How a medtech market opportunity is shaping up for wearable neurotech

When you think of brain stimulating medtech, startups building wearables as therapeutics probably aren’t the first thing that springs to mind. Such tech is still flying fairly under the radar — perhaps, in part, because these sorts of companies have raised a fraction of the investment that’s been ploughed into invasive technologies for targeting treatments at the human brain.

Elon Musk’s brain implant startup Neuralink is probably the most well known of the invasive plays – raising at least $323M since 2016 in a bid to get brain-computer interfaces to market as a treatment for people with neurological disorders or neurodegenerative diseases.

Given the far higher risks involved in embedding hardware inside the soft tissues of the brain it’s hardly surprising development is costly and time-consuming. But this is also why non-invasive neurotech — while less well known and more experimental than established — is an attractive prospect for investors willing to take a punt. 

Simply put, it’s a lot cheaper to zap a person’s head from the outside than to stick technology inside the brain. Development of therapeutics also looks much more cost efficient than drug discovery.  

“The opportunity is massive at the moment,” argues Kerry Baldwin, co-founder of U.K.-based deep-tech investor IQ Capital, which has backed a Belfast-based neurotech startup called Neurovalens at the seed (2019) and Series A (2020) stages. 

This medtech startup, which was founded back in 2013, has raised a total of $30.4 million to date to fund development of its wearable brain-stimulating technologies targeting a range of mental health and metabolic conditions. It has said it’s aiming to close a Series B by the end of the year, too – which could add another $40M to that pot.

But the amounts involved — still in the tens of millions — look modest compared to the costs of commercializing invasive neurotech. Or the billions that can be required to develop new pharmaceuticals. Which is explains why Baldwin is so bullish on neurotech, dubbing it “a great place to invest”.

A portfolio of treatment wearables

The scope of the market opportunity is another angle here that’s exciting investors. There are many potential therapeutic applications for neurotech wearables – with depression just one of multiple conditions and diseases where devices makers claim they can make a difference. 

Neurovalens illustrates how extensively the tech could range in healthcare as it’s developing a whole portfolio of electrical (TES) neurostimulating wearables. The startup was set up off the back of research by founder Dr Jason McKeown who was looking into applying brain stimulation to the vestibular nerve (which is located behind the ear) as a route to reach the brainstem, a key control center for fundamental bodily processes.

His team started with a prototype neurotech wearable focused on a weight loss use-case but have since expanded and refined their target applications to encompass the following five+ conditions: Chronic insomnia; GAD (generalized anxiety disorder); PTSD (Post-Traumatic Stress Disorder); Type II diabetes; obesity and – also potentially, depending on the outcome of a current clinical trial – depression. 

The startup has had two wearables approved by the FDA so far: A device to treat chronic insomnia, called the Modius Sleep; and a wearable for GAD, aka the Modius Stress. 

It’s also running U.S. clinical trials for separate wearables targeting PTSD and Type II diabetes — and the startup hopes to turn all these efforts into a pipeline of approvals over the next two years. Including another neurotech device that’s focused on treating obesity risk and promoting weight loss by targeting biological mechanisms that store visceral fat. 

Baldwin tells TechCrunch the deeptech fund was attracted to Neurovalens by “the sheer breadth of where this technology could be applied”. 

“In terms of how you can get to market in massive [healthcare] markets, once you’re through all the clearance regulations… you can do this quite effectively,” she explains, saying the relatively small capital outlay required to get to that point “made sense” for a deep tech, early stage investor.

She’s also upbeat about where the neurotech market is headed – pointing to projections that brain-targeting medtech is poised for major growth over the next five years. 

Currently, the market as a whole – factoring in both invasive and non-invasive neurotech – is worth around $13 billion-$14 billion, per Baldwin, but she flags forecasts predicting this will rise to $40 billion by 2030. 

How much of that growing pie ends up going to invasive neurotech startups vs wearables remains to be seen. But it seems a fair bet that non-invasive approaches have a good chance of gaining ground quickly – since, once they have the necessary approvals, their kit can be prescribed earlier, thereby potentially reaching more patients. 

When IQ was first considering a neurotech investment, Baldwin recounts how McKeown – who was a neuroscience professor at San Diego university at the time – had been exploring neurostimulation as a treatment for obesity.

“We’re stimulating the same area in the brain that controls how your body manages energy,” he explains, saying the startup has been able to show “really significant” reductions in visceral fat, i.e. fat that’s stored around organs, elevating a person’s health risks. 

“One of the joys of being a deep tech investor is just sitting down with your founders and saying, yeah, what if?” Baldwin continues. “That was what was so particularly attractive to Neurovalens; that they were able to apply their technology to several massive, globally important themes, rather than just have to drill down into one.”

IQ opted to make its neurotech investment in a startup developing wearable medtech, rather than something more invasive like brain implants – but Baldwin stresses they were looking at “bold treatments”. Evidently, though, the complexity and cost involved in commercializing implanted neurotech tipped the scales in favor of a head-mounted route in. 

“When you go invasive it’s a whole different level of complexity,” she emphasizes. “In terms of regulatory, the cash required to get there, the kind of team support you need – from not only the medical profession but also the regulatory profession. It’s a very different investment.”

