Notes from the Open Loop

I’ve been editing a few podcast episodes and caught a few things I missed

I’ve been working on my neurotech money series for a few weeks and I am starting to lose the plot a bit. Tracking the entire transaction history of more than 500 companies is pretty ridiculous, and I keep finding ones I missed long after I have told myself I am finished. But it has been fascinating to do alongside recording my podcast, because the conversations and all the research compliment eachother. I work for myself, mostly as a recruiter for early companies, the pre-Series A kind that need real help but cannot yet carry a full-time hire, so I spend most of my week close to the part of the field where this all gets decided. I also spent a good chunk of my earlier career as a recruiter in and around finance, so I have a decent sense of what normal funding looks like. But neurotech (maybe medtech as a whole or even just life sciences) investment is a long and painful process, and all this transaction analysis and excruciating data enrichment had me realising they explained three conversations I had already on the podcast, without quite clocking at the time what those conversations were telling me.

All three were with people building or backing real things. And in different words they were each describing the same shift. For a long time, getting a device through the FDA felt like the finish line. It is not any more. Clearance is barely the halfway mark. The thing that now decides whether good neurotech reaches patients is whether there is a path to getting paid, and that path almost never runs where you would expect. The science tells you whether something works. It does not tell you whether it gets built.

The first conversation was with Daniel Manson, co-founder of Flow Neuroscience. I work with Flow, so I am not going to pretend to be neutral here. They got the first FDA clearance for an at-home brain stimulation device for depression. Mental health is one of the biggest markets in healthcare, and it is also the reason I give a shit about any of this in the first place, so you would expect the money to come running. It has been slower than that. Daniel put his finger on why. Nobody has worked out yet how to get a take-home neuro device to patients at real scale, so there is no example for everyone else to copy. He told me the old medical-device playbook has been explained to him plenty of times, and he understands it perfectly well. It just does not fit what he is building. The model he actually looks to is not another device company at all. It is how Eli Lilly built access for its weight-loss drugs, making it easy for the patient to get while keeping the doctor in the loop. When the closest working comparison for your brain device is a weight-loss jab, you can see why an investor who likes a tidy comparison might pause.

Daniel Powell, who founded Spark Biomedical, was coming at the same thing from the other side. Spark built a device that sits on the ear and stimulates a nerve to ease opioid withdrawal, and the effect is genuinely striking, the kind where he watched someone go from full withdrawal distress to calm in about half an hour. But as he put it, addiction tends to take all your patients' money away. The company depends heavily on getting that treatment reimbursed, and that is still being worked out, which is a gentle way of saying the cheques are not flowing yet. So Spark has steadily pointed the same underlying technology at a different problem, reducing blood loss during surgery, because hospitals and surgeons can pay for it in a way that addiction clinics simply cannot. He was open about the pull of that. The addiction work did not stop mattering to him. The money was just somewhere else, and a company has to keep the lights on. That is the whole argument of my series in a single decision. The science did not move the company. The available money did.

The third conversation was with Jordi Parramon, who spent years backing neurotech companies at one of the original specialist funds. When you have seen the problem from the investor's side of the table, across a lot of companies at once, you stop talking about single clever devices and start talking about the path a patient actually travels, and who pays at each step. The company he pointed me to was Cala Health, and they are a fascinating one. Cala makes a wristband that eases hand tremor in essential tremor and Parkinson's, no surgery, no implant, just a wearable you put on when you need it. It is good, it is cleared, and it has real evidence behind it. But the route that worked first was not a normal commercial one. The Cala device is covered by the Department of Veterans Affairs, given to eligible veterans at no cost, because the VA has both the patients and a very direct reason to pay for something that helps a veteran hold a cup of coffee steady. Jordi's point was that the win is not the device on its own. It is finding where that device fits a real patient journey, and who will actually pay for it there. The VA was a dot most people would not have drawn first. It turned out to be the one that paid.

Once you start looking at it this way, where the money comes from matters far more than how much of it there is. The part most people outside the field never see is how much of the hardest work is paid for by people who have nothing to do with ordinary medical-device investing. DARPA and the US Air Force are behind some of the serious ultrasound work. The Department of Defense funds brain injury research using light. The National Institute on Aging turns up behind early dementia and sleep companies more often than almost any private name you could name. And the VA, as Cala found, will quietly pay for a wearable that a cautious commercial insurer is still thinking about. This is money with no strings attached to ownership, going to exactly the companies and devices a careful investor would file under too early or too odd.

For a long time I told myself a neat version of all this, that proven companies get bought and promising ones get funded, and that was that. Spending this much time in the early end of the field has worn that down. Every company that gets bought for a fortune was once a fragile little bet that nobody was sure about, kept alive by someone willing to back it before the path was clear. The neat story is too neat. The real one is messier and more human, and it is mostly about who found their believer, or their unlikely payer, in time.

There is a lot more to pull on here, and it is where I am headed next. Part three of the series goes properly down the rabbit hole of who these investors actually are, how the same names keep circling the same companies, and what happens when a specialist fund quietly folds into a billionaire's family office. If that is up your street, follow along on the Substack and you will get it when it lands.

So is neurotech well funded? It depends entirely on what you count. Count only the clean venture rounds and it looks thin. Follow the money properly and it is stranger and a lot more alive than that, held up by defence budgets, government programmes, the VA, the odd grant, and a fair few founders quietly funding themselves. Money does not just keep these companies going. It chooses between them. And the founder I worry about, the kind I spend most of my week with, is not the one with weak science. It is the one with strong science who cannot find the unusual money in time, and runs out of road while the obvious money is still deciding whether the path looks familiar enough. Because the obvious money, as ever, arrives last.

Chay Carter is the founder of Carter Sciences, a specialist neurotech recruitment and advisory firm, and co-founder of Reccy Neuro, a neurotech market data and intelligence platform. The conversations mentioned here are from the Open Loop podcast. If you found this useful, share it with someone in the industry who would appreciate it.