May 2015 issue
May 31, 2015 | As a sign that the investment climate for healthcare startup firms has undergone changes in recent years, several neurotechnology startups have exploited some new fundraising alternatives that were not available a decade ago. Some have turned to crowdfunding options as a way to supplement their startup capital.
Earlier this year, NeuroMetrix raised about $400,000 in an Indiegogo campaign that offered participants a Quell surface stimulation device for $199, a discount from the normal $250 price. The company also offered the option to own the very first Quell device made for $2500—it was quickly snapped up.
Another neurotech firm, Valencia Technologies, is pursuing an equity-based crowdfunding campaign to accredited investors as part of its effort to raise $30 million in startup capital for its subcutaneous stimulation system for hypertension. Unlike Kickstarter or Indiegogo campaigns, which take in donations from participants, Valencia’s program offers stock to investors who put up a minimum of $25,000.
Neither NeuroMetrix nor Valencia are putting all their eggs in the crowdfunding basket, though. Valencia hopes to raise about $5 million through crowdfunding, with the balance—$25 million—coming from more traditional institutional investors and VC firms. NeuroMetrix recently announced that it will raise $14.7 million—more than its current market capitalization—by selling 147,000 units on the NASDAQ Capital Market for $100 each. Each unit consists of one share of stock and 99 warrants for convertible shares at a price of $1.01 per share.
The company intends to use the net proceeds of the offering to fund the commercial launch of Quell, an over-the-counter wearable pain relief device that uses proprietary noninvasive neurostimulation technology to provide pain relief. The device is designed for people with conditions such as diabetic nerve pain, low back and leg pain, fibromyalgia, and pain associated with osteoarthritis. The wearable device is lightweight and can be worn during the day while active, and at night while sleeping. It has been cleared by the FDA for treatment of chronic pain without a prescription. Users of the device have the option of using their smart phone to track and personalize their pain therapy through the Quell Relief iPhone app.
Another neurotech startup hoping to follow in NeuroMetrix’ footsteps is Cur, a San Francisco firm developing a wearable TENS device for treatment of pain. Crowdfunding participants can receive one of the first Band-Aid-size devices for $149, about half of the final price. Unlike NeuroMetrix, however, Cur has not yet received 510(k) clearance for its device, causing some observers to speculate that the FDA may take a dim view of that thinly veiled marketing effort.