A cost efficient, scalable market opportunity

What about market opportunity? Given how many conditions and diseases medtech neurotech builders are eyeing this could end up scaling considerably, too, in the coming years. 

According to the CDC, the percentage of people in the U.S. aged 18 and above who report having “regular feelings of depression” stands at 5%. While data from the U.S. National Center for Health Statistics for 2015 to 2018 found that 13.2% of U.S. adults had used antidepressant medications over the past 30 days – with rates of medication for depression trending upwards since its last survey. 

Anxiety is another target area for non-invasive neurotech – and the CDC records U.S. adults experiencing regular feelings of “worry, nervousness, or anxiety” as even greater: 12.5%.

Turning to sleep disorders, between 30%-40%+ of U.S. adults report getting insufficient sleep. Although rates of chronic insomnia specifically are lower: A recent survey commissioned by the American Academy of Sleep Medicine found that 12% of U.S. adults had been diagnosed with this more disruptive sleep disorder.      

Diabetes is another major problem, in the U.S. and globally – one which can have very serious health consequences. According to the Centers for Disease Control and Prevention (CDC) more than 38 million Americans have diabetes – around 1 in 10 of the population – and between 90% to 95% of those have Type II diabetes, aka the kind Neurovalens hopes to be able to treat with its neurotech wearable. 

Obesity, which can lead to a person developing diabetes, is even more prevalent – with more than 2 in 5 adult Americans being obese, per the CDC. 

Another of Neurovalens’ target conditions — PTSD — is a lot rarer. But the National Center for PTSD, a division of the U.S. Department of Veteran Affairs, has suggested about six in every 100 people will experience it at some point in their lives. And while there’s a strong association between PTSD and military service, McKeown highlights that a particularly high risk group are middle aged women who have suffered from domestic abuse. 

He says the startup is particularly excited about the PTSD wearable in development as the condition is notoriously difficult to treat. “PTSD doesn’t respond very well to drugs – there are no really approved treatments. So we might be the first treatment available,” he suggests.

When its PTSD trial wraps up, giving them a chance to fully review the data, he says they may seek to submit that wearable under the FDA’s Breakthrough Devices Program which can speed up the process of U.S. regulatory review. So McKeown says they’re hopeful this medtech product – slated to be called Modius Spiro – could be approved as soon as next year.

Closer in line for clearance is Neurovalens’ obesity device (aka the Modius Lean) — which they’ve been trialing for longer. McKeown says they’re anticipating approval for that either later this year or early next. While the aforementioned diabetes device (Modius DM) is further out – but he says they hope to have FDA approval for it in 2026. 

Neurovalens is also considering commercializing a wearable for depression — which, if it goes ahead, would be called the Modius Mood — but the startup has yet to decide on whether to take that forward. 

While the commercialization of these higher risk category treatments must wait for a greenlight from the FDA before they can proceed, the medtech company does have two products approved already (for chronic insomnia and GAD). These therapeutic wearables will be launching in the U.S. in the next few months so it will be switching into active marketing soon. 

These first, lower risk neurotech products offer a chance for Neurovalens to test how much appetite there is for wearable neurotech in healthcare.

Despite being based in and developing out of Europe, its go-to-market strategy has always been focused on going to the U.S. first. McKeown says the FDA represents the “gold standard” for medical device approval. It’s also a required step to access the country’s massive healthcare market. 

While there’s no guarantee the FDA will approve any of the startup’s more novel (and higher risk category) treatments, McKeown is convinced the market opportunity it’s been working towards for so long is poised for lift-off.  

“There’s so much research being carried out – even [implanted] devices are now slowly making their way through to get reimbursement in the U.S., under the MediCare or the private healthcare payers. So the opportunity in general is just really exploding.”

He argues this is even more true of the non-invasive sector – pointing out these types of devices sit “quite close” to the consumer health category, where neurotech kit makers are bringing more devices to market that make (unregulated) wellness claims. “Although our devices are prescribed, they’re prescribed at the really earliest stages,” he emphasizes.

“An implanted device for, say, anxiety or a mental health issue is a last resort,” he adds, whereas neurotech wearables — being totally non-invasive — have the potential to achieve much greater scale and patient impact.

Now for the challenges…

Still, even with close to a decade of development work clocked up by some neurotech startups the challenges of commercializing head-mounted brain-stimulators undoubtedly makes for a long list. 

Discussing hurdles Neurovalens has had to negotiate to get this far McKeown talks unbroken for several minutes.

His list includes taking theoretical lab work and presenting it to investors to convince them to cut a check and take a bet it can be translated into clinically validated outcomes; convincing doctors to involved their patients in trials for novel and experimental treatments; and conducting clinical trials to amass data to make a convincing case for medical device regulators to approve novel treatments. 

“We just focus on making patients better. So the challenge… is showing to the FDA how well we can do this, and [that] the safety profile and the risk profile is proportionate to that,” he explains.

“And then the challenge after that is, well, how do you start selling it?”  

