The innovation that didn’t make it – from Engineer of the Year to bankruptcy
Interview with Maja Rudinac – LEA care robot
She was named Engineer of the Year in 2019. A few months later, her company went bust. Growing up in Serbia, Maja Rudinac had learned as a child that you have to seize the day. Motivated by this awareness, she did everything possible for her innovation, the LEA care robot. All lights were on green, everyone loved the product, and still the innovation didn’t make it. InnovationQuarter was one of the investors. We look back on the project with Maja. Where did it go wrong? Innovation is a voyage of discovery, where you can have great successes but also failures. The takeaway is how we can use the lessons learned so that together we can improve, get up after we fall and try again.
The summer of 1990. It was a sunny, carefree time and Maja was a happy child. Her parents had made plans for that summer; the family were going on a long holiday. They decided to postpone the trip for a few months so that Maja, who would be a bit older by then, could appreciate it more. They would also be able to take additional time off from work. A few months later, civil war broke out in Yugoslavia.
“We never went on that holiday. What that taught me, as a child, was this: if you see an opportunity today, grab it with both hands. You don’t know what will happen tomorrow. Today is the day you can make a difference in the world.”
Maja Rudinac completes her studies in Serbia – electrical engineering with a specialisation in AI – and is subsequently invited to do her PhD at TU Delft Robotics Institute under the supervision of Prof. Pieter Jonker. In 2015, together with Jonker, she launches the Robot Care Systems startup and develops the LEA care robot. LEA helps people with Parkinson’s disease to walk again, to be able to dance and to enjoy life. The robot senses when the patient experiences a freeze when walking, brakes when the patient leans too far forward, keeps appointments and guides the user through his or her physiotherapy programme. In 2016, a consortium of investors – including InnovationQuarter, Rabobank The Hague, CZ healthcare insurer and Lobeco – invests €5 million in the innovation. In 2019, Rudinac receives the Prince Friso Engineers Award from Princess Beatrix of the Netherlands. A few months later, the startup is declared bankrupt.
What went through your mind when you knew your company was not going to make it?
“We were devastated. Heartbroken. In January 2019, we were at Amazon’s stand at the CES innovation show, and in March we received the Engineer of the Year award. Everybody loved our product – patients, physiotherapists, healthcare institutions, investors, distributors, the government…. Nobody could predict what would remain of that good fortune and our plans a few months later. I thought back to that summer in my youth. Seize the day because you don’t know what will happen tomorrow. You have to make a difference today.”
Where did it go wrong?
“The explicit reason we didn’t make it is that we couldn’t find any scale-up investors in the Netherlands. And every foreign investor who was willing to provide finance asked us to move away from here and bring the IP rights and all. But that’s not possible if you’ve received large investments from the Dutch government, which is only logical. So, we were stuck in a Catch-22 situation.
“The healthcare system is also in a bind. Medical investments have an incredibly long life cycle. There is an average period of 12 years from the time a product completely meets the relevant criteria to the point it is fully reimbursed by health insurers. By the time your innovation is finally on the market, it is no longer an innovation. It is this long turnaround time that makes it incredibly difficult to get investors on board. In the Netherlands, investors like to see that you can stand on your own feet with profits in the first year. Incidentally, what is true for healthcare also applies to the energy transition. Those investments also have very long life cycles. Publicly funded investment funds could enter into even more strategic partnerships with private venture capitalists to enable these types of investments.”
What more can investors do?
“Obviously, you have to hit certain milestones to receive the investment tranches. But investors could be more flexible with those deadlines. If a company does not reach a milestone at precisely the agreed date but two or three weeks later, that would not be too much of a problem for the investor. The startup, on the other hand, is immediately in big trouble, so the timing of the tranches is vital. If the money comes after you require it, you can’t pay your suppliers; if suppliers deliver in three months’ time, you can only get your product on the market three months later, which means your profits will be deferred and so on.
“We have a lot of smart people here, a lot of talent – the Netherlands has enormous potential. But what we’re not so good at is scaling up. This is when we scale up our startups, in which we will already have invested a lot of money, to a corporate business. We were extremely happy that InnovationQuarter introduced us to a number of big investors. But this scope could be broader. Consider, for instance, a scale-up academy that links you to significant investors, helps you with pitch decks and financial decks and truly guides you through the whole process. Parties like InnovationQuarter can play a huge role in this.”
Liduina Hammer on the role of investors
“In the Netherlands, not all sectors and growth cycles receive sufficient growth capital. We often see that private investment funds choose to invest in a certain phase and in a specific sector. However, InnovationQuarter is a life-cycle investor that invests in various phases and sectors from our three funds. We do this with financing instruments and conditions tailored to each of these phases.
