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C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 6 , 2 0 1 6
NEURABLE
Management
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develop a system to allow children with severe cerebral palsy to take cognitive assessment tests using only their brain waves. Users will wear headsets embedded with sensors that record brain activity, wirelessly transmitting data to a computer loaded with the artificial intelligence software that interprets the brain activity and signals devices on how to respond. Neurable’s business plan calls for it to start generating revenue by the end of next year, and be at $30 million in 2018 and $90 million in 2020. “This is one of the most interesting early-stage companies I’ve seen in some time,” said Adrian Fortino, manager of the Ann Arbor office of the Houston-based Mercury Fund.
‘I want one for Christmas’ The three-day Rice University event is considered the best student business plan competition in the U.S., with 400 submissions being winnowed down to 40 presentations. But the big news for Neurable was that the Houston-based OWL Investment Group, made of some 40 angel investors nationwide, including some of the judges at the Rice event, committed to taking a big chunk of a seed round of $2 million the company is raising and is about to commit more, according to Robert Winter, the group’s managing member and a judge at the Rice event. “It’s sure to be in excess of that,” he said of the $285,000 the group has committed so far. The same day Neurable began the pitch contest in Houston, it was also in a pitch contest at UM’s Center for Entrepreneurship, the culmination of a semester-long startup competition for student-founded businesses. Neurable was one of three finalists, but the $15,000 prize went to Woodside Distributors, a distributor of home improvement, sports, outdoor, automotive and other products made by large brand names. Evan Ufer, a partner in the Ann Arbor venture capital firm Plymouth
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Co., mentored Neurable during the semester. “From the start, I thought Neurable was really interesting and an exciting brain-computer interface technology. Based on cutting-edge research, it allows entirely new forms of interaction with the world based on recording and interpreting brain activity,” Ufer said. Plymouth Management will not be an investor in Neurable because it invests in more mature companies. “Ramses and the team did a lot of work early on to determine that while there is an obvious and longer-term play in the medical industry, there is likely a faster and more cost-effective path to market in consumer-based augmented reality, virtual reality and gaming markets,” Ufer said. Alcaide said that while it makes business sense to go after the gaming market first, his inspiration for the company is his uncle, Margarito Aguirre, who lost both his legs in a trucking accident. “For a long time, I’ve wanted to dedicate my life to creating technologies for people with disabilities,” Alcaide said. Winter is a venture capitalist based in Menlo Park, Calif., and a Rice alumnus who has been a longtime judge at the business plan competition. Winter said he saw Neurable present at the first day of the competition and was impressed. Two days later at the finals, where he was a judge, he wanted something more from Neurable than another showing of a video the company had made showing a Lego car moving across a tabletop. “I’m a big believer in show-andtell,” he told Crain’s. He asked one of his fellow judges and OWL investors, Mitra Roehr, if her 14-year-old son, Jack, who was in the audience, could help with a fresh demonstration. Alcaide took Jack backstage, hooked him up to his prototype device, spent a few minutes teaching him how to control his thought process and — voila! — Jack was able to drive a motorized Lego car by thinking about what he wanted it to do. Alcaide shot a video to show the judges and audience members. During a Q&A later, as Winter re-
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counted to Crain’s: “I said, ‘What do you think, Jack?’ “He said, ‘It’s cool, I want one for Christmas.’ “If this works the way it looks like it could, it’ll be a big hit. A big hit, and that’s what’s attracted us,” said Winter, who, along with two other OWL members, visited Neurable’s headquarters after the Rice event. He said he’s looked at 10,000 deals in his career, and Neurable is right up there among the most exciting. “It’s too early to know for sure how the company will do, but they have the right ingredients,” Winter said.
