What $200 Million In Crypto Cash Means For Blackrock Neurotech

Cryptocurrency company Tether announced an investment of $200 million into Blackrock Neurotech to take a majority stake in the Brain Computer Interface (BCI) company.

As per Reuters, “The $200m deal which closed on Friday after several months of due diligence, values Blackrock Neurotech at around $350 million, making Tether its largest shareholder.”

As a neurotech company, Blackrock has been known for their longevity, bootstrapping, and heavy reliance on public funding to drive product development. Prior to this they’d only taken on $10m in VC in 2021; this deal represents a seismic shift in the company’s history.

Here’s a brief history followed by some informed speculation about what this deal might mean for the company and the field moving forward.

Who is Blackrock?

For those new to Neurotech, Blackrock is not just another BCI startup.

As the ‘oldest modern’ BCI company, they boast both the most implanted patients in the world (over 40) and the longest-implanted interfaces.

The brand is built on the pioneering Utah Array, now also known as the “Neuroport Electrode,” developed by Richard Normann. It was first commercialized as Bionic Technologies in 1997, then as Cyberkinetics Inc. in 2002, receiving the first of two FDA clearances in 2004 after initial capital and preclinical research at Brown University. The project became known as BrainGate and published initial results from a handful of hospital research partners, on way to becoming the longest running BCI study in the world.

In 2008, as per the company, “Armed with financing from investors in Europe and the Far East, Blackrock acquired Utah-based Cyberkinetics Neurotechnology Systems, Inc., another University of Utah spin-out. Blackrock broke even after nine months, according to Gerhardt, and jumped from about $700,000 in revenue its first year to $3.5 million its second year of operation.”

The business grew to consist of federal research grants, direct sales to academic hospital systems, and R&D partnerships with private companies like Battelle. They rebranded to Blackrock Neurotech in 2021 as part of their first private capital raise, a $10m round from Christian Angermayer, Peter Thiel, and Tim Sievers.

Where Will the Money Go? People.

Reuters reports the infusion will “primarily fund the commercialization and roll-out of Blackrock Neurotech’s technology.”

Blackrock has primarily sold their Neuroport Array system, priced north of half a million dollars, to several dozen hospitals who themselves use government funding to pay for the technology as an indirect cost in their research grants. Their private sector partnership contracts, larger but fewer in number, could represent strategic relationships for future commercialization plans.

In 2021, the FDA granted Blackrock Breakthrough designation for their BCI System, known as MoveAgain; the company’s plans to market this as a medical device for at-home use, once FDA clearance comes through, will require a concerted sales push that will very likely face heated competition over the rest of this decade from Synchron, Onward, Paradromics, and Neuralink.

Thus, their priority may be the human capital required to build a world-class commercial operation. Specifically:

• Pay Raises: A common refrain from employees on Glassdoor is that the pay is too low. Pinching pennies makes strategic sense during early market days, when BCI research was an exploratory niche and public grants dominated revenue. But now, with numerous well-established BCI companies fighting for engineers, and another spate of companies that are likely already being formed, it’s a good time to plan for retention.
• New Commercial Hires: Blackrock underwent a small reduction in size of about 15 people from last summer, seemingly due to organic churn, rather than in preparation for this financing. At the time of this announcement, Blackrock was actively hiring for their Research Sales team as well as Grants. I’d soon expect roles for experienced commercial leaders with med tech and implanted device sales backgrounds, as well as strategic partnership hires to forge new channels.

Where Won’t the Money Go? Product.

Blackrock’s technology is the most widely implanted BCI, but one of the more invasive of the current landscape. And yet - the arrays have been durable; Nathan Copeland, with the world’s longest implanted BCI, is going on 9 years next week.

While their MoveAgain system inches towards an FDA Clearance following their pivotal study, they’ve already developed their next-generation BCI, “Neuralace,” which they expect to become available as a research tool this year or next. Neuralace seems likely become their next commercial product. Longer term, Blackrock has mentioned vision and auditory implants in numerous media interviews.

Their broader pipeline seems full, due to a steady grant-funded approach. Blackrock has been running extensive R&D in the background, funded through over $13 million in NIH grants over the last decade for optogenetic interfaces, high-density carbon fiber electrode arrays, various interfacing components, and more. DARPA has funded over $3 million of additional exploratory work, such as restoring circadian rhythms, and the VA has pumped in nearly $5m as well.

Where Might the Money Go? Acquisitions.

