2025 Neurotech Investment Outlook with Jun Deng, Joyance Partners
Originally published in Naveen Rao‘s Neurotech Futures newsletter.
Joyance Partners has invested in over 30 companies that one could consider “neurotech,” spanning mental health, brain health, BMI, neurostimulation, novel therapeutics, digital health, longevity, wellness, and much more.
Last month Naveen Rao, founder of Neurotech Futures, spoke with our Investment Partner Jun Deng, who leads Joyance’s healthcare and biotech investments, about the VC outlook in Neurotech going into 2025. Here’s the jist of Jun’s predictions for the new year:
General Trends in VC: Cautious Optimism
Going into 2025, there are several reasons to be optimistic about the US economy, primarily due to deregulation, a pro-business administration, and AI serving as a major tailwind. The market is likely to experience a significant uptick in M&A activity and equity investments.
Looking at venture capital as a whole, you see a slowdown compared to the peak of 2020–2022, across the board. A recent publication in the Wall Street Journal looked at nearly 30 years of data on LP capital invested versus distribution from the Venture Fund. A fluctuation in 2024 reflects the biggest deficit in 30 years from distribution to LP investment.
What does that mean? If LP’s are not getting their investments back, there’s less capital to invest in new venture funds, and less for the funds to deploy into startups.
For fund managers and startups, you will see the effect in the next few years, when funds are more careful, slowing down, and being more thoughtful about deployment and pacing.
With the new administration coming in this year, we certainly are experiencing a lot of unknowns. The big questions include how much that affects regulation, reimbursement, interest rates, and investors’ mentality.
Thus far, some areas have been more affected, some less so, with AI being the jewel of the crown, which was not impacted at all. AI is driving a large portion of the top-funded deals and overall US venture investment.
On Neurotech: Indication, Validation, Modality Matter
Generally, this kind of slowdown is not significant in neuroscience. Deal flow has been strong and many deals are still being done. So I still see Neurotech as a strong, solid sector among all the life sciences, including Biotech.
In general, as investors, we need to see a clear disease-level indication, really differentiated technology, and ideally some initial efficacy data. Then it becomes interesting.
We’ve seen a lot of activity in innovations that address large markets. Even without advanced validation, especially in areas like BCI, if there is a clear indication, whether it’s a platform or a simple indication or technology, it’s worthwhile to explore new deals right now.
Another trend we’ve noted is that from a modality perspective, digital health is becoming more impacted. The field saw a big correction for the first time in 10 years. The downfalls of Akili and Pear Therapeutics have adversely affected digital therapeutics investments as well. From the Joyance Partners perspective, we haven’t seen a lot of success in consumer Neurotech. Just not many investors are buying in; there seem to be just too many barriers to adoption.
Still, if you look at the past data for the past 10 years the average Neurotech check size is going up, meaning that companies are moving from early stages to more mature stages of investment — definitely an encouraging indication.
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