Star turn at VC event Neurable, which employs six, was also the star of the Michigan Growth Capital Symposium in Ypsilanti on May 17. The event draws about 400 venture capitalists, angel investors and service providers from around the U.S. to hear pitches for equity capital from early- and growthstage Midwest companies. Hundreds of would-be investors packed the large meeting room for the presentation by Alcaide, who is finishing up his Ph.D. in neuroscience at UM, and Michael Thompson, the vice president of business development who is an MBA student at UM’s Ross School of Business. Alcaide is a native of Mexico who moved to the U.S. at age 5. He got his undergrad degree in electrical engineering from the University of Washington, and while in graduate school at UM, he founded and was CEO of Pharo LLC, a software development firm he left to found Neurable last year. He has had grants from the National Science Foundation, the Ford Foundation and NASA. Neurable also was the recipient in January of a $50,000 NSF Innovation Corps grant, which helps researchers commercialize their technology. The grant funded about 140 interviews around the U.S., including video gamers, video game executives, clinicians and those with disabilities to help Alcaide determine potential markets and how to prioritize them. Thompson got his leadership skills in the U.S. Army following an ROTC scholarship at the University of Richmond. He did one tour of duty in Afghanistan as a first lieutenant in 2010 and left the military as a captain in 2015 to enroll at UM. The spectators at the symposium filled every seat and stood shoulder to shoulder around the walls. Longtime attendees said it was the biggest crowd they had ever seen for a pitch. “I don’t recall any company here generating a buzz like this in years,” said Jonathan Murray, a partner in the Ann Arbor office of Pittsburgh-based Draper Triangle Ventures. “It was certainly the biggest buzz in the 10 years I’ve been going to the symposium.” And when Neurable held an open house later that week, investors flocked to its headquarters in the Ann Arbor Spark Central incubator to get a demonstation. Gabe Karp, a partner at Detroit Venture Partners, a VC firm co-founded by Josh Linkner, Brian Hermelin and Dan Gilbert, was one of those VCs. He’d visited Neurable the week before the symposium, having gotten
a tip from Invest Detroit, a nonprofit that invests in local startups, that this was a company to watch. “This is groundbreaking stuff,” said Karp. “The ability to move something with your mind? There’s no question this could be world-changing." He said the mood at the growth capital symposium was “ ‘Holy s---. This is amazing.’ ” With a few minutes of training, Karp was able to use Neurable’s brain cap to drive a motorized Lego car in front of his fellow VCs. Impressed as he was, he said a potential investment by his firm requires more vetting, and that a lot of work needs to be done before the technology is ready for market. The prototype requires the user to have his or her head gelled with a mixture made from salt, water and a thickening agent used in shampoos to improve electrical conductivity. Alcaide said he hopes to use the $2 million seed round he is raising to upgrade his equipment to a dry technology now being developed, which he says is a requirement for market acceptance. “No one is going to want to get their hair gelled just to play a game,” he said. “I’ve met with them and want to continue to meet with them,” said Karp. “They’re earlier stage than what we’d typically invest in, but it’s so cool.” Murray, of Draper Triangle Ventures, arranged a demonstration of Neurable’s gaming capabilities the week after the open house for other area VCs. Though not a gamer himself, he was impressed that after donning the Neurable device, he was able to shoot an arrow during a game just by thinking about it. “Clearly they’ve created something with scientific interest. The question is: Can they create something with market value?” said Murray. “Where does Neurable fit in the gaming world? I don’t know enough about the environment to know the answer. But it’s certainly promising.” Michael Psarouthakis, a former vice president at the Michigan Economic Development Corp. who is now assistant director of the Venture Center at the technology transfer office at UM, has been advising Neurable. He says the company could raise $20 million now if it wanted. But he says it needs only $2 million to hit its next development targets, so it makes sense to wait until later, when the company is worth more, before raising a larger round. “I’m leaving to meet with a big investor now.” he said. “I can’t tell you who it is, but it’s big. I get a call a day from investors wanting to know more. There’s deal heat. There’s excitement. The technology has such a big wow factor, everyone wants to see it.” Tom Henderson: (313) 446-0337 Twitter: @tomhenderson2
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