> Community > Stories > Funding innovation, from R&D to clinical use – the Distalmotion success story
14.09
2023

Funding innovation, from R&D to clinical use – the Distalmotion success story

Founded in 2012, Distalmotion has grown massively from a four-person spin-off venture from the Robotics Lab of EPFL (the Swiss Federal Institute of Technology) to a team of 150, working from their own office at Biopôle overlooking Lake Geneva. Growth for life sciences companies can be slow, with a need to find early investment for costly R&D and complex regulations to navigate. We asked CEO and Board Member Michael Friedrich to tell us Distalmotion’s story and the secrets behind its remarkable progress.

The challenges

I joined Distalmotion in 2014, when it was two years old. Since then we’ve transitioned from an early-stage R&D venture into a fully functioning commercial operation, with CE-marked products on the market in Europe and the process for FDA approval in the US underway. However, please don’t let me give you the impression that this process was easy. Growth doesn’t happen overnight.

The market potential of Distalmotion and our surgical robot Dexter is tremendous, which makes us very attractive for investors: we’re on an exciting journey commercially and from a financing perspective. But fundraising is still excessively hard. We’re going into a space that requires large amounts of money. Even though we’ve raised several hundred million Swiss francs, if we want to go to the US alone, without a strategic partner, we need to raise a few hundred million more.

It’s a costly domain we’re in, so it was very hard for us to encourage those early investors to take a risk. It was also difficult to demonstrate that we could succeed, not only from a technological, clinical and commercial perspective, but that we could also secure more money later on. It took a lot of trust building – we’re always working on our credibility, not only to convince clients, but also to attract investors.

We were funded by private investors in our first six or seven years. When we moved to venture funding, I spoke to over one hundred venture capitalists across Europe, the US and China over three years before we found our first investor. During that period we were technically bankrupt a couple of times; we were out of money for several months. We sometimes couldn’t pay salaries. This financing phase was very tough, but I understand the investor’s perspective: it’s a big bet to put hundreds of millions on a team of young people that are doing something for the first time.

Doing the groundwork

During its first five years, Distalmotion was doing research to figure out what the optimal value proposition for on-demand robotics was going to be. From the very first day, we weren’t only considering the customers for the product: the physicians, the surgeons, the hospitals. We also tried to understand the customers of the company, the potential acquirers of Distalmotion. Ultimately, the value proposition we designed with Dexter is uniquely optimised for both those targets. This gives us a great opportunity to sell Dexter to our clients, but it also creates a great platform and opportunity for the company to be acquired by a strategic acquirer once we have all the proofs from a regulatory and marketable adoption perspective.

We worked very closely with 40 to 50 surgeons across Europe to explore concepts. From the start, we strove to be in real-life clinical use as soon as possible. Back in 2015 we began an initial clinical pilot with very early-stage concepts. We’ve always leveraged the advantage that a smaller venture has. Since our early days, we’ve been agile and quick at iterating: going out into the field, learning what works and what doesn’t, going back to the lab, improving a product, then going back to the surgeons. So, every six months or so we had a new version of the concept that was ready for testing.

It was through this process that we started to refine not only our understanding of the unmet need we’re fulfilling, but also the technology required to match that unmet need. All this work was the foundation that enabled us to develop the product and start to build it in 2018, get it approved in 2020 and get it into day-to-day clinical and commercial use by 2022.

There’s an art to taking small steps forward on every front.

Growing the team slowly – then accelerating

When I joined in 2014, we had a small team of founders and engineers who drove concept exploration. In 2016, we bought those founders out. In 2018, we started to build a management team with people we hired from the outside, which helped us to bring in additional skills, experience and networks. Over the last 12 months, we’ve expanded the leadership team further, with global leaders joining us. We try to staff up the team gradually, bringing in the relevant expertise at the right time.

We’ve found that financing and team growth go hand in hand, but it’s a bit of a chicken and egg situation. If you don’t have any results, you struggle to get money and you can’t hire, but you can’t get results without having money and talent on board. There’s an art to taking small steps forward on every front. That ultimately allows you to take bigger steps when the company matures. We got a big boost when we received venture financing from our US investors with our Series E round. Revival Healthcare Capital is our lead investor, with Revival’s Chairman Rick Anderson as Distalmotion’s Chairman of the Board. This change brought us a lot of credibility as an investment opportunity; having a very experienced Board has helped us to attract more experienced talent to the management team too.

