September 28, 2017
Joanna Glasner is a business and technology columnist covering all things venture capital. She was previously a reporter for Wired and Reuters.
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Artificial intelligence gets all the buzz in startup circles these days. But VCs are also pouring capital into the original AI prototype: the human brain.

Overall, VCs have invested more than $600 million since last year into companies working on devices and therapies utilizing some form of brain-computer interface, neurostimulation, or implantable devices.

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Given that a majority of the funding rounds are early stage, investors believe it’s still early innings.

“We’re just beginning here,” Kevin Wasserstein told Crunchbase News. Wasserstein is the CEO of Neurotechnology Innovations Translator, a private center focused on commercializing technologies and therapies. The state of neurotech today, he says, is roughly akin to where heart treatment was over thirty years ago. The first pacemaker was implanted in the late 1950s, while it took three more decades for implantation of the first deep brain stimulation device as a treatment for Parkinson’s Disease.

While neurotech startups have been raising capital since the 1990s, funding has accelerated dramatically in recent years. Wasserstein predicts, as a result of increased funding, there will be “a sea change in therapies.”

And although much of the recent activity is still early stage, there are some large rounds getting done. Electrocore, a developer of neuromodulation therapies for serious headaches and other ailments, raised $37 million in Series B funding this month. Neuronetics, one of a handful of later-stage startups, has raised over $175 million to date, including a $15 million June round. The nine-year-old company develops treatments for depression and other mental illnesses through transcranial magnetic stimulation. And then there’s Elon Musk’s Neuralink, a company that manages to be both intensely hyped and rather stealthy, which has apparently raised about $27 million.

To see more broadly where the investment dollars are going, Crunchbase News put together a list of 23 companies in the neurotech space developing both consumer and medical device applications that have raised capital since last year.  Here are some of the investment themes that seem most attractive to founders and investors:

The Fascination With Neurostimulation

Tech entrepreneurs often get criticized for tackling frivolous problems in lieu of tough ones. Not so for neurotech. Startups are applying neurostimulation-based therapies (electrical or magnetic stimulation to the brain or nervous system, often through implantable devices) to treat paralysis, stroke, chronic pain, sensory loss, depression, and a long list of other serious ailments.

In addition to Neuronetics and Electcrocore, here are a few companies in this vein that stood out in our list:

Neuros Medical, which closed a $20 million Series A round in August, develops technology to deliver high-frequency stimulation to sensory nerves in the peripheral nervous system to block chronic pain.

Synchron raised $10 million in Series A funding in April to develop an implantable device designed to interpret signals from the brain with potential applications in treating paralysis, epilepsy and movement disorders.

Aleva Neurotherapeutics raised $18 million in Series C funding last year to continue developing its implantable deep brain stimulation systems for treatment of Parkinson’s and other diseases.

The Augmented Mind

Several startups are deploying neurotech in decidedly futuristic ways. Taking a page from science fiction, VCs have put more than $150 million in the past two years into companies that want to meld mind and machine for applications in virtual reality, gaming, and self-enhancement.

MindMaze is probably the most heavily funded player in the space. The Swiss company is working on a computing platform that captures brain activity to create what is essentially a mind-based operating system. While it’s eyeing potential applications in healthcare, MindMaze is also keenly interested in gaming, with a VR device that uses biosignal processing to replicate facial expressions from players to avatars.

Neuralink, meanwhile, is developing what it describes as “ultra high bandwidth brain-machine interfaces to connect humans and computers,” while Paradromics, which closed an $18 million round in July, wants to develop “broadband data links for the brain.” The company envisions developing online devices to compensate for a patient’s loss of biological connectivity, allowing, for instance, a blind person to see through the aid of a digital camera or a paralyzed person to shop online without having to move a muscle.

Neurodevices For The Rest of Us

In the near-term future, Wasserstein sees the “consumerization of neurotech” as a key goal for the industry, with lowered costs and faster procedures that would broaden the availability of therapies to a much larger cross-section of the population.

Pain control, one of the most pressing medical needs today, could be one of the earlier target areas for broader commercialization. Investors seem on board too. SPR Therapeutics, which pitches its pain control devices as a potential tool to combat the U.S. opioid addiction, closed a $25 million Series C round this month to fund commercialization and new clinical trials.

In addition to social benefits, at least one neurotech company offering therapy for chronic pain has delivered some big financial returns. Shares of Nevro, a venture-backed developer of a neuromodulation platform for the treatment of chronic pain, have more than tripled since the company went public in late 2014, netting a market cap of over $2.6 billion.

Social benefits and demonstrated returns have proved a potent cocktail thus far for brain-focused startups. It will be interesting to see if the current AI cycle will lessen or strengthen VC interest in what’s already between our ears.

Illustration: Li-Anne Dias