Lux Capital
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Lux Capital

Welcoming a New Secular Investment Wave: Health + Tech

By Peter Hébert

What causes industries to become stale and sclerotic, leading them to suffer from deficits of innovation? If history is any indication, it’s when they become insular and wall themselves off from new ideas, technologies, and bright people from outside their domain.

Long a prolific driver of invention and shareholder value¹, today’s Medical Technology industry has not kept pace with the rate of innovation and value creation realized by contemporary technology companies. While clever engineers can still drive new medical technology through regulatory approval to market, VC-backed medtech has produced only a handful of innovative companies with large cap valuations since the turn of this century.

Of course, that list includes some incredible success stories — Insulet, Livongo, 10x Genomics, NovoCure, Guardant, Penumbra, and iRhythm, to name a few — though only one of the companies sits above $15 billion in market value. To find larger success stories we have to look back to Intuitive Surgical (now $81 billion in market cap), which was founded in 1995! Another massive success from the last century, Illumina, was founded in 1998 and has climbed over several decades to more than $45 billion in value. Below this cohort, it’s slim pickings.

In contrast, over the same time period, the technology industry has created trillions of dollars in shareholder wealth from a blank canvas, propelling once humble start-ups to the upper echelon of the S&P 500: Amazon, Facebook, Google, Salesforce, Paypal, Netflix, Broadcom, ServiceNow… all iconic names. In fact, the list of multi-billion dollar public tech companies founded since 1995 numbers in the hundreds. Similarly, after launching with the 1976 creation of Genentech (and Amgen in 1980), the biotechnology industry has too become a wellspring of scientific innovation and capital markets activity, creating scores of public companies valued in the billions and tens of billions of dollars — think Gilead, Vertex, Biogen, Regeneron, Alexion, Incyte, BioMarin, Moderna.

But medtech? Bubkis.

The current who’s-who of publicly-traded US medtech companies — Abbott Laboratories, Baxter International, Becton Dickinson, Boston Scientific, Johnson & Johnson, Medtronic, Stryker, and Zimmer Biomet — have an average founding date of 1924. That these companies still remain major brands in healthcare is a testament to their enduring value and importance in the ecosystem. However, their age creates one significant disadvantage: dated business models.

What is responsible for the dearth of iconic medtech companies despite the brilliance of American biomedical engineering?

Early M&A carries a lot of the blame, swallowing the seeds of what otherwise could have become towering redwoods. Medtech venture capital has for too long declared successful exits as tuck-in acquisitions fetching relatively low price tags in the low-to-mid hundreds of millions. This yardstick of success conditions the ecosystem by first reducing investment proceeds to medtech VCs and entrepreneurs, which in turn trims allocations to new funds pursuing medtech innovations, which then kneecaps the ambitions of aspiring VC-backed medtech founders, who set their sights elsewhere. The result is a consolidation in the industry around a few centenarian incumbents.

At Lux, we hold a fundamental belief that the most compelling invention and innovation occurs at the edges of multiple technical disciplines. In a previous blog post, I shared how, in 2012, Lux believed there was a new, modern platform to be built at the intersection of flexible robotics and medical technology. At the time, we foresaw a new “platform technology company bridging core innovations like robotics, data science, and computer vision while delivering groundbreaking medical intervention.” That grandiose vision ran afoul of the unspoken rules in the medtech industry to “stay in your swim lane,” so we purposefully worked outside of the medtech VC ecosystem, choosing instead to partner with crossover tech investors who had access to nearly limitless balance sheets and an appetite to play big. That platform company was Auris Health, acquired last year by Johnson & Johnson for up to $6 billion, the largest private medical device M&A transaction in history.

So long, medtech… enter Health + Tech

So today we are announcing the start of a new initiative, which we hope will catalyze and ultimately lead to a new generation of standalone medical technology companies developing high-impact, high-growth, and high-value platform innovation: Lux Health + Tech.

As versatile technology and healthcare investors, we at Lux embrace the most cutting edge, multi-disciplinary technologies Silicon Valley has to offer: AI & machine learning, robotics and automation, and machine vision, among other groundbreaking innovations. Their value does not come in the form of empty-calorie buzzwords. Rather, these technologies enable the most attractive business model characteristics of high-growth global tech.

Lux has already invested in a number of companies that embody the Health + Tech mega-trend: Auris Health (flexible and surgical robotic intervention), acquired by Johnson & Johnson; Avail Medsystems (telemedicine and virtual collaboration meets the procedure room); Benchling (cloud-based informatics platform for life sciences); Cala Health (wearables technology and neuroscience); Cajal Neuroscience (drug discovery platform targeting neurodegeneration); CTRL-labs (wearables technology and neuroscience), acquired by Facebook; Eikon (in vivo single-molecule microscopy); Elektra Labs (remote biometric and phenotypic data collection); Kallyope (sequencing, bioinformatics, neural imaging, molecular biology, and human genetics); Recursion (machine learning, robotics, and drug discovery); Science 37 (digital technologies and virtual clinical trials); Strateos (robotics, automation, and life sciences); and Thrive Earlier Detection (liquid biopsy and machine learning; to be acquired by Exact Sciences for up to $2B+).

We hope to use a meaningful portion of our $1 billion in newly raised capital to back innovative companies at the intersection of healthcare + technology. With nearly $4 trillion in annual spending on healthcare in this country, there are gross inefficiencies and unmet clinical needs that must be addressed. The marriage between healthcare and technology will impact everything: how patients interact with care providers; how diagnostic data is obtained and analyzed; how intervention is recommended and performed; and how outcomes are measured and quantified. Technologies ranging from teleoperated devices and wearable sensors to machine learning and artificial intelligence are arming patients and healthcare providers with tools to make better and quicker clinical decisions.

The time for the next generation of health technology companies has come, and we’ll be there to back those visionary founders at every step of the way.


¹Medtronic founded in 1949; Boston Scientific in 1979; Abbott Labs in 1888; Fresenius in 1912; Zimmer in 1927; Becton Dickinson in 1897; Stryker in 1941; Edwards in 1958; Baxter in 1931




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