Galen Robotics investment shows how the Opportunity Zone program can fund startups

With a move to 1100 Wicomico in Pigtown, Galen Robotics is looking to expand in Baltimore by employing local talent — and partial thanks are due to the federal Opportunity Zone program.

After being initially based in Silicon Valley, the surgical robotics company — run on technology developed at Johns Hopkins University — moved to Baltimore. Now it is aiming to double its team of about two dozen employees in the next year.

CTO and cofounder Dave Saunders said the company wants to tap into engineering talent coming from the region’s universities, some of whom might otherwise leave.

“This gives us a great opportunity to hire folks directly out of Mid-Atlantic universities and give them a place right here to work,” he said.

The company received investment that will support the local job growth via College Park-based Verte Opportunity Fund, which draws on the Opportunity Zone program to invest in operating businesses. The amount was not disclosed.

Galen Robotics’ plans show how tech can contribute to economic development. It’s also a sign of one way the Opportunity Zone program could play a role.

The technology

The company’s system of bringing robotics to microsurgeries was invented at the Laboratory of Computational Sensing and Robotics at Johns Hopkins by lab director and surgical robotics innovator Dr. Russell Taylor along with Dr. Kevin Olds.

These surgeries are done by making extremely small incisions, which require operating microscopes and specialized tools to navigate. That means the surgeon’s hand must also move with precision, and hand tremors could lead to complications. Galen Robotics’ platform is designed to provide “cooperative control,” meaning the robot can feel hand motion and move a tool for the surgeon.

“You can effectively eliminate hand tremor, stabilize the tool, provide different kinds of … safety barriers, and all this can be done with a robot,” Saunders said.

The company was formed in 2016, when Saunders and CEO Bruce Lichorowic combined their experience in entrepreneurship and product leadership. Working toward commercial launch, they’ve built prototypes and collaborated with other universities on smart instruments as well as a business model called DSaas —Digital Surgery as a Service — with a variety of partners.

The location

Baltimore remained a focal point. The leaders were based out of San Jose, yet they continued to hire engineers in Baltimore, including from Johns Hopkins. First, the company had space locally with FastForward, which is run by Johns Hopkins Tech Ventures (JHTV). Then, it moved into the Launchport at City Garage, a medical device accelerator inside the Port Covington innovation hub. In the meantime, the cofounders explored local resources.

The move to 1100 Wicomico, which the cofounders are now officially dubbing their HQ, was kickstarted through introductions between JHTV and the Baltimore Development Corporation (BDC). With the company seeking new space in 2018, Galen was introduced to Ben Seigel, BDC’s Opportunity Zones coordinator.

In this role, Seigel is playing “matchmaker” between investors, real estate and others seeking to spur development via the Opportunity Zones program. The federal Tax Cuts and Jobs Act created the program in 2017 to spur investment in “economically distressed” communities. It encourages those with capital gains to make investments in areas that have been designated Opportunity Zones.

(Important caveat: The real estate development aspect of the program has also been criticized for benefitting the wealthy, including those with political ties, rather than those economically distressed communities.)

As the law rolled out and some clarifications were made by regulators, most of the focus on the program was related to real estate. However, it also has a provision that allows the investors who use the program to reinvest capital gains taxes in operating businesses located within the zones. This could open up businesses to a “whole new class of investors” for companies, Seigel said, even as it has been slower to emerge. There was more movement in the summer, however, and he began to connect investors with businesses — including Galen Robotics — as well as real estate developers.

“I’m a big fan of this program,” said Dr. Leonard Mills, who manages the Verte Opportunity Fund. “I think it has tremendous potential.”

The opportunity

Launched in September, Verte Opportunity Fund was created to invest in these businesses. Mills sees investment in early-stage, high-growth-potential tech companies as an important piece of the strategy, he said, and Galen Robotics is a unique company serving an unmet need with a potentially large market. With the fund, Verte is also looking to generate positive economic impact. And in this case, that comes in Baltimore.

The potential to “bring capital to communities that are traditionally underserved,” said Mills, is important to the fund, right alongside generating returns.

Upon meeting Galen’s CEO, Seigel introduced the company to Verte, who later decided to invest. He also sought to help introduce Galen to folks with space to move into that was in an Opportunity Zone, and 1100 Wicomico emerged as a suitor. BDC had previously worked with 1100 Wicomico, which is frequently on startup community radars as the home of Harbor Designs and Manufacturing and the recent host of Baltimore Innovation Week’s Dev Day. While the investment is in the business, the space was also an important part of the equation, Seigel said.

“The key third leg of the stool is the relationship with the [1100 Wicomico] folks, and being a space that worked to have Galen move into, which made them eligible to attract the Opportunity Fund investment,” said Seigel.

For Galen, there’s also room to grow: The company is initially taking 5,000 square feet of space, with an option to expand to as much as 50,000 square feet. And with the area’s talent being the “biggest driver” of the decision to move, Saunders said, that means more room for local engineers to work.