Have you ever wondered how surgery might change in the future? In this episode, we delve into the captivating world of surgical innovation as we uncover the transformative technology developed by Proprio, a company at the forefront of surgical advancement.
Join Henry as he speaks with CEO and co-founder of Proprio, Gabriel Jones, who provides valuable insights into how the company is reshaping the landscape of surgery, promising enhanced patient outcomes and surgical precision like never before. You'll also hear from Alan Cohen, general partner at DCVC and the lead investor in Proprio who highlights what sets Proprio apart in the realm of medical technology and why it's poised for remarkable success.
Get a sneak peek into the future of surgery, where data, intelligence, and cutting-edge technology intersect. If you're curious about the next frontiers in surgical innovation, this episode is a must-listen.
- Challenges securing funding in the current health tech environment
- The importance of enterprise technology and deep tech in the health tech sector
- Proprio's strategy in the spine industry, aiming to become the dominant navigation platform for all surgeries
- Alan's insights on investing in companies capturing significant value in large markets
- The importance of attracting investors with a long-term vision and diverse backgrounds
- Insights on companies that thrive during tough economic times
- 00:39 - Alan introduces himself and DCVC as a deep tech venture capital firm.
- 02:35 - Gabriel introduces himself and Proprio, emphasizing the paradigm shift Proprio aims to achieve in the field of surgery.
- 14:16 - Alan shares insights on identifying visionary startups and the importance of having a diverse team and data strategy.
- 20:00 - Gabriel emphasizes the importance of designing products with a user-centric approach, similar to Steve Jobs' attention to user experience.
- 30:45 - Gabriel announces the successful closure of a 43 million Series B financing round.
- 34:00 - Alan reflects on the challenging fundraising environment in the Medtech and health tech space over the last 18 months and how it has impacted various companies.
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[00:00:00] Henry Peck: Hey everyone, it's Henry. Welcome to Emerging Medtech Today by LSI. Today, I'm joined by Alan from DCVC and Gabe from Proprio. Together, we discuss how Proprio is pioneering real time light field rendering, how they plan to unlock a fundamental leap forward in surgery with their bold vision, early clinical traction, and fresh capital, and how VCs like Alan, with decades of success as an operator and investor, find and support radical innovation like Proprio amongst a sea of incremental solutions. Enjoy!
[00:00:38] Henry Peck: Gabe, Alan, welcome to the podcast. Thanks so much for joining us.
[00:00:41] Gabriel Jones: Thanks, Henry. Happy to be here.
[00:00:43] Alan Cohen: Hi, Henry.
[00:00:44] Henry Peck: Alan, we'd love to start with an intro to yourself and to DCVC.
[00:00:48] Alan Cohen: Sure, happy to. Starting with my firm, DCVC is a deep tech venture capital firm here in the Bay Area. And what we mean by deep tech is [00:01:00] usually the easiest way to describe it is the intersection of some form of computational advantage or AI in an industry that has not traditionally gone through that form of transformation- rockets, robots, microbes, health tech, climate, water, defense.
[00:01:17] Alan Cohen: So we invest in large, multi trillion dollar industries that are going through some form of transformation as the need for their goods and services increase. We have about 4 billion dollars under management, the firm's about 15 years old, and I've been with DCVC for 5 years. Before that, I spent 25 years in a range of enterprise technology, from little companies like IBM and Cisco to four startups in a row, three of them which I was able to exit with. My partners were investors in my last firm and convinced me that there was a lot of good work to do after a career in traditional tech. So that brought me to where we are today. [00:02:00]
[00:02:00] Henry Peck: Fantastic. Thanks so much for sharing. Gabe over to you, would love to learn a little bit more about yourself and Proprio.
[00:02:06] Gabriel Jones: Thanks Henry. Let me start like Alan did with the company. Proprio is a medical technology company we co founded seven years ago, myself and my co founders, out of the University of Washington, with the mission to bring compelling solutions to patients throughout the world.
[00:02:23] Gabriel Jones: Imagine surgeons having to work with outdated technologies like an x ray, really operating and thinking in 2D, in a 3D world full of... complex 3D problems. So Proprio combines robotics, augmented reality, artificial intelligence, algorithms, and data to be able to actually solve those problems for physicians and really bring the practice of medicine into the current and the future.
[00:02:45] Gabriel Jones: And that's really exciting aspect of what we're doing right now. I'm sure we'll talk more about the various applications of the technology. We think it goes very, very broad. Really a step change in the way that surgery is done and the expectations for outcomes from an intervention like [00:03:00] surgery. And really leveraging the data that's collected through a process like that to impact the entire continuum of care. So we think it's a literal paradigm shift, a new mode of operating and thinking about medicine. And that's a really exciting moment to be involved.
