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Jhe world is in the midst of a growing global brain health crisis, by which we mean all mental and neurological disorders across the lifespan, from autism and schizophrenia to Alzheimer’s disease and Parkinson’s disease.

The current workforce of health care providers cannot keep up with this brain health epidemic, and existing approaches to care are woefully inadequate. Screening is rarely implemented. The diagnosis is often subjective. The treatment is largely trial and error.

Brain health technologies are key to tackling the global brain health crisis. These technologies cover ‘omics’, digital therapeutics, artificial intelligence, robotics and devices. They aim to improve the entire spectrum of care, from prevention to screening, diagnosis, treatment and continuing care. They can facilitate scale and equity (think apps and telehealth) as well as personalization (think genetics).

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Although the field of brain health technology is booming today, it could easily implode.

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Gartner’s “hype cycle” is a graphical representation of a common pattern for new technologies. It has five phases: technology trigger, peak of inflated expectations, trough of disillusionment, slope of enlightenment, and plateau of productivity. We believe the hype cycle is relevant to the field of brain health technologies and offers a cautionary tale for it.

We see signs of the peak of inflated expectations in brain health technology. By mid-2021, a record $1.9 billion had been poured into brain health-related startups. There have also been soaring valuations for early venture capital-backed companies and a record number of so-called unicorn companies – those valued at more than $1 billion – on the ground. These skyrocketing valuations often contradict the underlying fundamental issues facing brain health companies.

These fashionable trends distract from the deeper issues that many businesses face. Some have viewed the field of digital brain health technology as the “lawless Wild West,” citing concerns about false claims about health benefits and poor data privacy management practices. There is a common disconnect between commercially successful apps and those that have been clinically validated, leaving it to consumers and clinicians to differentiate between which technologies will work and which are just hype. These questions are of concern to the sustainability of the brain health technology field.

There is a significant risk that the field will enter the trough of disillusionment, which portends chilled interest from investors. This is particularly problematic because the field needs decades of sustained growth, investment, and innovation to overcome the current brain health crisis. A market failure in brain health technologies would be disastrous. Every business failure means the loss of potentially valuable products, services and intellectual property that could help patients.

Given this dynamic, conventional venture capital may be suboptimal for the field of brain health technology.

Conventional venture capital models are staffed by financial executives with little or no experience in the field. The 2 and 20 model values ​​financial returns within a set timeframe and discourages significant operational input from general partners, the people who manage venture capital funds. In traditional venture capital models, force-fed unicorns – stuffing a company with too much money until it chokes – can arise to optimize returns for limited partners, the people who provide capital to venture capital funds, resulting in limited exit options, investors becoming more financially and less mission-focused, and high failure rates for other portfolio companies due to insufficient capital and the attention of general partners.

Conventional venture capital models may also lack the incentive to invest in the longer time horizons essential to neuroscience innovation. It may not be possible to perform thorough and effective due diligence in conducting fast-paced market activity driven by fear of missing out, which could increase the odds of investing in poor science or entities without real market potential.

The current focus on a few perceived winners in a portfolio to the exclusion of other companies that require more operational support may drive away companies that might otherwise have a positive impact on the brain health field, responding to unmet needs and bringing highly advanced solutions to clinicians and consumers.

Innovative solutions are needed to mitigate the risk of brain health technology market failure. A multi-pronged approach covering investment, operations, and governance can prevent the field from falling into the trough of disillusionment and heading straight to the plateau of productivity.

From an investment perspective, thematic venture capital funds with domain expertise and qualified resources are essential. Specialized investment funds are emerging in the area of ​​brain health, including those aimed at companies related to dementia, human experience technologies, neuroscience and education. Other investment models such as venture capital studios, which found and fund companies, may be particularly beneficial for the brain health tech space. The venture capital studio model has the unique advantage of “bringing together ideas, capital, resources and talent – partnering with co-founders to turn the best ideas into great companies”, as described by a company.

Integrated investment models that include venture studios, venture capital, and advisory capabilities can also be extremely valuable for early-stage brain health tech companies. Other innovative funding strategies include venture philanthropy, public-private partnerships, and emerging discovery-based business creation.

From an operational perspective, the development of effective brain health frameworks is an important innovation for the workforce. These are people who have the clinical, research, and business experience—as well as the creative thinking—needed to navigate the rapidly changing landscape of brain health technologies.

From a governance perspective, the perspectives of investors and clinics must be aligned. Involving brain health practitioners and researchers in tech company due diligence teams can mitigate information asymmetry, such as complex principles of neuroscience and black box algorithms misunderstood by advisors, employees and investors without the relevant technical or clinical knowledge. Forming partnerships with research institutes, universities, investors, healthcare associations, consumers and caregivers will also be valuable, which Dallas-based Pegasus Park Biotech+ and others are doing. Optimizing privacy and security measures and demonstrating their effectiveness through high-quality studies will also better enable solutions to apply for reimbursement or to be added to national formularies.

With the major societal issues facing the world, it is vital to avoid brain health market failure by proactively mitigating risk. A multi-pronged approach that incorporates innovative investments and changes in operational approaches and governance is essential.

Erin Smith is an Atlantic Fellow for Brain Health Equity at the Global Brain Health Institute at the University of California, San Francisco and a Thiel Fellow at Stanford University. Mark Heinemeyer is the CEO of PRODEO, a brain health technology executive services group. Harris A. Eyre is co-lead of the Neuroscience-Inspired Policy Initiative of the Organization for Economic Co-operation and Development, PRODEO Institute and Meadows Mental Health Policy Institute, founding steering committee member of Brain Health Nexus of Cohen Veterans Bioscience and pro bono member of the strategic advisory board of the Paris-based HEKA fund.