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Consumer Neurotech: Volume IV

Consumer Neurotech: Volume IV

Neurotech for Brain Modulation

In Volume I of this series on Consumer Neurotech, we established a framework for thinking about Consumer Neurotechnologies and their value propositions. In Volume II, we discussed neurotechnologies that have the value proposition of Control (or, using our taxonomy from Volume I, neurotechnologies whose “Effect-type” is Control). In Volume III, we analyzed neurotech with an effect-type of Feedback. Here, in Volume IV, we’ll explore neurotechnologies that directly modulate the nervous system.

Neurostimulation for Learning

Fiction

Eight squats left. Seven. Now, six. You silence the verbal monologue ringing in your head, attempting to focus all of your awareness on visualizing the flatness in your back, helping to construct the perfect angle with your upper legs as you lower yourself. You shift your focus to your feet and micro-adjust so your weight is distributed in the sweet spot, a little in front of your heel. Four squats left. You let the high-tempo electronic music take hold and carry you the rest of the way. Last one, and you put the bar back on the rack. Now you peel off your headphones—you run your fingertip over the electrodes in the band while you catch your breath. Training for your powerlifting competition is a game of masterful repetition. It can be hard to see the improvement day over day, and part of your will to continue comes down to belief in the power of addition: small improvements sum over time to noticeable changes, to heavier plates on the bar. Today, though, you notice that your squats felt meaningfully easier. The competition is in two months, and you can feel yourself on the path to your new personal record.

• • •

“Learning,” no matter which of its many conceptions we consider, ultimately comes down to cellular and molecular-level changes in the nervous system. As such, it’s reasonable to ask what would happen if we could make these changes occur more efficiently, or if we could make them more likely to occur? Below, we review one such piece of technology that takes the approach of modifying the brain at a molecular level in order to make it easier to learn motor tasks.

Halo Sport

  • Medium of innovation: Hardware
  • Device-type: Stimulate
  • Form-factor: Headphones
  • Effect-type: Neuromodulation

The Halo Neuroscience headset is a $600 neurostimulation device that uses transcranial direct current stimulation (tDCS). Halo has developed a set of headphones that feature electrodes to perform the tDCS; the headphones’ band typically sits over the motor cortex, and therefore the tDCS impacts the part of the wearer’s cortex that controls movement. According to Halo, the tDCS “primes” neurons in the motor cortex so they become more plastic—when an athlete wears the headphones before and during a workout, they can learn movements more quickly. Halo focuses their product on elite athletes who consistently train, and they’ve conducted decent studies comparing physical improvement of athletes who do and don’t use Halo’s neurostimulation. A large part of Halo’s strategy appears to be sponsoring athletes and sharing success stories. Although Halo’s primary marketing is around athletics, in this video a pianist describes the apparent benefits of using the Halo headphones while learning a new piano piece.

Takeaways

  1. Halo operates on a bold principle: “We run electrical current through your brain, and as a result, you learn more quickly” (our phrasing, not Halo’s). For companies like Halo that claim to enhance their users, there is a need to prove the efficacy of the product, because the knee-jerk reaction to such claims is intense skepticism. This proof can take either or both of two forms: anecdotal/qualitative and quantitative. Halo has undertaken both, through their sponsorship of influencer athletes (anecdotal/qualitative) and through conducting scientific studies of their product to provide data (quantitative).
  2. To the above point, an open question is the extent to which willingness to buy a consumer neurotechnology product will be based on testimonial, in contrast with scientific data. This will certainly depend on the particular product and market; as such, it’s advisable for consumer neurotechnology companies to quantitatively assess the preferences of their target audience through a survey or other methodology.
  3. The gold standard for evidence of product efficacy is evidence provided by a third-party. For a product like the Halo, where there isn’t much at stake in the decision to use or not us the product, this isn’t a huge deal. However, setting a precedent is important because there are technologies for which third-party verification is critical, as in the case of neuroimaging applied to lie detection, where non-commercial academic review has found significant problems with the first-party commercial claims.
  4. Although with this device, the risk faced by the user is mostly limited to a financial risk (which they mitigate with a 30-day satisfaction guarantee—although, is 30 days long enough to experience the benefits of the headphones?), an ethical question still arises: what responsibility does Halo or any other consumer neurotechnology company have to establish and communicate to potential users the variability in its effectiveness? With a 30-day money-back guarantee, this question isn’t all that important. It becomes more significant, though, looking forward to the distant future when invasive neurotechnology could be used for purposes of enhancement. This also bears resemblance to the developing and marketing drugs that might be toxic for some, but highly effective for others.
  5. Related to the point above, this inter-individual variability is going to be a marketing problem. If neurobiological and engineering constraints make it such that a product will only work for 50% of its users, reviews for the product will be highly polarized: imagine a barrage of 1-star reviews from users who see no results with Halo, and a set of 5-star reviews from athletes who’ve seen their performance improve markedly. How should Halo manage this marketing conundrum?