[00:03:14] Gabriel Jones: Now, it's an overnight success 7 years in the making. And we're going to talk a little bit about, I think, Alan and his firm's support of us along that journey, which is really compelling moment. Personally, to do something this ambitious I think you have to have a multifaceted background. In my case, it's engineering, law, business, tech, and a deep desire to impact global health at a global scale. And that's what brought me here today.
[00:03:37] Henry Peck: Fantastic. And congratulations on the recent success, which we're going to talk about, as you mentioned, the overnight success many years in the making. I want to talk a little bit about the solution before we go into that. I've seen surgical intelligence all over the industry and everyone from early stage startups to large corporate strategics working on their own versions and flavors of digitally enabled surgical solutions. But [00:04:00] tell me what is unique in your volumetric intelligence? Why is this something that's going to make that step change in surgery?
[00:04:09] Gabriel Jones: Yeah, I agree. There's a lot of claims out there. It's a confusing landscape in some respect. I think it's at a fundamental level. So Alan referenced deep technology. So first and foremost, you have to solve a problem that nobody else can solve or has solved yet. And I think that requires a different way of thinking about the problems or defining them.
[00:04:27] Gabriel Jones: You're looking for things that others have tried to solve, maybe with a one off solution rather than a platform, for example. I think that's a good frame of reference for what we're doing. So we're the pioneers of what's called light field rendering in real time. The simplest way to think about it is, whether you're looking with your eyes or a sensor or something on a robot, every pixel in the world, or in a scene, like in a surgery, or a music video, every pixel has a certain amount of information that's embedded in it, if you want to think about it that way.
[00:04:55] Gabriel Jones: And the extraction of that information, or those data, can be done with an [00:05:00] x ray machine, a pair of human eyes, a microscope, a CT scanner, and you go down the line of just these methods for pointing something at that pixel and trying to extract information to do something with it. And I think fundamentally, that's how we approach a surgery, is it's just goldmine of information that if you can extract it and present it in useful ways, then the surgeon, the robot, the augmented reality headset, these are tools and ways to combine things to perform the surgery.
[00:05:27] Gabriel Jones: But it's ultimately about what is the quality and depth of your information. And so that light field rendering approach, which we're again, the pioneers of doing that in real time in surgery, is the first system ever that's done that in real time, to navigate the surgery better. And really, it's about understanding everything about that case that surgery from skin to skin from before the surgery started in the diagnostic phase, in giving surgeons better information and better tools to even plan the surgery. And then great software tools that allow you to take that plan with heightened information into [00:06:00] the OR, into the surgery, with no gap, all the way through from preoperative to intraoperative to postoperative, understanding what you actually accomplished in that surgery.
[00:06:09] Gabriel Jones: To my knowledge, no one's ever done that end to end. And that is the ambitious, audacious vision is to fully shift how a surgeon or a team would even go about thinking about what is accomplishable or achievable for that patient on that day with fundamentally better information and tools, and we think that's possible.
[00:06:30] Alan Cohen: When you think about things such as health care, and particularly surgery, the power of the human brain and perception and human technique is something that is very difficult to replicate, right?
[00:06:43] Alan Cohen: It's the equivalent, all the discussion right now around AI, around artificial general intelligence. How could I create a fully sentient being, functioning being? And it turns out we're not even close, despite what people are saying. Because of, if you think about the, both the [00:07:00] bandwidth and the processing power of the human brain, we're not really there.
[00:07:04] Alan Cohen: And when you look at what Proprio is doing, it is a step toward creating that form of intelligence for decision making, and in this case, obviously taking care of people being able to perform surgery. To do that, you have to process an enormous amount of information. And that's where AI, where algorithms, you have to have enormous amount of sensory capability to replicate what you might see in the human eye or through touch or through hearing and the other sensors that go into what a surgeon uses.
[00:07:36] Alan Cohen: And what's really exciting about the paradigm system, why we got excited years ago, and what I think is important for folks listening to this podcast, Proprio is not a incremental step, it's a giant step forward toward being able to create what real intelligence is, which is an enormous absorption of data and real time [00:08:00] decision making toward a set of outcomes and doing something.