The importance of trust (and following your gut)

As I’ve mentioned, building trust has always been very important to Distalmotion. When you’re at the cutting-edge of a field like robotic surgery, it can be tricky to bring other people along for the ride. It’s a huge market and the existing, traditional robotic companies are growing very successfully with important margins and revenue. So it’s attractive, but the investor community didn’t believe our approach was going to be the winning one, and that we were able to become a leading player in soft-tissue robotic surgery. We had to build up credibility, be that in the operative room with patients and physicians or through other soft factors, like moving to a dynamic, reputable location like Biopôle.

When you’re building and you don’t have a lot of money available, you have to ask yourself: What can I demonstrate with what we have? How can I de-risk the story? In the beginning it’s mostly about showing that the concepts and product work, but at every stage we’ve tried to anticipate what the next biggest risk is from an investor’s perspective and worked to reduce it. That’s how we’ve progressed: lots of convincing investors to continue believing in us. It requires plenty of relationship building, and a balance between facts and feelings.

When investors look for opportunities, it’s always valuable and advisable for them to have a clear picture and pathway of how they’ll get their investment back. But it’s not just about the figures. They can look at very attractive investment opportunities, but if they don’t have a good gut feeling about the team, they won’t invest. They need to trust the people. Intuition is an important factor that is sometimes overlooked when studying an Excel spreadsheet.

Of course, the facts are crucial and they need to be rigorously reviewed. Investments can be lost when people don’t do enough due diligence and don’t dare to ask the really hard and painful questions. And sometimes those questions are simple: Why would someone actually pay for that? Why, and who? How much? What can go wrong? People can shy away from questions that seem too basic, but it’s vital to know the answers and share them with investors. This clarity of focus, alongside strong projections or results and the ability to create a positive emotional experience when interacting with your company – it’s a great combination.

Dexter from Distalmotion allows surgeons to freely switch from robotic to manual laparoscopy during a surgery.

Going global?

Today we’re no longer selling promises. We’re on the market, measured by results, which changes how investors look at our opportunities. Now, we deliver numbers and not just projections, and that’s a different game. The first million in funding is easy; after that it gets tougher. But it’s no longer just one person looking for the money. There’s an experienced team doing it and that certainly helps.

We have a narrow and deep commercial strategy, which informs our approach to growth. We don’t try to work in every hospital in every country for every possible application. We’re focusing on select accounts across Germany, Switzerland and France that we have consciously chosen and with which we have close relationships. We understand how Dexter will be used there every day, what it takes to create high customer satisfaction and high recurring use. We talk about building a commercial playbook for success before expanding further. In our case, we’ve worked out that ultimately about two-thirds of our income will be recurring revenues from utilisation, so it’s important that the robots are not just installed, but being used every single day. It’s therefore crucial for us to understand how – from a product design, training and clinical workflow perspective – we can ensure that the products are really used every day. That is so much more important than trying to sell in yet another country and not being able to take care of it appropriately.

We recently achieved the milestone of 200 successful surgery cases with Dexter at Saintes Hospital, France. It’s a valuable reference because it shows that Dexter works and that, if you have the right surgeons and train them well on the right product, you have a scalable business model. And that’s something you can multiply at a later stage. But taking one step at a time is still key. It allows you to be much more cash efficient and considered in the way you deploy capital.

Looking back: advice for other life sciences ventures

Always be ready to discard a technology. Life Sciences ventures are often based on technologies developed in labs by PhD candidates. Although ground-breaking, these inventions and discoveries may not be optimal technology. It’s important to ask the question early on: Does it provide the answer to a need in the market? Many ventures – including ours – waste time in those early years focusing on the ‘technology push’ rather than the ‘market pull’, not daring to pivot fast enough. You must clearly understand the needs you’re addressing and show you’re capable of addressing them.

It’s also essential to question the assumptions at the foundation of a company when it comes to people. One thing we did, with the buyout of the founders and our approach to evolving the leadership team, was to recognise that someone who is good in a lab is not necessarily a good entrepreneur. Equally, a good manager for a company of 20 people is not necessarily a good manager for a company of 2,000 people. It’s important that people are self-aware and understand where their strengths lie. Have open conversations about the best places for people to serve for the greater purpose, which is not their own career, but ultimately the future of the company.

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Michael Friedrich
CEO and Board Member at Distalmotion
Michael is the CEO of Distalmotion, a Swiss medical device venture introducing Dexter, the on-demand surgical robots that enables millions of patients to access high-quality minimally-invasive care across general surgery, urology and gynecology. Dexter is in day-to-day clinical and commercial use across select hospitals in core European territories.

Michael is an EPFL microtechnology engineer by training, and an entrepreneur by heart. Prior to Distalmotion, Michael co-founded, led and exited another medical device venture called Aïmago, as well as an IT venture while still in high-school around the turn of the century.

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