Use-Cases and Market Size

Athletics

Halo’s primary use-case for motor learning enhancement is athletics. To estimate the US market size, we split up our analysis between college athletes and professional athletes; it’s possible that non-collegiate and non-professional athletes would purchase a Halo, but given the $600 price-point, the inherent product skepticism, and the fact that amateur athletes usually don’t track their performance as closely as collegiate and professional athletes—we assume this market will be small, and therefore omit it from our analysis.

Broadly, we model this as [Number of Athletes] x [Market Penetration] x [Average Selling Price]. We estimate the number of professional and collegiate athletes and use the price of the Halo headset as our ASP estimate. We make assumptions for the market penetration growth curves, although our models are easily adjustable to accommodate different values for these assumptions.

With conservative market penetration assumptions, we estimate that the annual market for enhanced motor-learning will be only $500,000 for professional athletes in 2025 and $12,090,000 for collegiate athletes in 2025. Both of these numbers are smaller than the grand-slams sought in venture capital-funded businesses. The reason these markets are so small is that the total addressable market is limited—simply, there aren’t very many athletes. In order to increase revenue given the small TAM, Halo could introduce an annual subscription.

Music

Even though Halo has official marketing material around the musician use-case, we don’t think this market will take off. Musicians are probably less inclined to purchase performance-enhancing gear than athletes are; the field of athletics is already receptive to optimization (e.g. using fluid dynamics to design swimsuits), and a core principle of athletics is metrics-based competition. In contrast, music is aesthetic and appraised as art, sans quantification. We think this serves as a useful example of an important point: consumer neurotechnology products that emphasize enhancement should target markets that have an “optimization mentality.” Without this mentality, the value proposition doesn’t impress, and might even yield disdain.

Surgery

Transcranial direct current stimulation has been investigated for its utility in training surgeons. The reasoning goes: Surgeons must use fine motor control during surgery, so therefore if we make it easier for the motor cortices of surgical students to adapt to new movements, then perhaps we can train surgeons more effectively.

As of 2008, there were 136,000 active surgeons. The surgical student market is even smaller than the professional athlete market, so we assume that any company (Halo or otherwise) who wanted to enter this market with a tDCS product would need a subscription model to be profitable. Given that there are 141 medical schools in the U.S. and generating a back-of-the-napkin estimate for the number of surgical students per medical school (based on other statistics), in addition to estimating the ASP to be the price of the Halo headphones and estimating an annualized subscription cost of $300/head/year, our estimates show the 2025 market to be only $520,000.

Each of the markets we’ve covered have been, by themselves, fairly small. The Halo device and its particular constraints and business models represents only one take on a broader concept: upregulating human learning. Halo tackles the learning of movements; one can imagine future neurostimulation technology that makes it easier to learn to recognize visual patterns (helpful in e.g. pathology or radiology) by stimulating the visual cortex. We could further envision the upregulation of even higher-order learning—in a sense, we already have “technology” that does this: caffeine. Even though our projections have Halo’s markets as potentially small, the sheer number of domains where human learning is relevant (and the size of the academic and professional education markets) makes for a large opportunity.

Neurostimulation for Affective State

Fiction

Every Wednesday, it seems you rediscover the meaning of “Hump Day.” That mid-week hump hits right around 3pm—emerging from the food coma, you dwell on the thought of still having two days left before your severely-needed R&R. And that’s not even thinking about the essay you promised you’d edit for that friend who decided to apply to grad school after a decade in the workforce…and how is it, again, that you’ll finish the 20 more slides on this presentation before going home? Coffee is an option, but you’ve already had two cups today and you feel yourself approaching addiction. You sit for a few minutes and think, willing the haze to clear slightly so you can arrive at a plan of action. Suddenly, it dawns on you. You reach into the left drawer on your desk and fumble around with your fingertips for a few seconds, searching for the pod-like shape among the sea of pencils and dangerous papers eager to doll out paper cuts indiscriminately. You grab the device, pull it out, and nestle its curved adhesive pad onto the matching curvature midway down your neck. After opening the companion app, and setting the Energy intensity to level 7, the tingling underneath the adhesive pad starts to kick in. Sixty seconds later, you peel the stimulator off, return it to its home quickly, and crisply close the drawer. As you pull your chair up closer to your desk with a game-face on, you think you might be feeling slight butterflies about getting to give this presentation to the CEO tomorrow.

