Bob Gerard was sitting in an office room, having just watched a public service announcement while wearing a sensor that Dr. Paul Zak had wrapped around his arm.
"When it was done," said Gerard, who had been introduced to Zak by a mutual friend who thought Zak could help Gerard improve his internal training sessions at Accenture, a professional services firm, "Paul showed me the graph that the sensor had generated, and he replayed the video. As it was replaying, he was telling me exactly what I was feeling as he was reading it off the chart. My first thought was: I need this."
What this is, is called Immersion: a software program that, in the words of the L.A.-based startup's Chief Executive Scott Brown, "measures love." The sensor monitors how a person's brain responds to a given stimulus, moment by moment. And the readout that the software generates, for up to dozens of people at a time, provides real-time feedback that could be useful for everything from testing Hollywood audiences to understanding what resonates during a presentation.
A sensor measures the brain's response to content and uploads the data
Based on 20 years of scientific research, the company said, the technology can be used to understand which moments in a piece of content — a trailer, an advertisement, a lecture — are emotionally resonant, and which moments aren't. Creators can then adjust accordingly, and gain insight from algorithmic predictions about what actions people will take in response.
Immersion, Zak explained, specifically measures two factors in the brain: attention, and emotional engagement. When these two levels are high, Zak said, a person is immersed in the material at hand.
The company, which was founded less than three years ago and has mainly been in stealth mode, grew from Zak's work as a social sciences researcher and professor at Claremont Graduate University. He is also the director of the Center for Neuroeconomics Studies, which "develops neuroscience technologies to understand how people make decisions." Zak said the two main client uses of Immersion have been entertainment — such as for film, TV shows or advertisements — and corporate trainings.
Dr. Paul Zak runs the Center for Neuroeconomics Studies at Claremont Graduate College
Zak's research, which has received funding from the U.S. Department of Defense and Intelligence community, produced a set of findings that eventually formed into Immersion's commercial product. He found that oxytocin, a molecule produced in mammals, strongly correlates with emotional resonance, and he figured out how to measure oxytocin levels and attention non-invasively. Immersion's sensors — and, as of this week, other sensors like the Apple Watch or Fitbit Versa — can capture that data, then upload it into Immersion's software, which displays people's neurologic responses in a way that is designed to allow users like Gerard to get insight about their content "without having to have a PhD in data science," Zak said.
At Accenture, Gerard estimates that he's used Immersion for hundreds of classes and thousands of trainees since signing up for the subscription service. The program has helped to reveal which parts of trainings are engaging and should be expanded, and which parts are snoozers and need to be improved. Gerard has also experimented with using Immersion for sales training workshops, wherein two employees role-play a sales pitch while the one playing the customer wears a sensor that monitors her reactions and displays them to the class in real time.
An Immersion readout
Brown and Zak said Immersion has also been designed to enable clients to predict future behavior. In fact, they claim, because it relies on brain measurement rather than what people say, Immersion can understand audience response and intent better than audiences understand themselves.
When someone's levels of emotional resonance and attention are high, Zak explained, the brain "tags" those moments as "more relevant." These moments become "more easily recalled, and therefore more likely to be acted upon," Zak said. That is, the more that one is "immersed" in the content, the more likely they are to, say, watch the film (ie, if the piece of content is a trailer) or buy the product (if it's an ad). Immersion can also, Brown said, predict whether a piece of content will be a hit. Based on numerous studies, including with big companies like Facebook, Paramount and Warner, Immersion claims predictive accuracy of over 80%.
One hurdle that Immersion faces to growing is skepticism about a "big brother" omniscience about people's "true" feelings. Zak emphasized, however, that users must opt in to having their brain activity tracked, and that clients decide how much data to collect. Accenture, for example, chooses not to gather any personally identifiable information, Gerard said. Zak also suggested to dot.LA that being able to identify specific individuals who were highly immersed could be beneficial, as those people could be used as evangelists or for peer support.
The coronavirus pandemic is not exactly well timed for the company that according to Zak is "just now taking the lid off" and doesn't have a full-time marketing team, but the founder is confident his company will survive. While some clients, including a major studio and a large appliance-maker, have had to put their subscriptions or negotiations on hold, interest is perking up elsewhere. As companies and society experiment with distributed work, Zak is hopeful that his distributed neuroscience firm – subjects need not congregate in the same room – can fill a void. He's in talks with several potential new clients that are working from home at a distance.
