Osso VR: Healthcare, VR, and the Metaverse
- mukil0
- Nov 30, 2021
- 11 min read
The Don Valentine Perspective:
Bet on the idea. Do you believe in the products a company offers?
Products & Value Add
Virtual reality. Two of the biggest of buzz words in tech in recent years. The foundation of the next tech revolution, the metaverse.
The metaverse is likely still years away from becoming a significant part of our daily lives, despite Facebook, Microsoft, HTC, and several other large tech companies pouring billions into development and several investors already buying plots of virtual land in the new universe.
However, virtual reality technology is being employed in several other ways that are impacting our lives now, and will likely grow in importance as we get closer and closer to the dawn of the metaverse.
One such use case of VR tech is in vocational training. Schools and companies across several industries are using virtual reality-based training programs to supplement traditional hands-on, real-world experiences.
For example, pilots use virtual reality to get practice flying in several different situations before they take to the air for the first time. Mechanics & engineers use virtual reality to visualize problems they need to solve and test out potential solutions before putting them in place. Chemists and biologists are even using VR to explore complex molecules and look for interesting spatial cues that they could exploit to make revolutionary drugs.
Osso VR is attempting to address a similar need for training surgeons. The Osso team has created a game-like surgery simulator that allows users to perform operations and receive real-time feedback about their decisions and movements. The simulation is crafted to mimic a real surgery environment, from the gloves and gowns that surgeons wear to the machinery present in the room to the instruments available to carry out particular procedures.
Is there a need for such a product? Intuitively, one might think that no virtual practice could ever come close to the efficacy of the real thing. Why, then, would any medical schools or hospitals adopt a product like Osso's?
The answer: the existing training and assessment methods have left a significant portion of surgeons woefully underprepared to operate independently. Studies have shown a significant disparity between surgeon preparedness between residencies and fellowships. Inconsistency, inadequacy, and a lack of objective assessment metrics have been the bane of surgical residency programs.
As noted by Harvard Business Review, there are several data points that back this claim up:
A study done by the University of Michigan identified that 30% of surgeons were unable to consistently operate independently after their residency programs
Around 7 million patients experience some form of surgical complications each and every year
Skill level matters; lower-skilled surgeons had mortality rates that were 5 times higher than high-skill surgeons.
It is therefore quite clear that the traditional hands-on training methods do have limitations, and could potential benefit from technological innovation, namely VR-based training.
That's where Osso comes in. UCLA and Harvard conducted a joint clinical study using Osso's VR platform to supplement classical hands-on training, and found an increase in surgical performance of nearly 230% compared to current training methods. This quantitative measure was derived from the Global Assessment Five-Point Rating Scale, an acknowledged standardized metric of surgical performance.
The participants that used Osso's product also completed their procedures 20% faster. The findings were confirmed to be statistically significant: in other words, the product clearly works. Surgeons can truly benefit from the use of a high-quality virtual reality product like Osso's.
The technology itself offers an expansive suite of operations for users to explore and train with. The artistic team has won awards for its animation design of the virtual world, and recently, the company unveiled that multiple users could train together.
This aspect of collaboration is a significant benefit over traditional hands-on training; now, aspiring surgeons from all over the world can work interactively with their peers, using the shared experiences to improve their knowledge base and fine motor skills. It allows hospitals and university medical facilities to have "digital faculty" to provide more thorough educational experiences to students.
In essence, Osso has done everything possible to establish itself as the premier tool for VR-based surgical training. There is a clear need for such training, and Osso's product has shown scientifically proven results.
The software and artistic teams are among the best in the field, and the product itself has won awards such as the VR Healthcare Product of the Year award at the 5th annual VR awards, awarded within the last month.
Osso has developed the best product for a significant need in a large industry. That's usually a winning combination, and I believe it will be again with Osso.
Sales and Marketing
Despite receiving its first major funding less than 5 years ago, and despite the relative newness of VR technology as a whole, Osso has landed several big-name clients that serve as a good indicator of just how successful it will be in the next several years.
The most significant client Osso has landed is Johnson & Johnson. J&J, a healthcare company that has been around for more than 130 years, is one of the largest, most valuable healthcare companies in the country, sitting at a market cap of nearly $420 billion. Despite recent controversy surrounding their COVID-19 vaccine, J&J remains one of the most respected, well-known companies in the United States, if not the world.
This is a massive win for Osso. As VR-based surgical training catches traction, companies of all sizes will look to industry leaders like J&J as models to base their training programs off of.
J&J developed its entire Virtual Reality Preceptorship Program using Osso's product, offering training modules in joint reconstruction-, trauma-, and extremity-related surgeries. The company only released this program in November of 2021, and is working to further build on the program in coordination with Osso. With Osso serving as the catalyst behind what will likely become the template training program for several other companies, Osso is well positioned to land a significant number of clients in the next several years.