• • •

One obvious direction for neurotechnology to explore is that of modulating emotion and physiological state. We refer to these collectively as “affect modulation,” although we acknowledge this terminology doesn’t capture the difference between emotion and its physiological manifestation; rather, we operate under the assumption that physiology may be used to deduce and modulate emotional state. In the above scenario, we describe what it might be like to one day use a consumer-available neurostimulation device that generates a sense of energy.

Here, we’ll discuss two examples of devices that aim to achieve affect modulation through neurotechnology (we’re exclusively considering technologies that do this by electrically stimulating the nervous system; importantly, we aren’t considering ingestible substances like caffeine and other drugs).

Nervana

  • Medium of innovation: Hardware
  • Device-type: Stimulate
  • Form-factor: Headphones
  • Effect-type: Physiological

The first product is called Nervana, a non-invasive vagus nerve stimulation device that claims induce a sensation of relaxation and calm. The device, which costs $300, synchronizes vagus nerve stimulation with audio of the user’s choice: the user plugs their phone, MP3 player, etc. into the Nervana Generator using an audio jack, and the Generator outputs to Nervana’s headphones, which contain electrodes in the earpiece to provide electrical stimulation to the user. We want to note that Nervana provides no scientific data about the effectiveness of their product, so we have no idea if it works or not; we’re including it since it’s an interesting concept.

Thync (no longer sold)

  • Medium of innovation: Hardware
  • Device-type: Stimulate
  • Form-factor: General Headset
  • Effect-type: Physiological

The second device for modulating affective state was manufactured by Thync. Thync is a non-invasive neurostimulation company. Their original product, the Thync Calm and Energy Wearable, was intended to evoke sensations of energy or relaxation. Their second product, the Thync Relax Pro, was specifically focused on inducing sensations of relaxation. According to their website, Thync has since pivoted into treatment of psoriasis, an autoimmune skin condition, for which they’re conducting clinical trials and will pursue FDA clearance as a medical treatment. Our discussion here will be limited to the non-medical uses of the original two Thync devices. It’s unclear from public information why Thync pivoted, and therefore it’s difficult to take lessons from it.

The Thync device, at least for the relaxation mode, works by stimulating afferent fibers of the facial and trigeminal nerves, as well as cervical spinal nerves (C2/C3). The device used an adhesive pad to stick a stimulator to one side of the user’s forehead (facial and trigeminal nerves) and an additional electrode attached to the back of the user’s neck (cervical spinal nerves). According to research published by Thync in the journal Nature, their neurostimulation technique has downstream effects on the physiological mediators of stress. For those savvy with neuroanatomy and neurophysiology, this diagram from the paper delineates a possible pathway for the stimulator to achieve its effects. Note that “TEN” stands for “transdermal electrical neurosignaling,” which is the fancy name Thync uses to distinguish its technology from other neurostimulation techniques.

The original device cost $200, although the adhesive strips cost more (we aren’t sure what the specific price was). The Relax Pro cost $150, with a $30 monthly subscription to continuously send users the adhesive pads. Note that neither of these devices are available anymore—the reviews we’ve found are from early 2017. In terms of efficacy, reviews like this one from MIT Technology Review note that the original Thync devices worked for some people, but not for others.

Takeaways

  1. As with Halo, Thync demonstrates the fact that consumer neurotechnology will have to deal with severe value proposition variability. The products will work for some people, but not for others. This comes down to differences in the nervous systems between individuals, so it’s going to be tough to mitigate.
  2. The value of this product is directly measured in emotional and subjective experience, in contrast to normal consumer electronics like cellphones, or even consumer neurotechnology like the Halo headphones whose value will probably fuse the quantitative (My maximum squat went up by 10%) with the qualitative (My workout felt great when I wore the headphones). The closest analogue is narcotics. On one hand, if affect-modulation technologies work, then they’re likely less risky than drugs since they don’t require inputting substances to the body. On the other hand, to the best of our knowledge, it’s unknown whether relaxation effects will attenuate over time. The attenuation could cause addiction behavior (more stimulus required for the same reward); but, if there isn’t attenuation, and the reward is consistent…would this prevent addictive behavior? These questions are worthwhile basic science questions.
  3. Should affect modulation companies have an obligation to investigate whether their products can become addictive? There’s probably no legal imperative, but there might be a PR imperative as the expectation of technology companies rightfully moves toward building products that are conscious of their emotional impact.

