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12/06/2022

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Synopsis

Limb amputations are a devastating medical event, and they’re more common than some might think. Roughly 185,000 amputations occur in the United States each year. Just under 2,000 American babies are born with limb difference each year. In total, more than 3.6 million people in the United States will be living with limb loss by 2050. These figures are even larger in other countries, where limited healthcare access only increases the likelihood of limb loss. 

Prosthetics are an option for many limb loss patients, but many don’t use them. For upper limb (arm) amputation, documented rates of prosthesis use vary from 27% to 56%. One compelling account cites many reasons why those with limb loss may feel “more disabled” when wearing a prosthetic. Issues with current prosthetics range from comfort to cost, responsiveness to reliability, and everything in between. 

Atom Limbs hopes to revolutionize the world of prosthetic limbs, beginning with arms. Atom Limbs secured an exclusive partnership with Johns Hopkins University to commercialize the school’s Modular Prosthetic Limb system, which was developed via $100 million in research funding from the Defense Advanced Research Projects Agency (DARPA). With Johns Hopkins’ technology as a starting point, Atom Limbs is developing a disruptive prosthetic arm that is mind-controlled and can restore a basic sense of touch for those with limb loss. Atom Limbs plans to make these arms available to consumers in 2023. 

Atom Limbs’ current Wefunder raise has been rated a Neutral Deal by the KingsCrowd investment team. 

Price

Atom Limbs is raising capital via a Crowd SAFE at a $36 million valuation for early bird investors or a $40 million valuation for regular investors. That valuation seems aggressive for Atom Limbs’ current stage of traction. The company hasn’t generated any revenue yet and doesn’t plan to launch its prosthetic arm until 2023 at the earliest. It appears that Atom Limbs’ claims about the revolutionary nature of its arm are also somewhat exaggerated. Other companies like BrainRobotics and Unlimited Tomorrow are producing products that also incorporate mind control, a sense of touch, and other selling points. While Atom Limbs is certainly a company with potential to achieve major value, there’s no proof yet that significant value is justified. Therefore, this funding round’s price is too high.

Market

Limb loss is more common than one might expect, and unfortunately, the condition is becoming more common over time. Roughly 185,000 amputations occur in the United States each year, and experts project that more than 3.6 million people in America alone will be living with limb loss by 2050. Vascular diseases like diabetes cause more than 50% of limb amputations, and those conditions are increasingly prevalent.

Globally, the market for prosthetic arms was valued at $880.783 million in 2019. It’s projected to grow by 12.54% annually over the next five years and exceed $2 billion by 2026. The market for prosthetic limbs is somewhat small but has strong growth potential. However, it’s still a niche industry, and Atom Limbs can only hope to reach a small segment of the market given the strength of its competition. Companies like BrainRobotics and Unlimited Tomorrow offer similar products and act as direct competitors to Atom Limbs. Atom Limbs’ market size prospects will be more optimistic if the company can expand to other types of prosthetic limbs, but those products will be years in the making. For now, Atom Limbs’ market potential is relatively limited.

Team

Atom Limbs has an all-star team of executives and technologists from renowned companies. The business was co-founded by Tyler Hayes, a serial entrepreneur. Hayes got his start in startups as an early employee at DISQUS, which was ultimately acquired by Zeta Global. He then founded Prime and built the business for two years, though it appears to have shut down. Hayes’ big win came when he founded Bebo, a social networking company acquired by Amazon in 2019. Now, Hayes calls Atom Limbs and its mission of ending physical disability his life’s goal. 

Doug Satzer is Atom Limbs’ co-founder and chief design officer. He spent 12 years at Apple, leading teams responsible for the first iMac and iPhone in partnership with Steve Jobs. Satzer is named on more than 500 patents. Satzer likely recruited Apple colleague Eric Monsef to join the Atom Limbs team. Monsef is Atom Limbs’ final co-founder and its CTO. He previously spent 15 years at Apple as a director of product design and hardware engineering. The Atom Limbs team also includes other senior engineers and product executives who spent time at Apple, HP, Tesla, Nike, IDEO, and more. 

Overall, the Atom Limbs team has a truly impressive depth and breadth of experience from world-class, cutting-edge technology companies. The team is heavily weighted toward product development (rather than sales or marketing) at this time, but that’s to be expected given Atom Limbs’ current progress toward go-to-market. It’s difficult to envision a stronger team for a high-tech startup at this stage. 

Differentiators

Atom Limbs’ competitive advantage is rooted in the company’s partnership with Johns Hopkins University. This partnership allows Atom Limbs to commercialize the prosthetic technology built by the school. Johns Hopkins received significant funding — more than $100 million — from the Defense Advanced Research Projects Agency (DARPA) to develop the tech. 

This partnership does give Atom Limbs a significant leg up over companies building a prosthetic arm from scratch, but the precise details of this partnership seem a bit exaggerated in Atom Limbs’ raise materials. It’s important to clarify that Atom Limbs does not own the intellectual property behind its prosthetic arm. Plus, DARPA also funded a different prosthetic arm research project, which birthed the LUKE arm from DEKA Integrated Solutions Corp. 