In much the similar vein, MicroPort has adopted Osso's products in its Orthopedic division to improve surgical training for knee replacements and several other orthopedic procedures. MicroPort, headquartered in Shanghai, is one of the largest medical device companies in the world, at a market cap of $8 billion and yearly revenue eclipsing $790 million.
The acquisition of MicroPort as a client is a significant win for Osso's future: it puts Osso in position to cross borders and establish itself as a truly international company. While the US healthcare market is a large, profitable market on its own, it would clearly be advantageous to Osso to reach hospitals, universities, and healthcare companies across the world. China, because of its rapid economic growth, boasts a particularly interesting healthcare market to capture, and MicroPort is a solid first step for Osso to do so.
In March of 2019, Osso secured Smith and Nephew as a client as well. Smith& Nephew is a $15 billion company known for producing orthopedic devices as well as state-of-the-art robotic surgical systems. The latter is a quickly expanding market. Several companies have devoted billions of dollars to developing robotic systems that allow surgeons to perform operations with precision and accuracy.
Smith & Nephew announced a partnership with Osso to use Osso's custom training modules to help surgeons become familiar with Smith & Nephew's new NAVIO Surgical System. This shows the versatility of Osso's capabilities - the team is able to adapt to new technologies in surgery, and create the corresponding training modules to help surgeons adapt as well. That bodes incredibly well for the future. Medicine and surgery are not static, and Osso has proven that it is more than capable of changing with the times.
Osso has also landed several big-name universities as clients. UC San Francisco is considered one of the premier medical schools and surgery programs in the entire nation. US News ranks UCSF as the 5th best surgery program in the country, the 4th best medical school for research, and the 2nd best medical school for primary care, ranking ahead of world-renowned medical schools such as Stanford, Columbia, UPenn and UCLA.
Professor Dr. Jeff Barry at UCSF partnered with Osso to implement a complete remote training program for surgeons in residency. With COVID-19 disrupting educational standards and revealing the potential of remote-learning, Osso stands out as a ideal solution for medical schools across the country. Like the impact that J&J could have on Osso's exposure in the health-tech industry, UCSF can act as a catalyst for the adoption of Osso in educational institutes across the world.
Similarly, both Marshall University and the Hospital for Special Surgery have implemented virtual training modules using Osso. The Hospital for Special Surgery has been ranked the best hospital for orthopedic surgeries for 12 year in a row by US News, and the best hospital for rheumatology in the Northeast US.
It is clear that leading hospitals and medical schools are just starting to take note of the potential of Osso's product suite, but the number of high-profile clients that Osso has landed already, coupled with the technical strength of the product itself, paint a good picture of the potential that the company has.
The Georges Doriot Perspective:
Bet on the team. Do you believe in the people spearheading the company?
Team
Osso was founded by Matt Newport, who now serves as the CTO of the company. and Justin Barad, who now serves as the CEO. Both have significant expertise that should inspire VC confidence that Osso is in good hands.
Matt attended Cambridge University in the United Kingdom, one of the most prestigious universities in the world. He graduated with a degree in computer science and began to pursue his dream to be a video game developer.
He worked for several years at Electronic Arts (EA) , the company responsible for smash hits such as the Madden NFL series and the FIFA series. He also worked at THQ, another established game development company, for several years. In his time at both companies, he accumulated 9 game developer credits, proving his technical merit.
This game development background positions Matt extremely well to spearhead the technological pursuits of Osso. From animation to user experience, Osso's product relies on expert gamification of surgical processes, and Matt has significant experience building games from the ground up.
Justin Barad, the CEO, has an equally impressive background. Justin graduated with a bioengineering degree from UCLA, and went on to graduate first in his class of MDs at UCLA, one of the premier medical schools in the world. He then went on to complete his residency at UCLA, and his fellowship in Pediatric Orthopedics at Harvard and Boston Children's Hospital. From a purely medical standpoint, there is perhaps no better background that a founder could have. It is not difficult to see how Osso has crafted a product that is medically accurate, as well as technically brilliant; Justin is a brilliant medical mind with the credentials to back it up.
Justin's background also convinced me that this founding team is truly committed to the idea behind Osso. Justin mentions on the Osso webpage that he witnessed first-hand the inadequacies of modern surgical training. He also writes that he decided to shift from a medical profession to the health-tech industry after a family incident motivated him to fix the issues with modern surgical training. The personal connections that Justin has with the issue Osso is trying to address is reason to believe that he is committed and passionate to grow Osso beynd its current scope.
There is only one potential issue with the founding team: neither of them have any experience starting and running a company. Neither of them have engaged in any previous entrepreneurial ventures or have significant managerial expertise from previous jobs.
While lack of entrepreneurial experience is an oft-cited red flag for VC investors, I believe that the technical and educational backgrounds of both founders, as well as the success that the company has had acquiring clients so far, justify faith in the company. The company is no longer in its infancy. It is 2 rounds of financing into its growth, and has already won numerous awards and landed multi-billion dollar clients. The founders have proven themselves already, and there is no reason to doubt them going forward.