[00:08:03] Alan Cohen: It's not about the processor. It's not about just the algorithms and things like that. It's actually how those things come together and gave us a very compelling presentation that I've swiped a couple of times. When you talk about it takes 27 to 30 years to build the surgeon. It's training, it's schooling, it's human technique, it's apprenticeship, it's actually doing surgeries. And if, or if you think in a simpler manner, what people are trying to do with autonomous driving, you're creating systems of intelligence that can take action over time, initially to assist human beings and at some point in time to be able to take over some capabilities of what they do. And that's what's really special about paradigm. That's why we got involved a couple of years ago.
[00:08:49] Henry Peck: Yeah, that's super interesting. The concept that, like you said, how many years it actually takes to create someone with the intelligence required to operate in that field. Gabe, you talked about this [00:09:00] going across the continuum of surgery, really making a huge leap forward, not just a tool for something interoperatively, or a planning tool, pre op or an analytics tool post op, but really reinventing the way that we think about intelligence as a part of the surgical journey. Maybe on a different vector of surgery, you talk about different indications in therapeutic areas being very different in terms of the skills and competencies, the anatomy, the surgical path and patient journey. Where do you see this being most impactful today? And how far can this go in the future in terms of the areas that it can have an impact?
[00:09:39] Gabriel Jones: It's a fundamental question about the product development process too. We're fond of saying the first problem or solution is almost never the right solution, exactly. Right, it's almost never exactly the right solution. And so I'll take you back in time. We were developing a system for virtual reality microscopy.
[00:09:56] Gabriel Jones: You're running your process and looking at the microscope market and [00:10:00] it's very easy to go, how do we replace a million dollar microscope? But that's our bet is that helping surgeons to see around corners with a VR microscope is the literal solution to that. And I think in product development and in startups, we always have to have a lot of discipline to say, what is the real pain point that the user or customer not always the same thing, right, is really trying to get at? They may be able to describe the pain for you, but they don't necessarily always know what the solution is because no one's ever built it for them.
[00:10:29] Gabriel Jones: So I think it's a lesson in product development, strategy, deep tech development to say, okay, we're gonna go back and ask the user and the customer to describe their pain for us in detail, and then we are gonna go build the prototypes and the products that we're gonna put in front of them. And if we're right, they're gonna use it even in novel ways. Right? Because they're so constrained by the current, quote unquote, solutions or offerings. Essentially, in this case, with a surgeon, are just a bunch of workarounds that are created. To [00:11:00] make all those things work to fit them all together is just a bunch of workarounds, but it's not really a compelling, unified system, I like that Alan used the word system.
[00:11:09] Gabriel Jones: When you fundamentally think about it like that, what if we were going to drive a step change where there was more and better information presented in just the right ways at the right time, in all sorts of surgeries, from endoscopic or laparoscopic procedures, procedures that are done with the robot today, and procedures that are not. In spine surgery, for example, 75% of spine surgery is not navigated today, even though it really should be the standard of care. And you end up asking yourself the question, is it about a microscope and visualization or is about knowing where you are in 3D space at all times? Is it about enhanced, proprioception? And actually, when we made that leap to understanding that was the true pain point or the true opportunity is when we started incorporating the ability to navigate in 3D in real time.
[00:11:54] Gabriel Jones: And that is fundamentally the step change in thinking and operating and acting that we're [00:12:00] driving across, we hope, the entire industry. Spine is the first landing point. It makes a lot of sense. There's a lot of unsolved, unmet clinical needs in spine. Only about 35% of the time in spinal deformity, things like scoliosis. Is the care team able to achieve the desired correction of the spine? Those listening who are in the industry know this to be an unsolved problem. So you can get the hint that seeing and understanding what is actually occurring in the anatomy in 3D, independently on a segmented basis, meaning you can track the entire anatomy live in 3D, is just a fundamental shift in how you would go about doing the surgery.
[00:12:38] Gabriel Jones: And our bet is not only that that will greatly improve the outcomes, both clinical and economic outcomes, the twin aims, but that it will also lead to the invention of other approaches. Things that are currently thought of as not solvable in pathology today. That a very creative bunch of people, both entrepreneurs and surgeons, who are actually very creative writ large as a [00:13:00] group, will come up with ways to solve things that were not possible before. And we actually have tons of examples of that in medicine. There have been many surgeon innovators who have come up with innovative products.
[00:13:10] Gabriel Jones: Now, if you give them a new way of seeing, literally the new way of seeing, that's trademarked, you can use that. Um, but the new way of seeing, why do we say, ah, I see? We're not talking about seeing things with our eyes, we're saying, it's the broader definition. To see is to know. Now I know that we can actually tackle these other problems that weren't solvable before. And I think that's the most exciting aspect of what we're doing.