Use-Cases and Market Size

To build our model for the affect modulation market, we split the market into three subcategories: Positivity, Relaxation, and Energy. This could easily be extended to include other categories like Focus. We assume that devices will cost $200 (based on the original Thync), and most would employ subscription models for discardable physical components like adhesive pads and companion software—we estimate this as $15 / mo. Our model makes assumptions for market penetration split up by each of the three categories, and factors in churn.

Importantly, market penetration is relative to the “receptive subset” of the total addressable market. For example, if the total addressable market is every individual in the United States, only a subset of these individuals will be receptive to the idea of using neurostimulation to feel more positive or feel more relaxed. We guess these numbers right now, but we (or anyone else) could easily conduct a survey to replace our guesses with empirical point-estimates. Additionally, we make the limiting assumption that the receptive subsets of the TAM will be constant from 2018-2025 (the extent of our projections); this assumption is invalid because the receptive subset will probably grow over time as affect-modulation products become more popular. This growth rate could also be point-estimated empirically, although it would be more challenging. One additional assumption that could lead to an overestimate is that we consider Positivity, Relaxation, and Energy to require separate devices; it’s possible that, as with the original Thync, more than one of these effects will be achievable by a single device.

With the above considerations, noting conservative estimates for market penetration, we estimate that the U.S. market for affect-modulation technologies in 2025 will be $499,000,000.

Conclusion

In Part IV of our Consumer Neurotech series, we discussed consumer neurotech that directly modulates the human nervous system. In Part V, we’ll address some technologies that fall in a wildcard category.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Neurotech
11 min. read Show less
Apple: A Free Content Strategy Is the Right Approach

Apple: A Free Content Strategy Is the Right Approach

CNBC reported that Apple plans to give away some of its forthcoming original video content to Apple device owners as a part of a new digital TV strategy (likely starting in Mid 2019). We can not confirm if this is, in fact, part of Apple’s strategy but we believe it’s the right approach for the company, because it advances their mission as Services company.

4 Reasons why giving away original content makes sense:

  1. Quickly build awareness of Apple’s video content with about 1 billion consumers (Netflix currently has 130M+ paying subs, Amazon Prime 100M+).
  2. Increase hardware retention, an important component of Apple as a Service.
  3. Drive usage of Apple’s pre-installed TV app that allows users to sign up for third party subscriptions (HBO, Showtime, Starz), from which Apple takes a cut.
  4. Build a loyal viewer base that Apple could upsell to a range of paid options.

Details of CNBC’s Reporting

According to CNBC, starting as early as next year Apple’s pre-installed TV app will house both free original content produced by Apple (see details here) and other third party subscription video services. CNBC added that Apple is looking for a marquee series that could serve as the foundation of a paid subscription video service down the road.

The Numbers

We expect Apple to spend $900M on video content in 2018, growing to $4.2B by 2022. While the initiative is off to a disappointing start (think Carpool Karaoke and Planet of the Apps), we believe Apple is making measurable progress in original video content. Previously, we had expected video would begin to contribute to Services growth starting in 2019 or 2020, and video content could ultimately account for $10-$15B in annual revenue (Netflix will do $16B  in 2018) and 3-5% of overall Apple revenue. If CNBC’s report proves to be accurate and Apple continues to give away its original content, our video estimates may be too high.

Taking a Page from Amazon’s Playbook

Apple’s original content, whether free or paid, is an incremental value-add that makes the Apple ecosystem more appealing. Essentially, Apple is taking a page from Amazon’s playbook. Amazon includes extensive video content and essentially gives away hardware like Echo Dots to Prime customers aiming to increase the likelihood of a Prime member renewing their subscription. Apple as a Service involves expanding the range of services unique to Apple that are available on your devices which, in turn, make it more likely consumers will replace an old iPhone with a new iPhone.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Apple
2 min. read Show less
Consumer Neurotech: Volume III

Consumer Neurotech: Volume III

Neurotech for Feedback

In Volume I of this series on Consumer Neurotech, we established a framework for thinking about Consumer Neurotechnologies and their value propositions. In Volume II, we discussed neurotechnologies that have the value proposition of Control (or, using our taxonomy from Volume I, neurotechnologies whose “Effect-type” is Control). In this third Volume, we’ll learn about and analyze neurotech that leverages a phenomenon known as “neurofeedback.” Neurofeedback is a straightforward idea: record some aspect of neural activity, and feed that activity back to the brain through one of the senses. By doing so, the neurofeedback can help a user achieve a desired brain state. 

