Lumosity secures $32.5M for brain exercises

Menlo Ventures is drawn to the company's scientifically-backed exercises and proven results

You don’t often see websites for brain teasers and memory exercises getting huge rounds of funding from major Silicon Valley VC firms, but today Lumosity shook things up a bit when it announced the close of its $32.5 million Series C round of funding led by Menlo Ventures, with participation from existing investors FirstMark Capital, Harrison Metal, and Norwest Venture Partners.

While the games on Lumosity are fun and challenging (and even more challenging when you play them while half-listening to a conference call), it wouldn’t be entirely accurate to call Lumosity a brain teaser website. The site bills itself as a brain training program, and the exercises (while super fun) are developed based on scientific research and have proven results improving core cognition skills, like memory, speed, attention, flexibility, and problem solving.

Indeed, the company has its roots in scientific research. Co-founder Mike Scanlon was a neuroscience grad student at Stanford when he told Kunal Sarkar, then an investor in health and wellness businesses, about studies showing that the human brain is plastic and can be trained to improve its core cognitive abilities. And Lumosity was born. Today, the company has research collaborations with over 25 academic institutions, including the top five neuroscience programs in the U.S., in addition to a scientific advisory board featuring eight of the leading neuroscientists in the country. These guys aren’t playing around. They’re not putting out Mad Libs.

So, the company has developed a series of cognitive exercises, but do they work? Or do they just offer users the satisfaction of reminding themselves that their brains still work? Both, actually. From a scientific standpoint, the company has proven that regular practice using the Lumosity exercises produces measurable improvement in users’ core cognitive abilities. But the company’s real focus is on users’ personal feelings of improvement. For example, one user was an actor in Los Angeles who could never remember his lines when delivering monologues. He got an account with Lumosity and started using the training exercises, and he later contacted Lumosity to tell them that he saw dramatic improvements in his ability to remember his lines.

CEO Kunal Sarkar likens the experience to going to a gym. “The levels get harder until you get to a point where you can’t do it anymore, and then it trains you to keep going further. It’s like going to the gym and working out until you’re totally spent, and then training to build on top of your personal best.” Sarkar says that the service appeals to a broad audience—everyone from high school students trying to gain certain cognitive skills to professionals trying to hone their cognitive skills and older users who want to keep their brains sharp.

That’s all great, but the company still has to make money somehow, so what’s the business model? Lumosity is a subscription service, so users have to pay a monthly or yearly fee to access the training exercises. All new users get a free three-day trial, after which they have the option of signing up and becoming a paid member (note: it’s not one of those jerky scams that make you give them your credit card number in the hopes that you’ll forget to cancel your membership). And people do, indeed, want the service. Lumosity has over 14 million paid members, and Sarkar says the user base is growing by a rate of 25% quarter-over-quarter, which means the company’s revenue is also growing at a quarterly rate of 25%.

The company became profitable last year, which coincided with the launch of its mobile app for iPhone. Sarkar says that the company plans to use the new funds from this round to build out its mobile platform and expand to other OS platforms. Additionally, the funds will also be put towards expanding Lumosity’s service overseas, as well as making the site more kid-friendly.

With this new round, Pravin Vazirani, Managing Director at Menlo Ventures, will be joining the company’s board of directors.

“We talked to different investors but Pravin really got the company, he got the vision,” said Sarkar. “He really understands business model, and Menlo has a great track record.”