In addition, other prosthetic startups like BrainRobotics and Unlimited Tomorrow are advertising similarly high-tech prosthetic arms. Atom Limbs’ claim to be the first mind-controlled arm with a sense of touch and individual finger control does not seem to be true when compared to those other companies’ marketing claims. 

In sum, Atom Limbs is building a highly advanced prosthetic arm with significant competitive advantages given the licensure of DARPA-funded, Hopkins-researched technology. But despite these advantages, Atom Limbs still faces strong competition in this market. 

Performance

Atom Limbs is only about a year old and hasn’t brought its prosthetic arm product to market yet. That means there’s relatively little performance data to evaluate. The company didn’t generate any revenue in 2019 or 2020, and revenue isn’t expected until 2023. Its burn rate has been reasonable thus far, with a $176,814 net loss in 2020. However, it seems like the company will spend a great deal more in 2021 on research and development and its new, large team of senior executives. 

In general, Atom Limbs is a bit light on the details when it comes to monetization and performance projections. It will apparently offer a subscription plan to generate recurring revenue rather than one-time device sales, but it’s not clear what the customer will be subscribing to. The company offers a financial projections chart, but it seems optimistic, with more than $100 million in revenue projected just one year after the Atom Limbs prosthetic launches in 2023. The company’s projection of more than $1.5 billion in total revenue by 2030 appears a bit excessive. At this point, it’s just too difficult to assess Atom Limbs’ performance in the commercial market. 

Risks

Atom Limbs is a relatively high-risk investment, as most high-tech companies are. Admittedly, Atom Limbs isn’t exactly a “moonshot” company. Its prosthetic arm technology was already developed by Johns Hopkins, and its viability has already been verified with testing. But Atom Limbs still has a long way to go before bringing the limb to market and generating revenue from consumers. That means product, market, and time risks are all notable. There is no guarantee the product will sell, and if it doesn’t sell fast, the company risks getting further away from its goals. Investment terms also pose a risk in this deal because Atom Limbs seems overvalued for its current stage of traction. 

Bearish Outlook

Inventing new human limbs is a very complicated endeavor, and Atom Limbs has a long way to go before investors will know for sure whether their investment was successful. The company has at least one to two years before bringing its prosthetic limb product to market, with an intended launch in 2023 (though delays wouldn’t be surprising). Even then, Atom Limb doesn’t provide many details about go-to-market plans or revenue projections. The notion of subscription revenue rather than one-time device sale revenue is interesting but isn’t detailed in Atom Limbs’ raise materials. Plus, Atom Limbs’ revenue projection of more than $1.5 billion in nine years seems overly ambitious. 

In addition to these uncertainties, it’s concerning that Atom Limbs offers misleading information as to its competitive advantages relative to the market. First, Atom Limbs doesn’t own the intellectual property behind its prosthetic arm, which could be a major issue down the road. Second, the Defense Advanced Research Projects Agency (DARPA) also funded another prosthetic limb project in addition to the Johns Hopkins technology that Atom Limb now uses, which is a major competitive risk. And lastly, Atom Limbs is competing with other prosthetics companies that claim to offer similar advantages in terms of mind control, restoring touch, individual finger movement, and more. As these facts are clarified, Atom Limbs’ pitch looks less and less revolutionary.

Bullish Outlook

Atom Limbs boasts a world-class team of technologists and business leaders. Overall, the team boasts decades upon decades of combined experience at companies like Apple, HP, Tesla, Nike, and more. Atom Limbs’ collection of executives could apply battle-tested product development strategies to propel the company ahead of the competition. 

In addition, Atom Limbs seems to be applying more of a startup growth approach to the prosthetic limbs market, in contrast to more traditional medical technology companies offering competing limbs. Atom Limbs is well-branded and is leveraging the significant press from the Johns Hopkins “bionic arm” research project to make a splash. The concept of recurring revenue in a business otherwise defined by one-time device sales also reflects a new approach in medical technology. 

It’s too soon to tell whether Atom Limbs’ prosthetic arm can truly reinvent day-to-day life for limb loss patients. But with well-established technology, a deeply experienced team, and a new approach to prosthetics company growth, Atom Limbs may have what it takes to succeed.

Executive Summary

Atom Limbs is a prosthetic limb company developing an advanced “bionic arm” capable of restoring motion, control, and even touch to those without arms. Atom Limbs’ prosthetic arm technology is drawn from a partnership with Johns Hopkins University, which previously received more than $100 million in funding from the federal government to develop revolutionary prosthetic limbs. This technology, combined with leadership from seasoned Apple executives and other world-class leaders, could make a huge impact for both limb loss patients and Atom Limbs investors. 

On the other hand, Atom Limbs is a bit misleading in its claims about the revolutionary nature of its product. Other companies are developing similar technology, and Atom Limbs isn’t the only company to benefit from significant government research funding. Plus, Atom Limbs has years to go before it begins generating revenue, and the company doesn’t offer very many details about a go-to-market plan. The market opportunity is growing but still rather niche, and without any revenue, the company’s valuation is too high. Therefore, Atom Limbs has been rated a Neutral Deal. 

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com

Analysis written November 12, 2021.

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