Durham startup NeuroSpire has marketing on the brain
Published: April 14, 2013
NeuroSpire at a glance
Employees: More than 5
Business: Developed software for conducting neuromarketing studies that can be used with inexpensive EEG equipment. A company that buys an EEG headset and licenses NeuroSpire's software for $10,000 has what its needs to gauge consumer responses. NeuroSpire will analyze the resulting data for between $5,000 and $10,000 per study.
Financing: Bootstrapped plus $5,000 in prize money
By David Ranii - firstname.lastname@example.org
Jake Stauch, the 22-year-old brainiac behind Durham startup NeuroSpire, is bent on popularizing - and profiting from - the emerging field of neuromarketing by making it much more affordable.
For the uninitiated, neuromarketing involves measuring brain activity to determine emotional responses to stimuli such as a print ad or video commercial.
"It can measure your emotional responses in a way that is instantaneous and passive, so there are emotional responses you may net even be aware of and that you would be hard-pressed to be able to articulate in a survey or a focus group," Stauch said.
A neuromarketing study that uses EEG, or electroencephalography, equipment to detect brain activity reportedly can cost a company between $40,000 and $60,000, and Stauch says some studies can even reach $100,000 or more. But NeuroSpire offers marketers a mostly-do-it-yourself approach that costs significantly less.
Neuorspire has developed software for conducting neuromarketing studies that can be used with inexpensive EEG equipment - specifically, the Emotiv EEG neuroheadset, which sells for $750. A company that buys that headset and licenses NeuroSpire's software for $10,000 has what its needs to gauge consumer responses. Afterward, NeuroSpire will analyze the resulting data for between $5,000 and $10,000 per study.
Stauch (pronounced Stowk) was valedictorian at his high school outside of Charleston, S.C. and scored a perfect 2400 on the SAT test. He founded the company two years ago while he was a student at Duke University. He dropped out last year to devote full-time to NeuroSpire.
"I had basically checked out of Duke long before then," he said, "because the business had been a priority for at least a year before then."
The Triangle's largest advertising agency, McKinney, has been experimenting with neuromarketing with the assistance of NeuroSpire. To date it has conducted two studies that tested consumers' reactions to 30 different ads created in the past by McKinney and other ad agencies.
"I like it a lot," Chris Walsh, vice president and director of consumer and business insights at McKinney, said of NeuroSpire's technology. "I think we have uncovered some pretty interesting insights along the way ... It's a new kind of research that we will continue to experiment with and learn more."
"One of the things we are seeing consistently," Walsh added, "is that advertising that evokes a stronger emotional response seems to perform better in the marketplace ... which makes sense. At the end of the day, emotion is a primary driver of our behavior."
Like many CEOs of privately held companies, Stauch is tightlipped about the company's revenue but says that to date it has landed dozens of clients in the U.S. and abroad that he's not at liberty to name. He's also not willing to specify how many employees the company has other than to say it is more than five.
"Things are going very well, I can say that," Stauch said. "We're profitable. We're now doing studies in over 20 countries and we're doing work for a lot of major brands."
A recent Popular Science article about NeuroSpire declared the scientific merits of neuromarketing services "murky," but Stauch believes the science has gotten a bad rap because some companies have promised more than they can deliver.
"There are hundreds of peer-reviewed scientific articles that validate the metrics we use," Stauch said. "I think five years ago I would have been in more of a position to agree that it's murky, but in recent years there's really been an explosion of research."
"I think neuromarketing has a bad reputation because of some companies that make claims that aren't supported by the science," he continued. "They say they can measure things like purchase intent ... and that's not really the case."
Stauch sees neuromarketing as a tool that complements - but doesn't replace - current market research methods, such as focus groups.
Stauch was inspired to found NeuroSpire after learning about neuromarketing in a neuroscience course he took at Duke. He proceeded to devour all the scientific studies he could find with an eye toward creating a company, which is something he always felt he would do some day.
His research led him to a free software program for conducting neuroscience experiments that was the brainchild of Jeroen Kools, a software developer living in Amsterdam who has a master's degree in artificial intelligence.
"Very quickly, I realized I wanted him to join the team," Stauch said. "I felt this software could be the backbone of what we did."
After Kools joined NeuroSpire - he remains in Amsterdam but may move to the U.S. later this year - the company complemented what he had created by developing new software that could analyze the data from neuromarketing experiments.
Stauch said his efforts to drum up business by cold-calling potential customers didn't really pan out, but that the company's website has proven to be a customer magnet.
Stauch has managed to nurture NeuroSpire without any outside funding except for a $5,000 prize that the company won in the spring of 2012 at Startup Madness, an annual competition for budding entrepreneurs who are students at Atlantic Coast Conference schools.
"Startup Madness is about those students who went beyond the idea stage and have actually done something," said Scott Kelly, the event's organizer. "(Stauch) actually took action and was further along than any of the other teams on building a product."
Kelly, a former vice president of investment banking at Keysource Commercial Bank, is impressed that in the past year Stauch has been able to attract clients from around the world and that he has positioned the company to be able to expand quickly.
"I think there is great potential," he said.
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