Of the dozen or so VC investments made in robotics in 2011, why are the millions slated for robotic hair restoration so lopsided in comparison to all the other robotic offerings? Restoration Robotics, developer of an image-guided hair transplant robot, pulled in $43 million?that?s a whopping $18 million more than the second VC gainer on the list. In a year where total VC investment in robotics totaled only $164.4 million, Restoration Robotics? haul is rather surprising.
Restoration Robotics? ARTAS System for robotically harvesting hair follicles easily succeeds at three key VC criteria: a unique product that’s market ready in a growing market segment where quite possibly an IPO or acquisition is not far off. Other qualifiers include FDA approval, Canadian Medical Device License approval and ready acceptance by hair restoration surgeons, who used the system for two years of clinical trials and found it very surgeon friendly, which translates into a motivated customer base.
The first commercial surgery using the system took place in August of 2011. At the controls was Dr. James Harris, a world-renowned hair surgeon who was also a principal investigator in the clinical studies. ?We couldn?t be more pleased with the results,” he reported, ?which were consistent to what we saw during the clinical trials.?
The keen-eyed VC was Clarus Ventures (Cambridge, MA), a life sciences venture capital firm ($1.2 billion of assets under management), which led a Series C funding round , joined by Sutter Hill Ventures, Alloy Ventures and Interwest Partners.
The ARTAS system is minimally invasive and harvests hair down to the individual follicle level, replacing the arduous, manual technique whereby surgeons work for up to eight hours pulling 800 to 1600 individual follicles from a patient?s scalp in a single session. Once harvested and collected up, each hair follicle is then reinserted into the patient?s recipient sites (insertions are still performed manually).
Another principal investigator in the two-year study, Dr. Sara Wasserbauer, collected data on the effectiveness of the ARTAS technology by itself and compared to manual hair transplantation techniques. Dr. Wasserbauer’s findings show that the hair grows back at the same rate as hair that is manually harvested. “However, healing time is reduced using the robotic system and the minimally invasive surgery leaves only tiny scars, less than a millimeter in diameter where each graft was taken.”
The VC recipient, Restoration Robotics, Inc. (Mountain View, CA), a privately held medical device company founded in 2002, is entering a marketplace that has been sized by IBISWorld as a half billion dollars that?s quickly on an ascent to $1 billion. Market drivers are the 35 million individuals in the US with male pattern baldness, plus the fact that in an ageing population, one where 50 percent of all men over 50 years-old exhibit some hair loss, the trend toward surgical hair restoration is on the rise.
The hair restoration industry is dominated by two companies, Bosley Medical (a subsidiary of Aderans Co., Ltd., of Tokyo, Japan) and Hair Club (combined 42 percent market share). Bosley Medical, is the larger, with 43 offices throughout the US and Canada and might well become a near-term suitor if the ARTAS machine continues to grow in popularity.
The ARTAS robotic harvester is more precise and less invasive than its human counterpart, while at the same time besting any surgeon on the number and quality of usable hair follicles harvested. With surgical hair restorations costing upwards of $50,000, depending on how many follicles are needed and how many sessions necessary to complete the restoration process, the one-of-a-kind ARTAS robot harvester is in an unassailable position as a potential market leader, with plenty of room to grow.