[00:13:33] Henry Peck: You talk about the product development process and strategy. It reminds me of the old adage from Henry Ford, who said, if I asked people what they wanted, they would have said faster horses, before building the car. And I think you bring an interesting analog into medicine, which is most of the technologies that we see today are trying to improve the, minutiae of processes or functions for a very defined set of procedures or procedural approach, versus what you're saying, is not only can we [00:14:00] scale this type of intelligence across everything that exists, but we can unlock the intelligence needed to pioneer new approaches.
[00:14:08] Henry Peck: Alan, I don't want to take you down a rabbit hole away from Proprio, but I am curious, given the benefit of your investing and operator experience, how often do you see that journey that Gabe is describing of the pivot from an earlier conception of a solution to something brand new in the work that you do with founders now and what kind of insights do you have for next generation entrepreneurs and founders on getting that customer needs finding and product development strategy right from the outset, or as early as possible, to get to the type of step change solution in other industries as well that Proprio is achieved in here?
[00:14:46] Alan Cohen: It's an excellent question, Henry. To start with, I'd say we see the opportunity maybe one every 1000, one every 2000 pitches. That means is that possibility there? Because most [00:15:00] technology development is forms of raging incrementalism. So we don't see a lot, but we do see it. Today, actually, one of our companies announced, completely different space company called Pivot Bio, announced that it just passed 100 million a year revenue mark. It is a microbial replacement for chemical fertilizer. It is on about 6% of the U. S. corn crop. And if you were to go to the industry that creates fertilizer, they would find better ways to deliver fertilizer, more efficient fertilizers, but what they, what Pivot did, it says, how do you deliver nitrogen, the absolute central molecule for growth in agriculture, and they did that through a microbial root stock of fixation.
[00:15:44] Alan Cohen: So to pull this example back to when we started Proprio, there's two things that I did that gave us a lot of confidence that they would have a lot of runway. One, I read all their patent filings, and when you read the patent filings, and I'd [00:16:00] recommend to your readers to go do this, you'll see things about artificial intelligence, you'll see things about modularity as a visualization, but a lot of what you read about is about the different forms and uses of data. And if you think about it, when a surgeon goes into a surgery, what do they do? They do blood tests. They do cat scans, pet scans, MRIs, x rays. They are collecting data, and it's gotten better and better, right, and people have created more powerful forms of scanning.
[00:16:30] Alan Cohen: Of course, the minute you open somebody up or you enter the human cavity, then you actually have to make decisions in real time because you can't see everything, and you can't understand the implications. We see companies have to go through that journey. And they have to do a couple of things to do that. One, they have to be very multidisciplinary. So if it was just Gabe and, no offense to anybody and just 10 surgeons, they may have come to a different answer. But when you look at the Proprio team, there's a range of skills from medical devices [00:17:00] to one of the co inventors of Lightfield, to AI, to machine learning, to surgeons, to people in the industry.
[00:17:08] Alan Cohen: And it's through that raging confluence of these different streams that you push through, but it also takes a form of mental discipline because, as a startup, you're incented to take your early money, turn it into something and try to turn it into revenue as quickly as possible. So you can continue to stay funded.
[00:17:30] Alan Cohen: And if you can't explain or can't find investors willing to go through that more fulsome journey, then you might get stuck. That's why it's rare because the pressure of investments and returns and uncertain markets will actually cut off some of that. And you have to kind of look where you were doing.
[00:17:51] Alan Cohen: So if Steve Jobs and Tony Fadell just wanted to build a better MP3 player, they would have stopped at the iPod. Right. Said best [00:18:00] music player out there. That was never their plan. Their plan was to build the Hitchhiker's Guide to the Galaxy and a mobile handheld computer. And there was things that went into them, but many of them sensors, GPS chips, processing chips, cameras. It is very interesting.
[00:18:16] Alan Cohen: So how it processed data allowed it to create a range of services and go into a range of markets. So if you start with that kind of foundation around the technology, you do see the one in 1, 000 type of company get there. And of course you have to execute which the Proprio team has been able to do very strongly along the way because seeing it and being able to do it is also, you went from one in 1,000 to 10, 000, because there's a lot of smart people who see it, who can't get there.
[00:18:46] Alan Cohen: Either, it doesn't work out technically, they run out of money, things happen along the way. So it isn't often, that's why as a firm, we read 2, 500 to 3, 000 business plans for everyone we invest in. [00:19:00] That's how many come through to do that. It's a lot of work. And now we don't read them all cover to cover and interview people for five hours each, but because what you're really looking for is, are you going to have meaningful long term impact in an industry?