Neurofeedback for Attention

Fiction

This morning, walking into the espresso bar en route to work, you ran into a friend you hadn’t seen in months. When you’d seen her last, she told you she thought her boyfriend might propose soon. This morning, you updated her on your project at work, your son’s first words, and other little things, but you could tell she was waiting. Finally, you had yielded the microphone and she promptly broke the news by holding up her hand. When you saw a glistening engagement ring, you felt a rare, precious vicarious excitement. You were chatting away excitedly but realized if you stayed any longer you’d be late, so you hurried over to the office riding the high on life. You’ve finally just now squeaked into your swivel chair, and your priorities are evident: text friends about the engagement first, second, third…get work done later. The adult in you tries to wrestle control back, and you start listening to music through your headphones. When you first put them on, they’re constantly dinging, telling you that you’re unfocused. The dings work like chimes in wind, catching your attention and slowly zoning you into trance-like productivity. 15 minutes later, you’re in flow, and there’s a small smile from this morning still cemented onto your face.

• • •

One well-known application of EEG is for assessing focus and attention: certain patterns in EEG signals indicate greater or lesser degrees of attention. Given the volume of research, patents, and practical utility of attention enhancement, we’re likely to see an abundance of products that leverage these signals. Here, we’ll discuss two such products on the market.

Mindset

  • Medium of innovation: Integrated
  • Device-type: Record
  • Form-factor: Headphones
  • Effect-type: Feedback

Mindset is a pair of headphones that integrates EEG sensors into the headband. The goal of the $280 headphones is, as per their website, “[With] our powerful EEG technology, you will train your subconscious to recognize and tune out the things that distract you.” According to Mindset’s explanation of the science behind their product, they use the principle of neurofeedback to provide an auditory cue through the headphones whenever a user loses focus. Through this feedback, over time, the user’s brain will become trained to stay more focused. Mindset is launching in the coming months; preorders are active on their website.

NeuroPlus

  • Medium of innovation: Integrated
  • Device-type: Record
  • Form-factor: General Headset
  • Effect-type: Feedback

NeuroPlus is a $100 EEG device that’s paired with attention-enhancing games. Like Mindset, NeuroPlus leverages neurofeedback: “[Users] play brain-controlled video games that give real-time feedback on how well they’re paying attention. The more they focus, the better they’ll do in a variety of fun, interactive training games. Over time, this practice leads to improved focus in everyday life.” Users are granted access to the games for $30 / mo. for an individual, $50 / mo. for a group of 2-4 people, and each additional person beyond the fourth adds $10 / mo. to the subscription price. A large part of NeuroPlus’s target market appears to be children with ADHD, and they include a 60-day money-back guarantee so that users can have a fair shot at determining whether the device and software work for them.

Takeaways

  1. Mindset and NeuroPlus both integrate attention training into pre-existing use-cases: for Mindset, it’s music-listening; for NeuroPlus, it’s gaming. This is a theme in consumer neurotech: it’s useful to find pre-existing contexts in which to use the technologies. To show how this makes sense, suppose we’re comparing Mindset with Thync (a device we’ll discuss in Volume IV that attaches to the user’s temple and stimulates nerves—the goal is to help a user relax or feel energized, i.e. to modulate their affect). Mindset benefits because users have already developed behaviors for using headphones and opening up an application (e.g. Spotify) when they want to wear their headphones. In contrast, Thync requires the new behavior of placing adhesive strips on the device, then putting the device itself onto their forehead with no purpose other than to modulate affect; this is a high-friction requirement. We suspect that not only will it lower friction to deliver neurotech value through pre-existing use-cases, but it will also make prospective users more comfortable with the idea of technology that records or stimulates neural signals—comfort is born of familiarity.
  2. The fact that neurotechnology can be packaged into existing use-cases will be a boon to its uptake. Contrasting with mixed and virtual reality, neurotechnology doesn’t need a “killer use-case” because it will piggyback on use-cases that are already killer, such as listening to music.
  3. Mindset takes advantage of the fact that they can place EEG sensors into hardware that people are already used to using (Halo Neuroscience does something similar, although Halo’s headphones are less ergonomic and some athletes don’t wear massive over-ear headphones while working out, perhaps to avoid pooled sweat). NeuroPlus, in contrast, requires a dedicated but low-profile EEG headband.
  4. It’s interesting that the actual usage of neurotechnology generally recedes into the background: neurotechnology isn’t necessarily the primary experience a user is aware of when interacting with a product. This is true of the CTRL-kit, the Muse (see below), the Halo headphones, the Mindset headphones, the NeuroPlus games, and more. Consider that even the semantics of “augment” or “enhance” make this evident: we have to augment something, enhance something. These verbs need their nouns.