Assuming an FDA greenlight, medtech players also need to tackle the issue of reimbursement — convincing healthcare payers the treatment represents value for money — if they want to get their kit into the hands of patients at major scale. And, if that goes well, they arrive at the next challenge: Patient education. 

For neurotech, this means getting people to look beyond what are still rather whacky optics (brain zapping headbands) and see a wearable device as a viable treatment for, say, a mental health issue alongside more established choices like therapy and medication. 

There’s a further wrinkle where patients are concerned, too, as a positive outcome from neurostimulation as a treatment is not guaranteed. 

As is often the case with all sorts of medical treatments, patient outcomes can vary. But there’s perhaps a particular incongruity if a gadget is not doing what it’s supposed to given consumers are so accustomed to having high tech utility on tap, thanks to the rise of smartphones or even consumer wearables.

Flow Neuroscience, the Swedish medtech we met in the first part of this series, has had to device a strategy to tackle the challenge of variable efficacy.

It’s chosen to commercialize an electrical form of neurostimulation known as transcranial direct current stimulation (tDCS) for its first product, which is depression-treating wearable. However CEO and co-founder Erik Rehn accepts tDCS may not work for every person — but he’s quick to point out that antidepressants and other drugs have the same issue: “With some people it works great, with others not.”

“The reality of it is that people’s brains are different, and also people’s depression. Depression as a diagnosis is very heterogeneous,” he tells TechCrunch. “It’s a big problem, of course, but we’re kind of stuck with the terminology… that’s what treatments are approved for.”

Medtech builders have two options, in Rehn’s view. One: taking a “precision medicine” pathway that narrows and optimizes targeting – but also requires “advanced equipment” and techniques that may crimp accessibility and raise costs. Two: “Make something that’s cheap and available to everyone, but it might not work for everyone – but everyone can try it.” The second route is what Flow opted for. 

This strategy shoots for greater scale, and in doing so — the idea is — there’s a better chance of finding those patients who will respond well to the treatment. Crudely put, it could be described as spray and pray. (Or perhaps scale to prevail.) And, along the way, there will be some patients for whom the wearable therapeutic works as hoped and some who will be disappointed.  

Rehn admits it would be “very interesting” to better understand and predict patient outcomes – and he says Flow has done research exploring why tDCS helps some people but not others. But moving too far in that direction this would shift the startup’s strategy closer to the “precision medicine” approach he believes is too restrictive to build traction and scale.

How to maximize efficacy while also keeping neurotech cheap and convenient to use — while also building a viable business that can deliver returns to investors — is, he suggests, “an open question.”

It’s striking how different Neurovalens’ approach is to this neurotech challenge of uncertain outcomes. It’s opted for an R&D intensive strategy that has enabled it to develop a range of devices during a pre-market phase, each aimed at distinct and precisely defined conditions (and, therefore, patients). 

“We really want to have a well defined patient that has the very specific disease that we treat,” emphasizes McKeown.

This portfolio play allows the startup to tweak the neurostimulation dosage for each patient segment — a degree of targeting that should help it to mitigate uncertain outcomes. (So, for example, its wearable for treating anxiety is not just for anyone suffering anxiety but for the specific condition generalized anxiety disorder (GAD); similarly its insomnia device is not for any sleep disorder, just “chronic insomnia”.)

It’s fair to say this is not the typical startup approach as it involves years of preparatory way-paving before a budding business is even able to introduce its first products. Whereas Flow’s B2C (and, later, it hopes B2B) route looks more a more familiar startup playbook. 

Having multiple medtech products in development simultaneously obviously ramps up costs and demands on the team. It also requires a decent funding cushion to support years of R&D before the business is in a position to pull in meaningful revenue from device sales. This explains why Neurovalens has raised so much more (around 3x) investor cash vs Flow (the Swedish startup had raised a total of just over $11M back in 2021 when it bagged its $9M Series A so appears to have taken a far leaner approach to funding.) 

“We have been doing R&D for a long, long time,” McKeown admits. “It feels like forever.”

How has the startup stuck at it for so long? “We were quite reserved in our milestones,” he responds. “Every big milestone we hit ahead of time and ahead of budget gives investors confidence to keep reinvesting and to get to the next milestone.” Whereas, he suggests, an excess of ambition can lead to investors jumping ship when unrealistic expectations are not met.

Neurovalens getting its first couple of FDA approvals – the first was for the insomnia wearable in fall last year – was a major credibility milestone, he adds. “Now that we have got our first two approvals then there’s really no doubt in the investor’s mind that we can do this.” 

Even with carefully curated patient segments, it’s clear Neurovalens’ neurostimulation won’t work for every brain it’s applied to. And, as we noted above, that’s a particularly interesting challenge for a hardware startup to grapple with. Patients have learned to expect patchy results from popping pills but when it comes to consumer tech expectations can be a lot more demanding of insta results.

“People assume that it’s a bit like an iPhone – that technology just works for everyone,” McKeown observes, yet ‘it just works’ is not the case with neurotech. “There’s a bit of an education piece.”

One future hope for further reducing variable outcomes from non-invasive neurostimulation is if device makers can find ways to better personalize the treatment per patient. But that’s something else startups in this space will have to scratch their heads over in the coming years.