[00:19:14] Alan Cohen: Are you going to effectively have the opportunity to transform it in some way? And is your science and computational advantage so strong that it's going to be very difficult to replicate? And that's not a huge amount of companies, but when you get it right, you get some very magnificent things happening.
[00:19:35] Alan Cohen: And probably there hasn't been that many companies in surgery, maybe outside of intuitive and, you know, I'd argue our tech stack is actually compared to where theirs was, it's very interesting, they were interested in robotics and neurology, and they're very focused on a very single market, very successful company, but the ability to go across spine to other forms of neurosurgery or orthotic surgery and other areas where I think Proprio is going to [00:20:00] have applicability, starts with the foundation principles that I mentioned a moment ago, which is really rare in a company. And you have to do a little extra work as an investor to be able to see it because it's easy to say, yeah, there's spine surgery company where in fact, Gabe can tell you when he and Sam came to pitch our partnership before we've made the first investment in the company, we had a raging argument about our, we don't want to just invest in the spine surgery company. That's all they're going to do.
[00:20:27] Alan Cohen: And Gabe and Sam to their credit get up and say well look, this is why spines surgery is incredibly important start because it's so difficult, and but then laid out a very fulsome vision for a much more general purpose approach that, one, was going to really make surgeons very happy because it was going to make their job better and simultaneously have the potential to provide great outcomes for patients across a range of areas. And those kind of investments you want to run to them, good times or bad. You want to try to get into them and support them. [00:21:00]
[00:21:00] Henry Peck: Gabe, tell me a little bit more about that interaction where you were pitching the company and you had to articulate that vision in that first pitch for why this was more than a spine surgery company?
[00:21:11] Gabriel Jones: Thanks, Henry. And by the way, if you're going to ask me why we go after and try to get investors like Alan involved in our company and our journey and our vision, you just heard it right there. The best in the biz.
[00:21:21] Gabriel Jones: The reciprocal is also true. There's just very few people and firms who have that long term vision, who actively seek out the difficult problems and the founders who are either crazy or driven enough, some combination of the two, to solve it at all costs. We're going to get there. An ambitious vision at that.
[00:21:38] Gabriel Jones: I'll take you back to your comment about Henry Ford. It's actually a frequently erroneously attributed or described quote. He never said that. What he said was, they would tell you to build a better riding crop. This goes back to focusing on the right problem. Every biography, autobiography, every reference to him out there, I don't know how the quote got to that point, but it's probably [00:22:00] because that is the product that someone would describe, back to my earlier comment regarding the pain point.
[00:22:04] Gabriel Jones: I want to go faster, is what they might have said, and they might have immediately gone to current mode of transportation is a horse, so I'd like a faster horse, and Ford being an engineer, a designer of things, would say, well, that's the mode to make a horse go faster, it's a more effective riding crop, longer, heavier, lighter, whatever it might be.
[00:22:23] Gabriel Jones: I think actually in the misattribution is the good stuff. That's where the magic is, because it's not that I want another microscope. I want to be able to deliver better care, better, faster, safer. That's what a surgeon really is trying to express when they describe how much the current set of products frankly suck.
[00:22:40] Gabriel Jones: And that's what takes you to the Steve Jobs comment. The analogy holds well. It's, I want to take all the world's knowledge with me everywhere all the time, including of course music and the ability to connect and tap into the web and all those things. And that's where Jobs is genius really is educational to us.
[00:22:57] Gabriel Jones: I think there's also a misattribution in his [00:23:00] case, where people often say, Steve Jobs didn't care about the user, because he said things that could be interpreted that way, such as, the user doesn't know what they want, so we don't do user focus groups. Again, that's erroneous. I think he deeply cared so much that he put the extra time in, and I'll give you one example. Oftentimes in Jobs' demos, somebody would hand him an iPad or an iPhone or precursor products, and he would sit quietly and turn his head from side to side, looking at the product, and even blinking for long beats, a few seconds. And they were demoing things to him. They thought he didn't like it, but he was trying to find the beginner's mindset.
[00:23:38] Gabriel Jones: The user who's walking into that interaction with that product, that experience, that software, that UI, for the first time ever, and capturing that newness of the experience. Imagine doing that with a product you've seen 20 demos of already. So there's a discipline in the way that we have compassion for the user and the customer that I think is something that we try to do really well here at Proprio.
[00:23:59] Gabriel Jones: [00:24:00] Alan talked about a diverse team by many different measures and interpretations of the term, diverse. It's required, in fact, you would fail, in my opinion, if you didn't put a team together like that and consistently focus on it, where they come from, who they are, the kinds of questions they ask. And I would say the same thing for technology.