Use-Cases and Market Size

We’ve split the market size here into two categories: attention training for people with ADHD (like NeuroPlus), and attention training for inducing flow state (like Mindset).

ADHD

For a given year, we can estimate this market size by combining a total addressable market scaled for market penetration with the price of the hardware and annualized cost of a subscription. 6.7M children in the United States have been diagnosed with ADHD, so we use this as the TAM in our calculations. We use NeuroPlus’s price point of $100 for the hardware, and a 12 x $30 / mo. = $360 annual subscription cost. We estimate that in 2025, the American market for ADHD-targeted attention training will be $113,000,000. In 2003, there was over $2B of U.S. spending on ADHD medication, so the ceiling on this market is high.

Flow

Given the ubiquity of using headphones to help focus, we assume for this calculation that headphones will be the most common form-factor for focus enhancement. As such, our starting point is that the smart headphone market is expected to be $0.995B in 2018 and $2.825B by 2022. In 2016, Bose had 8% of wireless headphone sales. We’ll assume that this market share stays constant. A pair of Bose QC35 headphones cost $350, so using the 2018 figure from above, we can estimate that Bose sold roughly 227,430 headphones in 2018. In 2022, that would mean 645,700 headsets sold assuming constant market share. With linear growth, this would grow to 960,700 Bose headphone sales in 2025. We assume the size of the Bose market represents the upper bound for the total number of headphones that will incorporate neurofeedback features by 2025 (including and in addition to Mindset). We use an exponential curve to model the growth of neurofeedback headphone sales from 2018 (estimated at 5,000) to 2025 (estimated at the upper bound of 960,700). Using this as our model, we estimate that in 2025 there will be $269,000,000 in neurofeedback headphones sold for the purpose of more easily entering flow and staying focused during productivity sessions.

Neurofeedback for Meditation

Fiction

Every morning, you wake up and tell yourself with stern-voiced and earnest conviction that when you come home this evening, you’ll write another page of the short story whose idea was seeded months ago by a chance interaction on the street. Every night, you come back from work carrying a boulder’s weight of tension in your shoulders, and the creative in you sits cowering in his corner, terrified of the stress and refusing to be coaxed out. Tonight is no different: you walk in the door, take your backpack off, sling it around and let it slam down on the floor. Every morning, your glance at your laptop is loving and longing, wishing for the chance to sit down and have a conversation with a blank screen, mediated by keys. Every night, with this one as no exception, your eyes seem to have the same magnetic polarity as your computer: by a mysterious cognitive law of physics, you can’t bring yourself to look at it. The only escape from this internal battle is to sit down on your couch. You close your eyes, wishing that energy and motivation would return to bring you back to your early-morning fervor. Didn’t you hear on a podcast that meditation can help clear the head after a long day? Wait—you still haven’t opened that meditation headband your mom curiously gifted you for your birthday three months ago. You dig it out from under accumulated magazines and daily material acquisitions and follow the instructions for set-up. A little while later, after fumbling around through the on-boarding in your tired state, you thank yourself for purchasing such a well-crafted comforter as you lay back with the headset on and the app open, ready to give it a try. Thirty minutes later you emerge and feel strangely refreshed. Tonight, you decide, you’ll sleep—but tomorrow, you have a new approach to tackle that tension and maybe, just maybe, you’ll wind up in an invigorating tango with a word processor, bringing that street-encounter to literary life.

• • •

In a similar vein to its application to attention, EEG-based neurofeedback paradigms can be applied to meditation as well.

Muse

  • Medium of innovation: Integrated
  • Device-type: Record
  • Form-factor: General Headset
  • Effect-type: Feedback

The major player in this space right now is Muse, built by InterAxon. The Muse is a $200 headband with EEG sensors and comes with a companion app to help users meditate more effectively. The app delivers sound to a user through their headphones and uses the real-time EEG signal to determine whether or not a user is in a meditative state. The app will change the sounds based on the EEG signal. Muse offers the Muse PRO software to professional therapists and meditation guides for ~$35 / mo. With the subscription comes access to Muse Connect, a SaaS platform for using Muse to assist with a professional practice. This subscription also includes a reduced price for practitioners’ clients who purchase the headset as part of a referral program, in addition to access to case studies, best practices, and more. Muse also has a developer program where developers can gain access to raw EEG data from the headset in order to use it for their own applications or for research.

