What $200 million in crypto means for BlackRock Neurotech

Cryptocurrency company Tether has announced that it will invest $200 million in BlackRock Neurotech to acquire a majority stake in the brain-computer interface (BCI) company.

According to Reuters, “The $200 million deal, closed on Friday after months of due diligence, values ​​BlackRock Neurotech at about $350 million, with Tether as its largest shareholder.”

As a neurotechnology company, Blackrock is known for its longevity, self-management, and heavy reliance on public funding to drive product development. Prior to this, they had only underwritten $10 million in VC in 2021. The deal represents a major change in the company's history.

Here's a brief history and some educated guesses about what this deal means for the company and the sector going forward.

Who is Blackrock?

For those new to Neurotech, Blackrock is more than just a BCI startup.

As the “oldest modern” BCI company, the company boasts both the largest number of implant patients (over 40) and the longest implant interface in the world.

The brand is built on the pioneering Utah array developed by Richard Norman, now also known as the “Neuroport electrode.” First commercialized in 1997 as Bionic Technologies and then as Cyber ​​kinetics Inc. in 2002, after initial capital and preclinical research at Brown University, he received his two FDA approvals in 2004. I got my first one for him. The project became known as his BrainGate, published initial results from a handful of hospital research partners, and evolved into his BCI research, the longest running in the world.

According to the company, in 2008, “BlackRock, armed with funding from investors in Europe and the Far East, acquired Utah-based Cyberkinetics Neurotechnology Systems, another University of Utah spinout. Gerhardt said BlackRock broke even after nine months, and its revenue rose from about $700,000 in the first year to $3.5 million in the second year. ”

The business has grown to consist of federal research grants, direct sales to university hospital systems, and research and development partnerships with private companies like Battelle. They rebranded to Blackrock Neurotech in 2021 as part of their first private funding round, $10 million in funding from Christian Angermayer, Peter Thiel, and Tim Sievers.

Where does the money go? people.

Reuters reports that the injection will “primarily fund the commercialization and deployment of BlackRock Neurotech's technology.”

BlackRock primarily sells its Neuroport Array System, priced at more than $500,000, to dozens of hospitals, which themselves use government funds as overhead for research grants to buy the technology. are paying for. The companies' private sector partnership agreements, while large in size but small in number, could represent a strategic relationship for future commercialization plans.

In 2021, the FDA granted Blackrock Breakthrough designation to the BCI system known as MoveAgain. Once approved by the FDA, the company's plans to sell it as a home medical device will require a concerted promotion, with heavy competition from Synchron, Onward, Paradromics, and Neuralink for the rest of the decade. very likely to be faced. .

Therefore, their priority may be the human capital needed to build a world-class commercial business. in particular:

• Raises: Glassdoor employees often say they're underpaid. In the early days of the market, when BCI research was an exploratory niche market and public grants accounted for most of the revenue, pinching pennies made strategic sense. But now, with many established BCI companies vying for engineers, and others likely already established, it's a good time to start planning your talent pool.
• New Commercial Hires: BlackRock has made small cuts of about 15 people since last summer, but this appears to be due to natural turnover rather than preparation for this latest funding. At the time of this announcement, Blackrock was actively recruiting for research sales as well as his team for grants. I am soon looking to hire an experienced commercial leader with medical technology and implantable device sales experience, as well as strategic partnerships to build new channels.

Where does the money go? Products.

BlackRock's technology is the most widely implanted BCI, but one of the more invasive in the current climate. Still, the array is durable. Next week marks nine years since Nathan Copeland underwent the world's longest BCI implant.

The company's MoveAgain system has undergone significant research and is inching toward FDA approval, but the company has already developed its next-generation BCI, Neuralace, which will be available as a research tool this year or next. is. It seems likely that Neuralace will be the next product. Long term, BlackRock has mentioned visual and auditory implants in numerous media interviews.

With a stable grant-funded approach, their broader pipeline appears to be full. BlackRock has been involved in extensive research and development over the past decade, including over $13 million in optogenetic interfaces, high-density carbon fiber electrode arrays, and various interface components funded through his NIH grant. has been carried out. DARPA is funding more than $3 million in additional exploratory research, including restoring circadian rhythms, and the Veterans Administration is chipping in nearly $5 million as well.

Where does the money go? Acquisition.

In 2022, BlackRock acquired a stealth neural interface company called MindX, which was founded in Maryland in 2017 as a spinout from Johns Hopkins University's $200 million DARPA project. The acquisition price is unknown, but MindX raised $3.65 million in seed and Series A funding prior to the acquisition. According to Catalio Capital, “The company is building a see-and-think interface that gives users spatial control over digital objects on a display.”