[00:24:16] Gabriel Jones: If you're building a platform, a la the iPhone for surgery, a la electronic medical record for surgery, to acquire those data and parse them, that would make it possible to do things in a completely different way, with higher set of standards of goals in something like surgery, you should be thinking bigger than just surgery. You should be thinking about the entire continuum of care. How do we do patient selection? How do we show things to a patient so that they have the right kind of expectation for the care?
[00:24:46] Gabriel Jones: Turns out, today, that's the most predictive piece of data about the outcome of the surgery as measured by the patient satisfaction. It's the selection of the patient and how do we communicate what is likely to happen, which expectations should be. [00:25:00] So as companies building hard things and software and all those things together in platforms, I think Proprio and the whole industry needs to be thinking about what does a medical technology company of the future look like?
[00:25:12] Gabriel Jones: It's data enabled from its inception, it must be. That's going to be table stakes, and that'll be hard for some companies to make that turn and that change, and others will be able to fully grasp that through down to their culture and every product they build, and I think those are the ones that are going to be successful. If that transformation hits the entire industry, I think we'll all be in a much better place.
[00:25:35] Alan Cohen: And then Henry, I'm gonna come back to your initial question. So there were 2 things that Proprio did in that meeting that I remember because I wrote the memo to our limited partners for the investment, one with all kidding aside, right, we said, we don't want to just invest in a spine company. Proprio is working in the best of the best spine surgeons in the world. They picked one of the most difficult problems to start with, which is very atypical in a lot of tech companies. A [00:26:00] lot of companies and enterprise technology, for example, they'll sell to the SMB in mid market and then they'll go after the larger enterprises later and they'll wait till their product hardens and all of those things.
[00:26:09] Alan Cohen: And we kind of liked that they were just picking a really tough market and working with literally physically and mentally giants in this industry to pioneer this because if we don't win in spine, we don't win overall. We're going to win in spine and we're going to win overall. We'll see how many things we can get to in the next couple of years because it is a 30 billion dollar market.
[00:26:33] Alan Cohen: It's very important as the rest of the world adds more people to middle income, meaning next 2 billion people who hit the middle class, the patient universe for procedures that are going to be navigated by Proprio is going to go up a lot faster than the number of surgeons available to satisfy that need and the health regimes of these countries around the world.
[00:26:56] Alan Cohen: And the second one is what Gabe said, they were the first medical [00:27:00] device company that we had seen in five years that had an absolutely killer data strategy. And understood about the data they were using the data, they were capturing and a view on how that data was going to be put to work over the next couple of years in the service of the market and the product and their customers. And those are things you really look for as an investor. They were willing to do the hard things and be very open and transparent about that, as opposed to saying, well, we'll get this thing out the door and we'll get a little bit of this, and then we'll move on and do that.
[00:27:34] Alan Cohen: And of course, you always want things to go faster than you'd like. We started probably three and a half years ago or longer than when I first met Gabe and Sam and James and the team at Proprio, maybe even longer. It's going to probably come up on four years pretty soon. We made the initial investment over three years ago, and we've been very careful to both be as investors aggressive with team to execute, but also not to rush [00:28:00] things and to get this first version of the product that's coming into the market this year, getting it to something that's so further ahead than anything else that is out there.
[00:28:10] Alan Cohen: And the team at Proprio is pretty modest, but investors are not, and we're really proud of what the team's done and really excited to be on that journey. But having a view on how to win in a tough market and having a view on how data and sensory, and think about the sensors that are attached to the system, whether it's the light field cameras, the depth sensors, the importation of other forms of imaging and scans into that, is part of the data strategy.
[00:28:38] Alan Cohen: And then what really makes it exciting is how that data strategy works in real time, during a procedure. And that's, what's so unbelievably unique about the Proprio system. And just as you don't want to make better fertilizer, you want to actually deliver nitrogen. You don't want to create a slightly better approach to guiding a surgical implant.
[00:28:59] Alan Cohen: You want to [00:29:00] find a way to actually be able to figure out the outcome a patient will have in a procedure that includes implants, as well as surgeons and other things that go into it.
[00:29:11] Henry Peck: I can feel the excitement from both sides through the camera.
[00:29:15] Alan Cohen: As an investor, you just got to ask harder questions. The company's got to dream bigger at the same time.
[00:29:21] Henry Peck: I love it. And Gabe, I'll use a question celebrating your recent success to wipe the egg off my face with the Henry Ford quote, but you guys recently closed your Series B financing. And as Alan mentioned, your product is now entering its commercial phase. Talk to me a little bit about the Series B itself, the raise process, bringing investors like Alan and his team to the table and where this financing gets you from here.