The founders have also surrounded themselves with incredible product, engineering, commercial, financial, medical, and artistic teams that seem built to succeed. The artistic department is comprised of talent from Marvel, Apple, Warner Bros, Netflix, EA, and DreamWorks - quite certainly the cream of the crop when it comes to animation.
The product team is lead by the former Director of VR Platforms for PlayStation, one of the global leaders in VR tech. The engineering team is led by Matt himself. The commercial team, responsible for sales and marketing, includes former Google, Salesforce, Pinterest, and Medtronic employees. The customer experience team is made up of former technical leaders at Microsoft, Amazon, and numerous game studios.
There is an overwhelming amount of expertise on all fronts at Osso. The team is also as diverse as a team can get; as mentioned in my article about Ketch team diversity significantly increases a company's chance of succeeding.
So far, Osso has passed every test, and has done so with flying colors. The product is fantastic, previous sales are very promising, and both the founding team and the rest of the company are people very difficult not to believe in.
Financing
In total, Osso has raised $43 million in two rounds of funding. The Series A was $14 million at a pre-money valuation of $24 million in September 2020,. Less than a year later, in July 2021, the Series B was $26.5 million at a pre-money of $71 million, for a valuation step up of 1.87x between the two rounds. Funding in the company's Series B was primarily provided by Kaiser Permanente Ventures and prominent early-stage health-tech firms such as GSR ventures and OCA Ventures.
Osso is now valued at nearly $100 million after the 2 rounds, and is experiencing rapid growth. According to Pitchbook, the company has weekly financial growth of 1.53%, which places in the 97th percentile of all companies listed on the site. The early-stage company is clearly growing quickly, and has ample room to continue growing for the foreseeable future given the size of its target market.
The one remaining consideration is the existing market, and an attempt at forecasting a ceiling that Osso could realistically hit. Osso is, indeed, the premier player in the market they operate in; though there are other growing surgery-related VR companies, none of them fill the same niche that Osso does.
Augmedics, another up-and-coming VR health-tech company valued at $86 million, creates products designed to help surgeons visualize patients' anatomies during surgery. It is not meant for training purposes, and therefore serves an entirely different purpose than Osso.
MindMaze, a recently crowned health-tech unicorn, is a VR platform designed to help patient rehabilitation; while the company is massive successful, it also does not fit the same niche as Osso. It is not intended to be used by surgeons.
Proximie, while also targeted towards surgeons, is not meant as a training platform either. It offers a mixed-reality platform that allows surgeons to give peer-to-peer assistance to other surgeons during operations. It is not intended for students, nor does it offer any concept of training "modules" - once again, different niche than Osso.
Vicarious Surgical, a heavily funded public health-tech company, designs surgical robots that surgeons can use through VR technology. Once again, not meant for training, and therefore not in the same niche as Osso.
These 4 companies, along with Osso, were identified as the 5 major players in healthcare-related VR by Pitchbook's 2021 vertical snapshot of Augmented & Virtual Reality. Neither of the other 4 companies are direct competitors to Osso, and given its differentiation from the other major players, Osso has established itself as the industry leader in the surgical training space. The aforementioned Healthcare VR Product of the Year award that Osso recently won is further confirmation of the company's already-established place in the market.
The market for virtual reality-based healthcare solutions is starting to explode as well. Virtual reality hardware, such as Oculus' Quest 2 headset, is becoming relatively cheap, thereby making virtual reality systems scalable and accessible. This accessibility, along with the scientifically proven ROI discussed earlier, is slowly making VR-based training king. Osso's technology has the potential to be used in every medical school, hospital, and healthcare company in the world.
As the popularity of VR grows, we are looking at a billion dollar industry. And Osso is positioned to be a major, major player going forward.
I would be remiss if I did not mention the potential of the metaverse in relation to Osso. While we have no idea what the metaverse will look like, nor do we know what economic opportunities it will bring, one thing is clear: virtual reality is not going anyway any time soon. If the metaverse is as big as many think it will be, and virtual reality becomes a cornerstone of our daily lives, there is no telling what Osso's potential could be. Surgeons could train within the metaverse. Telehealth as a whole could extend into the metaverse.
This is purely conjecture for now, but my point remains: even without the existence of the metaverse, Osso has the foundation to be a billion dollar company. If the metaverse materializes and grows in prevalence, Osso could reach heights far beyond what we project now.
Verdict:
Investors should be chomping at the bit to get in on Osso's future rounds of funding. With the virtual reality market expanding, VR-based healthcare growing in popularity, the technical excellence of Osso's product, and the sheer quality of the Osso team, we are looking at a company primed to hit the prized "unicorn" status within the next 5 years. Now is the time for prospective venture capital firms to acquire equity in Osso.
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