What does that say about their needs and wish lists? In general, BCI companies are looking to expand their capabilities from VR to wearables for future at-home patients, to niche technology labs with potential acquisitions, to research teams. Compatible custom software and, of course, a growing menu of exciting, if not essential, investment opportunities to consider. , manufacturing. I previously noted that both Synchron and Precision have announced large-scale in-house manufacturing capabilities as long-term strategies.

Will this new kitten prompt BlackRock to acquire another of today's BCI companies? That seems unlikely for several reasons. First, there are the competing priorities listed above. $200 million is not what it used to be. Second, we have a robust and diverse product roadmap. And finally, the other companies in the competition (and their respective investors) are very bullish on this market upside, so they are unlikely to sell too soon.

Why does it cost so much?

After raising funding in 2021, co-founder Florian Saltzbacher said: “We have achieved this by serving customers in the research community and running a revenue-oriented business with the support of friends and family. We've accomplished everything, but essentially we've come on our own. Now imagine where we are.” We closed our first institutional investment round, so we did well. ”

Notably, this was several months before Neuralink's $205 million Series C in July 2021, and about 18 months before Synchron's $75 million Series C. Given the suddenly crowded field now, being well-capitalized is both a talent strategy and a guarantee for the market. Risks – world wars, economic rivalries, biosecurity threats, etc.

The broader intrigue, and perhaps the most interesting aspect of this story, is not just the amount, but the who's who.

one commenter quipped on my linkedin feed. “Finally… cryptocurrencies will contribute something useful to society.”

So who exactly is this financier? According to Reuters, “Tether issues a cryptocurrency pegged to the dollar, which has grown rapidly in recent years, reaching $100 billion in circulation in March. The token is denominated in dollars. Tether has made approximately $1.7 billion in venture capital investments, raising funds from profits and keeping reserves intact.

The company's numerous projects include Tether Evo, which is “at the intersection of innovation and human potential, dedicated to propelling humanity into a future where technology and human capabilities converge in unprecedented ways.” will appear.

What does this mean for Neurotech?

Let's avoid speculation about the intersection of cryptocurrencies and brain-computer interface technology and focus on today's neurotechnology market.

It's hard to imagine a world in which this particular deal would materialize without Elon Musk and Neuralink exciting the tech and financial worlds over the past decade. High-flying global visionaries with billions in cash and no limited partners to appease are legitimately interested in exploring the cognitive frontiers of humanity, not just chasing trends. If so, what does that mean for this growing universe?

All in all, this is more than just noise, but it's also not a complete signal. Every deal depends more on the specific player than on the type of organization.

• Veteran experience meets new money: This deal is unique not only for the funder but also for the startup. BlackRock has already built a reputation and legacy. The fact that the company was willing to sell a large portion of its business to investors who did not seem to understand the nuances of medical device commercialization but believed in the company's proven traction, vision, and leadership. Hopefully, micromanagement won't be an issue.
• Private Equity: Traditionally, this investor class focuses on large, established businesses with repeatable redemptions and scalable models. While BCI is not, this technology is foundational for future use cases beyond movement disorders. So while there is no shortage of PE investment opportunities in the healthcare space (and things can change), companies that are interested and can write bigger checks (such as ARCH) are likely to have immediate financial strength. You may end up competing with a new entrant.
• Venture Capital: $200 million is a big check. Could this deal incentivize smaller crypto tycoons to become smaller neurotech investors? Traditional venture capital firms would typically ignore this external competition, but finding good early-stage neurotech deals isn't always easy. Most of all, I'm interested to see if young neurotech funds use this deal as inspiration to secure cryptocurrencies rather than seeking backing of funds from traditional LPs.
• Studio Model: I was skeptical whether neurotechnology would be a good fit for the enterprise builder model, given the decades-long time to ROI and the significant R&D costs of building a new BCI. But given the crypto world's interest in cutting-edge science/technology, humanitarian self-awareness, and, in some cases, apparently deep pockets, the next Tether (or Tether's next investment) may require a broader strategy. It may make more sense to establish a commitment. For this industry, it's more like a centralized research organization.
• Recruiters, medical technology executives, and other neurotech startups: This field continues to heat up. Given the size of this deal and the general state of private capital, we expect continued inbound interest from non-traditional sources. The value of proven expertise and operational experience is increasing. I don't think other treatments, such as transcranial magnetic stimulation or digital biomarker platforms, have as much outside influence as BCI, but the world of neurotechnology is converging and evolving by the week, so I'd like to hear more information. Please pay attention to.