the funding come from for the smaller players that are not being subsidized by one of the large strategics or another external partner with the deep pockets to move this over the line?

VC’s will not show up in the early innings. Unless they change their models, I am not convinced that the VC world will be big players in the early surgical robotic space. It requires a long-term engagement in the investments.

In a best-case scenario, it takes 5-to-7 years to potentially get a robot out to market and start making sales, show adoption, and possibly get acquired or have some sort of liquidity event. It is also a sizable investment about north of $200 million. Too big of a bet as VC’s do not play that type of long ball.

VC’s also do not have a core competency in surgical robotics. It is a complicated and a relatively new platform for them. This is because VS’s are often not first-movers in the market. They tend to be lemmings and will wait to invest in a space / technology only after they see others vc’s invest in it.

The surgical robotics / digital surgery space has rapidly changing technologies that revolve around software and big data. Medtech VC’s do not have that skill set nor experience. Typical VC’s invest in single use disposables, implants or durable medical equipment. A 500k to million-dollar capital equipment play is not their sweet spot.

Technology is great but the money to develop these systems has to come from somewhere.

It will take some deep pockets. It is an enormous investment. Some of the major financial gates to be sensitive to:

  • R&D – The cost to support a headcount of super talented teams (mechanical, software, systems, electrical, UI/UX, clinical, etc.) to develop a system that will be meaningful enough to have users buy it. The monthly burn rate on teams of this caliber when you work in salaries, facilities, tools, proper KOL engagement and field based marketing is massive.
  • Clinical – Develop, test, clinical interaction, feedback, repeat. Add to that, the intense clinical activities for the regulatory submission.
  • Marketing and Sales Team – The economics of putting these teams in place is where I have watched many startups choke themselves to death. Capital equipment sales is a long ramp up. It also requires experienced individuals who know how to successfully pull it off and those people cost big money at about $300-500k per year guarantees in most cases. That is just the salary. Do the math on putting a team in place and getting sales traction in the market and you start throwing around big commitments.
  • Service, Install & Repair – Having the back-end infrastructure to sell a system to a clinic or hospital will need a proven back end support system that the buyer will be convinced the company will be there to support it. Depots around the country / world with personnel in place is an expensive venture.

VC’s will not show up in the early innings. Unless they change their models, I am not convinced that the VC world will be big players in the early surgical robotic space.

Regulatory and Quality

The regulatory landscape is going to become complicated. The previous mindset of “it is only a 510k”, easy enough, is going to change dramatically. See Transenterix and Globus as recent examples as they both took it on the chin in their first attempts. Issues like software, security, patient safety and procedure specific issues (what is actually “going in to the patient”) will all be evaluated by the FDA. Out of all the medical device domains, the FDA may have the least experience in this space. I would look out for an early over-reach by the Agency.

In addition to regulatory becoming a major gate to pass through, it will be the same with the quality function, especially in the R&D phase. A surgical robotic system is a complicated initiative. In the medtech world, the quality system seems to always lag behind the pace of the R&D efforts.

Retention of talent will have to become a core competency for these companies and in general for the industry, it is about time.

That is understood, because you do not want a quality system to choke down the speed of innovation but you also have to have the discipline to have it be “just trailing” it in a healthy way. Falling too far behind and playing catch up will be a killer in more platforms than not.

Specialty suppliers, at-risk components in the supply chain with limited suppliers in the space (motors, transmissions, bearings) are eventually going to be choke points unless they are grown out quickly. (Hint to PE firms looking to do rollups).

IP Wars

There will be challenges coming out in court rooms revolving around IP.

Surgical robotics is based around a sophisticated technology and platform. By nature, it then becomes an IP playground. In joint efforts between “partners,” there will also be IP struggles that develop unique technologies will have to determine who owns what.

Salaries & Talent

Salaries will become elevated. It’s just simple supply and demand.

The surgical robotics space requires very specific skills, such as Mechanisms, kinematics, FEA Analysis, controls software, robotics software, UI/UX and imaging to name a few. Most of these skills need to come from robot specific backgrounds, specialty from universities who have mechatronics or robotics programs or from other industry such as gaming industry.

A talent war will ensue. Lack of a specific skillset can dramatically impact a program. Buying the best and bidding for the best will be a strategy that the industry will have to use as a tool. No one likes to have to “buy someone,” but specific skills in the areas mentioned, will get paid to play.

The talent requirements for all functions will be highly valued and be in high demand. Retention of talent will have to become a core competency for these companies and in general for the industry, its about time. You will see companies changing their compensation plans, going from annual reviews to quarterly, incentives for non-sales persons will be put in place for certain technical deliverables and recieve large retention bonuses as well as sign on bonuses.

Companies will pay much higher than market value just to keep the most talented in their company and not going to a competing company. Even if that means grossly over paying. It happens in other industries. Visit Silicon Valley and look at the war for talent with FaceBook, AirBnB, LinkedIn, Apple and Uber.

Talent will rule in this space perhaps more than any other we have seen thus far in the medtech field.

Conclusion

Surgical robotics and digital surgery represent a major shift in the healthcare market and psyche of everyone it touches, both literally and figuratively.

Surgeons will be less artistic and act more as “drivers” of the technology and platform. These machines will be amazing feats of engineering and become as intuitive (no pun intended) as your iPhone or Mercedes are.

Do I go to a Google / JNJ play? Do I go to an Intuitive? Should I consider a Transenterix or Mako or Titan? It depends on where you are in your career, what your specialty, education and skills are.

Are you interested in being part of the early architecture of a system where every day may bring a major move forward? Or are you interested in iterative development and perceived safety of a larger firm?

My advice is going to be “it depends”.

I am a huge fan of this surgical robotic / digital surgery space. The dynamics of it, the pace of change and the requirement for specific skillsets that are hard to find. It is the first real “melting pot” of the medtech world where individuals from many other industries with a deep expertise in a specific area are welcome.

The watering hole is being filled from the rains of a technologically changing climate. Let’s see what comes out from the horizons to take ownership of it.


Written by Joe Mullings
Joe Mullings is President & CEO of The Mullings Group. He and his firm The Mullings Group continue to be the #1 Search Firm in the med-tech industry.

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