Crowdfunding and IPOs for Medtech Startups

Benjamin Sexson is a mechanical engineer-turned-medtech entrepreneur. A CFA charterholder with a background that spans business development roles to founding a successful B2B retail brand, Benjamin is now poised to bring a new era to knee replacement surgeries with their fully-automated robotic arm at Monogram Orthopedics. Even though he describes himself as a “Moses-type leader who’s reluctant to do it”, he has been steering the ship successfully into uncharted territories since 2018.

Monogram’s flagship product is mBôs Surgical Robot. The team recently demonstrated its prowess in the world's first fully-remote total-knee arthroplasty on a cadaver. This particular market – knee replacement surgeries – is projected to surge to $37.99 billion by 2030. While currently 88% of surgeries are manual, 50% of surgeries are expected to be completed using robotics by 2027. You could say that Monogram is strategically positioned at the cusp of this transformation.

Benjamin is refreshingly direct and practical. "When you think about robotics, it’s supposed to commoditize things. It’s supposed to increase throughput at a lower cost," he says, which is exactly the core mission of Monogram – to make operating rooms, starting with knee replacement surgeries, less reliant on manual skills, to reduce incremental costs and boost efficiency.

Benjamin’s vision of roboticizing knee replacement surgeries was shaped by his collaboration with Dr. Douglas Unis, a practicing orthopedic surgeon, who later founded Monogram. "It probably wasn't until about three to four years of seeing knee after knee after knee that I really started to understand why this was a must-have product," Benjamin says. Additionally, he realized it was almost mandatory to integrate 3D printing for custom-made implants with robotic surgery.

In hindsight, Benjamin describes it as a "no-brainer innovation." Yet, Monogram’s project isn’t without its skeptics. Some argue that the concept isn’t novel. "You really have to start to drill into the details of the surgery to really understand what's actually different here," Ben explains. But to give you an idea of what’s unique versus conventional methods: first, Monogram focuses on soft tissue management instead of just bone-cutting surgery, which makes it incredibly precise. Second, the operating time frame is currently 40 minutes as opposed to the market average of 80 minutes. And third, the mBôs system is fully autonomous, which is a first in the robotic surgery market. 

Commercially, the company is gaining momentum. With the first sale of the mBôs system to a major global distributor in late 2023, Monogram is not only eyeing the lucrative U.S. market but also recognizing the potential overseas, especially where there's a dearth of surgeons. The journey towards FDA approval is ongoing. Trials are expected to begin in 2024 and FDA clearance is anticipated in 2025. 

While knee replacements are Monogram's initial focus, the company's roadmap includes a broader array of orthopedic solutions. From robotic surgical equipment to tissue ablation tools, Monogram is poised to make a dent in the orthopedic joint replacement surgery market.

As Monogram prepares for its next live stream, it is also set to demonstrate not only the technological marvel it has created but also the economic and clinical benefits it brings to the table. 

Key Learnings From Benjamin’s Experience

• Avoid the sunk cost fallacy. Don't let past investments cloud your judgment about a project's present viability. Regularly reassess the viability of your idea based on current conditions, not past investment. Be willing to pivot towards a better solution, even if it’s difficult. Maintaining a steadfast belief in your work is crucial; without it, your ability to overcome challenges and effectively communicate your vision will be compromised.

• Finding the right funding source is tricky, especially for early-stage startups. Consider alternative routes like crowdfunding or IPOs. Be aware that both options have their challenges: crowdfunding requires a strong marketing push and IPOs can create administrative headaches. Thoroughly evaluate your specific needs but don’t be afraid to iterate as you move forward.

• Medtech is a team sport. A strong support system and an A-plus team are a must. Find talented people who are willing to shoulder responsibility with you through the tough times and can set aside their egos. Maintain a company culture where everyone is heard and there’s no punishment for raising one’s opinion, even if it proves to be wrong.

Don't Champion Something You Don't Believe In

One of Benjamin's core philosophies is to never back something you've lost faith in. This aligns with a significant risk for any startup: the sunk cost fallacy. 

The sunk cost fallacy, or trap, is a cognitive bias where you justify continued investment in a project based on how much you’ve already invested in it rather than its future potential. Let's say you own a stock and its value dropped to half even though the overall market has risen in value. At this point, it's essential to reassess the investment based on its current value, not on the initial conditions. As Benjamin puts it, "Don't think about what you had. Right now, today, what you have is changed." If you hold on to the stock that keeps dropping in value instead of selling it and putting the money into a different stock that is likely to rise in value, you would be subject to the sunk cost fallacy.

This is where startups must be wary. After investing time and money, it's tempting to keep pushing a product that in fact has proven to be suboptimal. Benjamin urges leaders to remove previous spending from the equation and ask, "How much capital do we have and what are the decisions with the information we have right now?"

When Monogram arrived at a crossroads with their rotary tool system, it was time for Benjamin to put this philosophy into practice. "You can start going down rabbit holes by changing different aspects, but at the end of the day you have to answer this question: What is the optimized end case for this product? Is it a good product?” And if the answer is no, then you know what to do. Instead of pushing something that’s not good enough, you pivot towards something that could be much better.