“We are aware that in addition to capital, guidance and access to talent and markets are crucial for entrepreneurs. This is why InnovationQuarter launched the Impact Academy last year, a growth programme for our scale-ups. We also rolled out an investor-readiness programme in which 10 entrepreneurs work towards a successful application for funding within 10 weeks. You can tell, from the participants’ enthusiastic responses, that there is a great need for knowledge sharing and guidance. As an entrepreneur, you have to juggle many roles and responsibilities.”
But even though the Netherlands has its stumbling blocks, you stayed.
“I received many offers after Robot Care Systems went bankrupt and could easily have moved to a different place and continued my career there. But I want to make things better here. I don’t want to go to Silicon Valley – I want to bring Silicon Valley here. So I convinced a scale-up there to open a branch here and bring some of their production to the Netherlands, from where we now serve the European market. I want to empower the economy here and I would like to spread the word to other parts of the world and tell them just how innovative this country is.”
So, you were heartbroken, the system had let you down. And yet you are still committed to strengthening the ecosystem here?
“I don’t think the system let me down. Innovation is a voyage of discovery. The government, our shareholders, the distributors – everyone had the best intentions. I also received a lot of support through the Innovation Credit Grant of the Netherlands Enterprise Agency. Actually, I’m incredibly grateful for all that help. We wouldn’t have been able to achieve all that we did without it.
“What our case shows is that we have not sufficiently covered the gap between startup and scale-up. This doesn’t mean that everything we do for startups is wrong; we have the World Startup Factory, CIC, YES!Delft, many incubators, Amsterdam Campus, Brainport Eindhoven, InnovationQuarter and the Innovation Credit Grant. I would say that we do very well as a country during the R&D phase. We just have to learn from our experiences to do better for scale-ups and I am happy to help with that. I’m now working with the Economic Board to improve the funding system for energy investments.”
What makes being an entrepreneur so rewarding?
“When you make something and deliver it to the user, you see how your innovation can improve lives. That’s worth everything. When l look back and see how much effort not only I but especially my fantastic team put into this… I’m still moved by it. We put in many weekends and often burned the midnight oil. Even in the darkest moments, even when they were not sure if they would get their salary at the end of the month, they continued to do their work with total dedication.
“You know, it doesn’t matter that we as a company did not succeed this time. Even if another firm picks up the innovation where we left off and helps people with Parkinson’s walk again, our experiences will have been worth it.”
What touches me about your answers is that even though you were hurt, you didn’t walk away and are not bitter. You have stayed close to the Netherlands, your team and LEA.
“Yes, but how else do you improve things? What do you achieve by walking away? It would have been a different story if everyone had walked away from us. But this country has helped us so much with our innovation. Everyone was involved – from government to journalists and healthcare institutions.
“If everyone with a broken heart runs away or leaves the country, we shift the problem to the next innovation. We’re not the only ones with this problem. Hopefully, there will be hundreds of thousands more wonderful innovations that will change the world. Let’s make it as easy as possible for these innovators. Your opportunity is today – grab it with both hands.”
Business developer Lonneke Baas outlines the context in the healthcare sector
“The healthcare sector is an incredibly difficult market to tap into as a startup. Up to the day you start making money, as Maja says, you will have worked on your product for eight to 12 years. It’s easier for large companies to develop a new product alongside their existing line as they are already making money or have a basic product. But a startup launching a new product still has to prove everything: effectiveness, safety, market validity and intended use. As a startup, it’s incredibly difficult to retain investors for long R&D phases and trial periods. The market is dominated by a small number of major players. You often see that startups eventually enter into a strategic partnership with a bigger party.”
Towards a solution in healthcare
“We know that the healthcare sector is risk-averse. And for good reason, of course. The underlying principle is that we want to keep healthcare accessible and affordable for everyone. To facilitate technological innovations in healthcare, we, as business developers at InnovationQuarter, are working on stimulating change in this sector so that innovation becomes easier and part of the culture. To achieve this, healthcare must become more outcome-based; that is, it must focus on the best outcome for the patient, take joint decisions and adopt a funding approach aimed at fewer people ill or more people better. Currently, you still get paid per illness or treatment.
“To make outcome-based healthcare possible, you have to innovate the entire chain. All stakeholders must take part in this conversation – from insurer to municipality, from general practitioner to patient. We stimulate new collaborations and business models through our HealthTech (ZorgTech) programme. Healthcare technology developers can test the applicability of their technology through the programme. Funding is also available for this. Projects that wish to qualify for HealthTech must have at least three types of chain partners: a tech partner, a healthcare partner and a field lab. For InnovationQuarter, the latter is important as it will allow us to make joint use of the lessons learned as a region.”
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