Takeaways

  1. One of our team-members tried the Muse a couple years ago, and they were neutral-to-negative on the experience of the neurofeedback. Two important caveats are that a) the Muse and its software have likely improved since then, and b) our team-member had no guidance (and therefore lower motivation to keep trying). This latter point may, hypothetically, explain why Muse is marketing the device heavily through meditation guides and therapists: they might be finding that individual users aren’t using the product properly/consistently.
  2. This insight is applicable to consumer neurofeedback as a whole: neurofeedback inherently takes time to work, and this means that users will have to use the products for a while sans value add (note the similarity to the exercise, dieting, and broader meditation industries). That’s a big ask to make of a user, and Muse’s way around this is to use another human—the professional meditation guide or therapist—as a forcing function. NeuroPlus takes a similar approach with the parents of children with ADHD. This contrasts with Mindset, whose product inherently adds instantaneous value by playing music, regardless of whether the neurofeedback actually works. While Mindset will only succeed in the long-run if the neurofeedback succeeds, the inherent value should make it easier for users to try out Mindset for a sufficiently long period to see improvements.
  3. Control devices like CTRL-kit or various Commoditized EEG applications have immediate value.
  4. The meditation and self-care markets are rapidly growing (more on this below), so this could be a promising opportunity area in the sense that people are actually taking the time to use meditation apps like Headspace and Calm, which require repeated usage to work. What are the success factors for these apps? How much effort do they require of the user? Why are users coming back? How long does it take for users to perceive the value-add? Perhaps the answers to these questions will be informative for neurofeedback products.
  5. Neurofeedback products contrast with neuromodulation products like Nervana and Thync (to be discussed in Volume IV), which are “on/off” in that the user just has to turn them on in order to receive value from the product, whereas neurofeedback products take time. It’s important to consider the psychological impact of on/off technologies. A 2017 paper by Weible et al. reported on an experiment where meditation-like brain states were switched on and off in mice using a neural interface. When these brain states were on, the mice showed behavior consistent with reduced anxiety. Extrapolating into the far future, neurotechnology could conceivably turn many things we currently have to work for into “on/off” experiences; we think it’s important to begin investigating the psychological and cultural impacts this shift might cause.

Use-Cases and Market Size

We tailored this projection to Muse’s current business model of selling both direct-to-consumer and through professional meditation guides and therapists. There are 2450 meditation studios/centers in the U.S., and we estimate three professionals per studio. The number of behavioral therapy practitioners is ~100,000. Summed, these give us an estimate for the number of professionals who might purchase subscriptions to Muse PRO.

There are conflicting reports on the size of the meditation market: according to one source, 18M adults in the US (8%) meditated in 2012. According to another, only 9.3M adults (3.7% based on 2017 population) in the US meditated during the year-long period covering parts of 2016-2017. We’ll take the conservative approach and use 9.3M as our estimate for the number of meditators in the US right now (if the number of children and teenagers who meditate is non-trivial, then this is certainly an underestimate).

In 2017, there were 1000+ meditation apps available, which conjointly with websites and online courses generated $100M+ in revenue. The total meditation market was $1.21B in 2017, and is expected to have 11.4% average annual growth to $2.08B by 2022. There seems to be big growth in meditation app uptake. Calm had MAU that grew 81% YoY in 2017-2018; self-care app installs are up 36% YoY, and consumer spending in the top 10 self-care apps was up by 40% YoY.

To calculate how many digital meditation app users there are, we divide the market value for apps by the total market value: $100M / $1.21B = ~8.3%. This is probably an overestimate, since many meditators don’t pay for meditation. Therefore, if we’re going to use this as a proxy for figuring out the number of meditators, we need to scale the denominator accordingly. We estimate that the number of paying meditators is only 25% the number of total meditators, so we divide 8.3% by 4 to estimate that 2% of total meditation users use digital meditation apps. Finally, multiplying the 9.3M meditators of 2016-2017 by 2%, we arrive at 186,000 digital meditators in 2017 (since our math is loose, we’re comfortable removing the ambiguity of “2016-2017” from our estimate).

As described above, digital meditation is growing very quickly; hence, we’ll assume a 20% YoY growth sustained through 2025. All told, we calculate there will be ~666,500 digital meditators in 2025, which seems a sane estimate (only 7% of the 9.3M adult meditators in 2016-2017).

Finally, we scale this by market penetration and account for Muse’s business model to yield our final estimate of a $30,280,000 market in 2025.