[00:29:44] Gabriel Jones: So as you're alluding to a tricky environment right now, right, it's quite challenging, especially in the health tech space for teams and founders and leadership teams to close financing rounds. And we've been very fortunate that despite all that context, we've been able to have quite a bit of [00:30:00] ongoing support from folks like Alan and DCVC and been able to bring in fantastic new investors as well.
[00:30:05] Gabriel Jones: Back to your comments or in questions earlier, it requires that sort of diversity of long term thinkers and investors to place their chips on something like this. And if we were solving one off sort of problems, I don't think the power law works out. It doesn't make sense from an investment process, unless you're thinking really big and executing very big, as Alan alluded to.
[00:30:27] Gabriel Jones: So we've been fortunate to be able to do that. And as a result, we closed what was reported as a 43 million Series B financing recently. And there were U. S. and global investors involved in that and Medtech and deep tech and folks who have investments in both implants and software and data and platforms.
[00:30:43] Gabriel Jones: And so you see that diversity all the way through into the investing group, as well as the team and the customer base. We're executing on a strategy in spine today to, we think, become the dominant navigation platform that can tackle the entire pie. So not just the [00:31:00] 25% of surgeries in spine that are navigated today, but the whole thing.
[00:31:03] Gabriel Jones: And that is in a sense, growing the navigation pie and sort of redefining what the, really the category of real time surgical intelligence, as you alluded to earlier, Henry it's a misused sort of term. Are we really doing something that's that intelligent? I think the industry needs to be honest with itself, as do we.
[00:31:22] Gabriel Jones: Proprio is now actually adding significant additional intelligence in real time, volumetric intelligence, which is what we call it, because you're understanding more about that entire scene. And the Series B finance enables us to start to expose more of that to the industry. Those who have seen it, um, as Alan mentioned, very excited, the 300 or so surgeons we've been working with to date, to build the product, build excitement and start to roll it out both nationally and overseas.
[00:31:50] Gabriel Jones: So the Series B really finances that go to market motion and accelerates it, which is very exciting. So there's 2 to 3 years of funnel that we're really [00:32:00] addressing now, which is exciting because we've had the signal of product market fit for some time and the financing allows us to go and really prove that we found that. I think that's the most exciting aspect of this moment right now.
[00:32:12] Gabriel Jones: You had mentioned, Henry, about the context and LSI coming up in Barcelona and then the Dana Point event, which we've been happy participants and beneficiaries of. Why does this moment matter right now? It's a challenging fundraising environment. Pitchbook says 50, 000 or so U. S. startups are in some form of needing financing, doing extensions or about to start a financing this quarter or in 2024. These are real challenges for founders and leaders to raise money. And so we're fortunate that the message is resonating with customers and with investors, and with prospective employees joining the team, everybody's pretty fired up.
[00:32:51] Gabriel Jones: And in this context, I think that's amplified even more. We know from history, the market moves in cycles. And we're fortunate [00:33:00] that Proprio is going to be well funded for multiple years to go, frankly, compete in an environment where surviving is thriving.
[00:33:07] Gabriel Jones: Mark Andreessen said you need to be well fueled to go build. As Alan has said to me, it's time to grind and execute and deliver. The initial signal is there from the market. And so that's what we're really excited about. We see the challenges out there in the market and financing. And we feel for those other companies that are raising money or we'll be needing to do that soon. And you tend to focus on other proof points to deliver a financing like this in this timeframe, much more material things. And that's what we've done. And I think that's resonated.
[00:33:37] Henry Peck: And we're looking forward to having you in LSI Europe 23 in Barcelona, you'll be sharing more insights on this financing state and the process that you went through and thoughts on the market at large on a growth investing panel alongside some other VCs. Alan would love to wrap up with some of your thoughts, reflecting on what Gabriel just said about the market right now, raising money in med tech and health tech, kind of how we've seen the [00:34:00] evolution of the market pre COVID to now, as Gabe mentioned, a lot of down rounds, a lot of bridge rounds, a lot of companies left needing financing right now in this space, what needs to happen or what's going to happen, do you think, in this space? And how has that maybe juxtaposed with some of the other spaces that you look at in the breadth of your role at DCVC?
[00:34:18] Henry Peck: Obviously,
[00:34:19] Alan Cohen: the last 18 months have been one of the worst environments that, I've been in this industry long enough to have had 3 or 4 crashes, still have all of my fingers. We've seen this, and there were a lot of companies that were funded in the 20 to 21 period of time when money was kind of hot. And people will throw things in there and to the point that Gabe actually astutely observed, their two years are up, they're coming up for money and they're finding it really very difficult.