Having spent time invested in a dead-end idea is never optimal. But the ability to change course is a startup superpower. Big companies, Benjamin points out, often struggle to admit mistakes due to money spent and internal politics. "It takes a very special manager to say the decision was wrong. A lot of companies are trying to make everybody believe it's great."

At the end of the day, Benjamin's advice comes down to a simple, yet powerful, mantra: "Always do what you believe in. Be true to yourself." If you lose faith in your product, the lack of conviction will show. He emphasizes, "I fundamentally believe in it and our team believes in it. If you lose that, it's very hard to be a good salesperson."

Belief doesn't mean ignoring limitations. At times, depending on the capital you have left, the right decision is to move on to the next phase of development, but the key is believing in what you are doing. "If you're not on the edge of your seat a little bit at a startup," Benjamin quips, "you're taking up too much space."

What Funding Suits You Best?

"God, nobody wanted to give us money," Benjamin laughs, recalling Monogram's early days. Like many young companies, Monogram had to find a way to bridge the gap between a great idea and paying the bills. 

Rather than contacting VCs, Ben chose to follow two unorthodox routes for an early startup: crowdfunding and IPOs.

There’s a reason why IPOs are an unusual choice for a startup. Ben explains: “How do you attract the best people when your stock options are, at the moment, worthless? You can't buy groceries with potential.” 

Next, Benjamin turned to crowdfunding. However, counterintuitively, this method is seldom free. Ben partnered up with a marketing firm hoping to bring their message to a wider audience.

Monograms’s team needed to raise awareness for what they were building, so they tried a bold move: realtime surgical demonstrations on YouTube. There was no high production, no editing, just the team doing what they do best. "People want to be on a bit of an adventure with you," Benjamin shares. Although risky, Monogram’s transparency and authenticity won them an audience willing to overlook the rough edges. One memorable occasion proved Monogram’s success in outreach: a podcaster, initially a harsh critic, was won over by a stellar live stream. Benjamin recalls, "We just absolutely crushed it. He became an investor."

“Crowdfunding was a blessing,” Benjamin explains, “but it had become a little bit of a one-trick pony.” When the company reached a point of maturity, Ben decided to go public in order to access strategic capital. 

At first, Monogram worked with brokers, only to find out that the 'packaged deals' with preferred share classes were too restrictive for Monogram’s startup nature. The brokers put each investor into a preferred class, and gave them voting rights. But Monogram had thousands of people on their list, with big and small contributions. This made the administrative tasks a bit tricky. “You need the investors to vote on some resolution, but you end up in their spam folders,” Ben explains, as being one part of the problem.

The reason for going public was to access the right type of investors, but coupled with crowdfunding, IPOs made Monogram’s cap table practically uninvestable by parties who ultimately had big-time capital. 

Luckily, Ben figured out how to best serve Monogram's funding needs: to convert all the preferred share classes into common classes. After that, going public solved a big portion of the problems and opened the door to the kind of capital a medtech startup needs. But it was easier said than done. Ben says, “There's not a good, clean way to take a crowdfunded company public.” The process is still rough around the edges. This is what he advises those who want to go public: make sure you know the reasons, make sure you can handle a lot of administrative work, and be aware that, as a startup, you’ll be under the spotlight much more than you were before.

Be a Team Player and Expect the Same From Others

Monogram's success is clear. But Benjamin is quick to acknowledge that this journey wouldn't have been possible without his support net. "My wife has been an important part of this. Without her help, Monogram wouldn't have existed,” he shares. For two years, his wife financially supported their family while he dove headfirst into the company. "Anyone trying to build something – find the people who believe in you, in life and in work," Benjamin emphasizes.

“Almost every entrepreneur I’ve met has had some help, whether they recognize it or not,” says Benjamin. Entrepreneurship, especially in medtech, is a team sport. Dr. Douglas Unis, orthopedic surgeon and early collaborator, was another key figure in Monogram's story. Today, the company has grown to 24 dedicated employees. "We have some of the world's most talented engineers," Benjamin shares. And he knows that a big ego will get you nowhere. It's about the work, not who's the smartest. “If you think you're the most amazing engineer in the world and you want to talk down to other people on the team, you're not welcome here. That's our culture,” he says unequivocally.

"I can't take all the credit," Benjamin admits. "My strength is keeping the mission front-and-center, building the right product, and bringing together a team with a 'let's fix this' attitude, not a 'who's to blame?' mentality." As humble as he is, this is the exact job description of a CEO and it’s not easy to pull it off, especially if you’re building a fully autonomous robotic arm to perform knee replacement surgeries. 

So even with a great team, there were some stressful moments throughout the company’s R&D efforts. For example, initially, they used a rotary tool and effector in their system. But there was an issue that became apparent as they moved forward. "The bur spins so fast it heats the bone. You have only limited time before you start cooking the bone – which is disastrous for the patient," Benjamin explains. Even though the team has already made significant investments into the rotary, Ben decided to pivot to an agile saw – with the encouragement he received from their CTO.

Things turned out great, but even if they hadn’t, Ben explains, he wouldn’t have thrown the CTO under the bus. A startup is where you make a decision together and you win or lose together. The point is to solve the problem, not to find a scapegoat. “We're now actively cutting without external fixation in phenomenal cut times that can be even further optimized. We actually have something that we all believe is the best robot in the world,” Ben shares, rightfully proud.