In 2022, Blackrock acquired a stealthy neural interface company called MindX, originally founded in 2017 in Maryland as a spinout of a $200 million DARPA project at Johns Hopkins. The purchase price was unknown, but MindX raised $3.65 million in Seed and Series A funding before the acquisition. As per Catalio Capital: “The company is building a look-and-think interface that allows users to control digital objects spatially on displays.”

What does that hint about their needs, or their wishlist? In general BCI companies have a growing menu of exciting, if non-essential investment opportunities to consider, from VR to wearables for their future in-home patients, niche tech labs with acquihire potential, custom software to cater to research teams, and of course, manufacturing. I’ve pointed out previously how both Synchron and Precision have announced large-scale in-house manufacturing capabilities as a long term strategy.

Could this new kitty lead Blackrock to buy another one of today’s BCI companies? It seems improbable for a few reasons. First, the competing priorities listed above; $200 million isn’t what it used to be. Second, the robust, diverse product roadmap. And finally, the other companies entering the race (and their respective investors) are so bullish on the upside of this market that selling too soon is not likely.

Why So Much Money?

After their 2021 fundraise, co-founder Florian Solzbacher said, "We have achieved all this by running a revenue focused business servicing our customers in the research community and supported by Friends & Family – but in essence we were bootstrapped. Now imagine where we are able to take things having closed our first institutional investment round.”

Notably, this was a few months before Neuralink’s $205m Series C in July 2021, and about 18 months before Synchron’s $75m Series C. Now, given the suddenly crowded field, being well-capitalized is both a people strategy and an assurance against market risk - global wars, economic hostilities, biosecurity threats, and more.

The broader intrigue- and arguably the most interesting aspect of this story - is not just how much, but who.

As one commenter quipped on my linkedin feed: “Finally... Crypto contributes something useful to society.”

So who exactly is this financier? As per Reuters: “Tether issues a dollar-pegged cryptocurrency which has grown rapidly in recent years, hitting $100 billion in circulation in March. It says that the tokens are backed up by dollar-denominated reserves. Tether has made approximately $1.7 billion in venture capital investments to date, using funding from its profits, while leaving the reserves untouched.”

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

What does this mean for Neurotech?

Let’s sidestep speculation about the intersection of cryptocurrency and brain computer interface technology, and focus on today’s neurotech market.

It’s hard to imagine a world where this specific deal happens without Elon Musk and Neuralink ginning up excitement in tech and finance circles for the last decade. If lofty global visionaries with a billions in cash and no limited partners to appease are not just trend-chasing, but legitimately growing interested in exploring humanity’s cognitive frontier, what does it mean for this growing space?

Overall, it’s not just noise, but it’s not quite a signal either. Any deal depends on the specific players more than the type of organizations.

• Veteran Experience meets New Money: This deal is unique, not only due to the funder, but to the startup. Blackrock has built a name and a legacy already. The fact that they were willing to fork over the majority of their business to an investor who seemingly doesn’t understand the nuances of medical device commercialization, but trusts the proven traction, vision, and leadership of the company suggests, hopefully, that micromanagement will not be an issue.
• Private Equity: Traditionally this investor class focuses on larger, well-established businesses with replicable reimbursements and scalable models. BCI is not that, but the technology represents a foundation for future use cases beyond motor impairment. So while there are no shortage of PE investment opportunities in healthcare (which may change), those firms interested and able to write bigger checks, e.g. ARCH, could soon find themselves competing with deep-pocketed newcomers.
• Venture Capital: $200 million is a large check. Could this deal motivate smaller crypto tycoons to become neurotech investors at a smaller scale? Normally, traditional VCs would shrug off this outside competition, but good early stage neurotech deals aren’t always easy to find. Most of all, I’m curious whether younger neurotech funds will use this deal as inspiration to secure Crypto money, rather than seek traditional LPs to back their funds.
• Studio Models: Given the multi-decade time horizon to ROI and the steep R&D costs of building de novo BCI, I’ve been skeptical if neurotech is the right fit for a company-builder model. However, given the crypto world’s interest in frontier science/technology, humanitarian self-perception, and in some cases, their evidently deep pockets, it could make more sense for the next Tether (or, Tether’s next investment) to establish a broader strategic commitment to this industry, more akin to a Focused Research Organization.
• Recruiters, Med Tech executives, and other Neurotech Startups: The space continues to heat up; given the size of this deal and the general state of private capital, expect ongoing inbound interest from nontraditional sources. Proven expertise and operational experience is growing in value. While I don’t think other modalities, e.g. transcranial magnetic stimulation or digital biomarker platforms carry as much external clout as BCI, the world of neurotech is converging and evolving by the week, so stay tuned for more.