"You want to test content and see what the brain's responding to?" Zak asked. "Right now, we're the only game in town."
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Sam Blake covers media and entertainment for dot.LA. Find him on Twitter @hisamblake and email him at samblake@dot.LA
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That’s not hugely surprising given the sluggish dynamics gripping the venture capital world at large these days, due to macroeconomic factors including the ongoing stock market correction, inflation and Russia’s invasion of Ukraine. While startups and VC investors haven’t been hit as hard as public companies, it looks like the ripple effects are beginning to bleed into the private capital markets.
Image courtesy of Hagan Blount
In addition to slowing deal volumes, most investors said they’re seeing startup valuations lose momentum, as well: Roughly 81% said valuations either stayed the same or decreased from the previous quarter, with nearly 39% noting a decline.
Should that sentiment continue moving forward, it could spell bad news for startups as far as raising the money they need for growth, investors said.
“If I was a startup right now, I would be making sure I have plenty of runway,” said Krisztina ‘Z’ Holly, a venture partner at Good Growth Capital. “When it looks like there's some potential challenges ahead in the market, it’s good to fill your war chest.”
Among VC respondents, about 86% said they believed that valuations in the first quarter were too high—one potential reason why deals slowed down in the first quarter, according to TenOneTen Ventures partner Minnie Ingersoll. She noted that L.A.’s growing startup scene features more early-stage ventures, whose valuations haven’t come down the way later-stage startup valuations have.
“I would say we are just more cautious about taking meetings where the valuations are at pre-correction levels,” Ingersoll said. “We didn’t take meetings because their valuations weren’t in line with where we thought the market was.”
While most respondents said the Russia-Ukraine war didn’t have much impact on their investment strategies, some 22% said it did have an effect—with one VC noting they had to pass on a deal in Russia that they liked.
Is There a Flight Out of Los Angeles?
Los Angeles was heralded as the third-largest startup ecosystem in the U.S. at the beginning of the year, behind only San Francisco and New York. Yet nearly one-third (31%) of VC respondents said that at least one of their portfolio companies had left L.A. within the past year. It won’t come as a huge surprise that the city of Austin, Texas has been one of the prime beneficiaries of this shift—with roughly half of those who reported that a portfolio company had left L.A. identifying Austin as the destination.
The tech industry’s much-hyped “exodus” from California has been widely reported on, especially as more companies have embraced the work-from-home lifestyle and also opted to move their operations to lower-cost cities and states. Most notably, Elon Musk has recently moved two of his companies, electric automaker Tesla and tunnel infrastructure startup The Boring Company, from California to Texas (with both of those firms moving in and around Austin).
“In today's competitive market with lots of capital to invest, we think the next generation of successful VCs are going to be diverse in markets (not just Silicon Valley)... [and] have access to undiscovered founders from everywhere,” said one survey respondent.
NFTs Aren’t Popular With VCs—But Web 3 Is
“It’s the future,” according to one respondent. “Buckle up and get on board.”
Are NFTs...
More than 71% of VC survey respondents said they were bullish on Web3—the new blockchain-enabled iteration of the internet, which promises decentralization and a whole range of applications involving cryptocurrencies, NFTs, DeFi and more. It’s the same sentiment informing Santa Monica-based VC firm M13’s new $400 million fund, which considers Web3 a core piece of its investment thesis.
In Q2 2022, do you expect your portfolio companies to:
L.A. is home to an ever-growing cadre of Web3-focused startups operating across the realms of finance, entertainment and other industries. But while local investors are willing to pour money into blockchain-related ventures, one segment of the space continues to evoke skepticism: Only 18% of respondents would describe NFTs as “a good investment,” while 33% thought they were “bad” investments and 39% said they were unsure.
As in our last survey several months ago, it appears that NFTs continue to divide opinion, with respondents expressing differing perspectives on their value and utility. One referred to them as “get rich quick schemes,” but added that the art pieces and social communities that emerge from them may be valuable. Another said that “NFTs as a digital medium are a legitimate thing”—but noted the vast majority are “awful investments with no intrinsic value.”
Graphics courtesy of Hagan Blount.