Neurofeedback for Sleep

Fiction

You read about empathy often these days, and normally you think you’re fairly decent at it. You frequently imagine yourself as your waiter when you dine out with your colleagues, and act in a way you think will make the interaction meaningful and invigorating. You read competing views on political topics and feel torn by testimonials at odds with each other. Your empathy has a hard limit, though: those so-called “morning people” are full of it. Mornings are Atlassian at best, Sisyphusian at worst. You’re a different person for those 45 post-wakeup minutes than for the rest of the day. Your eyelids experience gravity more strongly than anything else, and your soul feels destined for the underworld. Mornings are, unequivocally, the worst. Two kind and clever colleagues of yours became tired of your morning mood and pitched in to purchase a headband that supposedly helps improve your sleep and your wake-up experience. That was two weeks ago. No, maybe three? Hold on a second…you’ve only been awake for five minute and you’ve been thinking about all of this—that never used to happen! Coherent thoughts at this hour? Unheard-of. You roll out of bed lithely (unprecedented) and open up your phone, checking your sleep stats. The graph is moving slightly, but definitively, upwards. Well, you think, I suppose I have an extra 30 minutes to kill, now. You glance over at the waist-high stack of books in the room’s corner. Might as well…

• • •

Sleep problems are ubiquitous, and as with attention and meditation, the underlying troubled system is the brain. Therefore, sleep is a prime candidate for neurofeedback using EEG and other biosignals.

Dreem

  • Medium of innovation: Integrated
  • Device-type: Record
  • Form-factor: General Headset
  • Effect-type: Feedback, User Characterization

Dreem, one of the leading companies using neurotech to improve sleep, estimates that across Europe and the U.S., 1/3 of the adult population has poor sleep quality. Dreem is a $500 headband that contains EEG sensors, an accelerometer, and a pulse oximeter to measure blood oxygenation. With these biosignals, Dreem uses algorithms and a companion app to add four types of value to users who wear the headband while they sleep: they fall asleep faster, get deeper sleep, wake up more refreshed, and can analyze their sleep over time and therefore improve it. Users wear the headband at night and can check their sleep stats in the morning on their phone.

Takeaways

  1. Among Dreem’s four discrete value propositions, three require no effort from the user: 1) to fall asleep faster, the headset provides audio cues. 2) Similarly, audio is used to facilitate deep sleep. 3) Dreem induces a gentle wake-up by playing the user’s alarm at different times depending on their sleep stage. Achieving the 4th value proposition of long-term sleep improvement, however, requires the user to consistently check in with the sleep data collected by the headset, and compare this to their lifestyle; ultimately, if a user wants to benefit from this information, they have to enact changes in lifestyle themselves. This duality of value proposition—effortless and effortful—probably works to Dreem’s advantage since even for users who don’t put in the effort, the device can still be useful.
  2. 7/60 reviews on TrustPilot complained about the comfort of the Dreem device. Discomfort will reduce the addressable market for Dreem and any other head-worn consumer neurotech.
  3. The Dreem companion app features a Sleep Score that characterizes how well a user slept. Referring to this score, one testimonial from their website reads, “It’s very addictive! It’s very interesting to see the scores of the night.” Quantitative self-improvement can become addictive—what are the ethics around using biosignals as the quantitative value that causes addictive usage behavior, as opposed to external signals like a score in a video game?
  4. Dreem offers a high-quality white paper about the science behind their product. The paper contains information about how the biosignals are processed, where and how Dreem uses algorithms, and the efficacy results. In our view, this ought to be the gold standard for articulating the science behind a neurotechnology product. It has ethical value, and it’s also a smart business decision: customers will be more comfortable using the product, investors will be more comfortable investing, and influencers will be more comfortable influencing.

Use-Cases and Market Size

The total addressable market for sleep products is large: in the United States, 131M people have sleep problems. This TAM should be scaled back by a factor representing the proportion of people who can sleep comfortably with a head-worn device. To do this, we use the fact that 7/60 reviews on TrustPilot mentioned discomfort. We round this up to 10/60 to make the clean estimate that 1/6 people will find the headset too uncomfortable to sleep with. This would shrink the TAM to 109.2M people.

We estimated market penetration ad-hoc based on our sense of what’s reasonable. We suppose that 10,000 Dreem units are sold in 2018, and 1,000,000 units are sold in 2025. We also assume the ASP of this product will decrease over time from $500 to $200. Our estimate for Dreem’s wearable sleep enhancement market in 2025 is $200M. Assuming that other companies come along with unique hardware and software innovations, Dreem’s market will be only a subset of the total size of the neurotechnology-enhanced sleep market.

Conclusion

In Volume III of our five-part series on Consumer Neurotechnology, we took a look at neurotech that leverages neurofeedback to drive value to users. In Volume IV, we’ll explore consumer technologies that directly modulate the human nervous system. Stay tuned!

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Neurotech
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