[00:34:48] Alan Cohen: I don't want to be Machiavellian, but I think it's just natural that the cycle is that the stronger, more valuable players are going to have a better opportunity [00:35:00] in this environment because there's two things that drive the value of companies, what is the stock market, right, the stock market is ultimately the DNA evaluation for everything. And then the other is the acquirers in an industry. Traditionally, a lot of med device. We don't do a lot of med devices, by the way, as a company, because most med device outcomes are not exciting to us. When we make an investment, we say, can our ownership of a company pay back the entire fund? And our last fund was 750 million.
[00:35:39] Henry Peck: Tough to find a med device exit at that order.
[00:35:41] Alan Cohen: Yeah. But there have been some, right? And I mentioned Intuitive, and there have been other companies. So that means you actually have to grow a real company to get that kind of return and be willing to be on that journey. If you're going to quick flip something, you're going to get a hundred to 400 million as an investor, you're going to get your percentage of that. [00:36:00] And I am, not to be arrogant, right, because we're still early in the journey, and I'm not ever superstitious, I'm paranoid, which is a better way to be, is that you have to execute at a very high level, and if you're not, and you're not providing obvious and demonstrable value that could be seen throughout the entire medical supply chain from preoperative, intraoperative, postoperative, from thinking about a care regimen to a patient to bringing them to the other side of a surgery or any other technology, if you're not doing that, you're not going to have a very strong outcome, if you have an outcome.
[00:36:37] Alan Cohen: And so we'll see some companies and, you know, we'll have some in our portfolio, right, it's just all venture investors will have that. None of us are geniuses, despite what you might see on X slash Twitter, but what you look for are companies that have an ability to capture an enormous amount of business, in this case, patient, physical, and economic value in very large [00:37:00] markets. And not a lot of people have started in spine. We've seen companies that are capturing data that are doing, for example, training of doctors and surgeons, like postoperatively, hey, let's go look at that image. And that's great. It's really important, right? But that's kind of a bunch of cameras and some editing software and some AI annotation.
[00:37:21] Alan Cohen: You look for companies that are participating in the profit pools of an industry. And, you know, what I've learned the last couple of years working with Proprio is like surgery is for a lot of hospitals what keeps them afloat economically. Renting beds is not where hospitals make money or make enough money if they're a nonprofit hospital to get by.
[00:37:42] Alan Cohen: It's in the procedures they do. And this would have to be reimbursable, they have to have high value because the staff performing it tend to be extremely well paid. They've worked really hard to get there. Are you swimming in a very profitable lane [00:38:00] and be being a must have for the people that participate in that lane?
[00:38:04] Alan Cohen: So whether it's enterprise technology, whether it's deep tech, whether it's medtech, whatever definition you're looking for, if you're not going to be there, it's going to be tough. And the truth is there's just zombie companies out there. They're doing a certain amount of revenue. They have a low burn rate, but they have nowhere to go.
[00:38:22] Alan Cohen: It'll be a very interesting year. Also, there are a lot of money came into venture. There are a lot of first time managers. Some of them are quite good, by the way, right, it's not a bias against people who are early to it. Our industry and investing kind of shrinks and grows on a regular basis. I think we will see some companies not making it.
[00:38:41] Alan Cohen: We will see some companies exiting as soon as they can, and we'll see some companies having spectacular outcomes. I will tell you, I've built two companies that were founded during recessions, and really got going during recessions. And one of those was Cisco Systems. It was founded in the mid 80s. It was horrible. Literally [00:39:00] 84, we're kind of like talking second term of Ronald Reagan, energy crisis, double digit inflation, Apple was founded during that period of time in the late seventies. And there's something about companies that make it in really tough times in large and fast growing markets that can have spectacular outcomes, no pressure, Gabe. Just telling you how I think about you and the rest of the team at Proprio.
[00:39:25] Henry Peck: I love it. We'll take that forward thinking and forward looking perspective on the market as something to leave us with now and reflect on as we see how things play out over the course of the year.
[00:39:34] Henry Peck: Alan, thank you so much for your perspective and for joining us, wishing you and DCVC all the best in the rest of this year and beyond. And Gabe, very excited to see you and your team at LSI Europe 23 in Barcelona. And congratulations again on all the success to date and the future success that you're set up for.
[00:39:51] Gabriel Jones: Thanks, Henry. Looking forward to seeing you and the team in Barcelona.
[00:39:54] Alan Cohen: Thanks, Henry.