Start-up Modern AlkaMe is in the business of making you smarter

(OC Register, December 23, 2015) It could have been a scene from the 2001 blockbuster film “A Beautiful Mind.”

Post-it notes and scraps of paper plastered the walls of a room in Garrett Ruhland’s Anaheim home. A whiteboard for brainstorming further outlined ideas for a business Ruhland and former co-worker Bryan Welker were hatching.

In all, there were at least 200 problems and ideas they considered before launching their business.

Both men felt like they were on the cusp of something big, like being in the Los Altos garage with Steve Jobs and Steve Wozniak – pre-Apple kind of big, as they would later describe it.

The duo previously had worked at a Santa Monica-based business that made products containing nootropics – supplements that are billed as brain enhancers. That company created drinks and capsules filled with these “smart drugs.”

But Ruhland and Welker wanted to create something new in the field of nootropics. With public interest in personal health, wearable devices and apps like Lumosity at an all-time high, it felt like the right time to catch the wave of health-centric products.

Over the course of an intense weekend in November 2014, secluded from the outside world, the two settled on a business idea: They would create a platform to analyze a user’s personal information and recommend over-the-counter “smart drugs” that fit their profile. They would then modify those recommendations based on the client’s subsequent experience.

A biostatistician from the National Institutes of Health would cull the data to find patterns in efficacy of the supplements and further tailor the suggestions of the new company.

Before they could set off down the path of creating a new platform, the two needed to think of a name. They created a list of medical terms that would accurately and quickly convey the concept behind their product to a potential client.

Axon? Synapse? Dendrite? Those words captured the style, but they might alienate some customers with their masculine-sounding names. Brain Sherpa? Too nerdy.

An offhand remark from Garrett’s mother, Paula, provided the spark of an idea. She suggested “alchemy.” They added “modern” to reflect the fact that their product wasn’t just rooted in old science but was also at the cusp of something new.

They played with the spelling of the word alchemy to try to reflect the experience of the user. In a matter of hours they had their name: Modern AlkaMe.

In May, Ruhland and Welker moved into the Irvine offices of EvoNexus, an incubator for startups. They were one of eight companies selected out of 88 that applied to be part of the incubator’s second cohort.

“We saw a need for a service like this,” said Carolyn Liikala, the portfolio manager for EvoNexus’ Irvine location. “Currently all (nootropic) users are going to blogs on what they should be taking. We really liked that the team had experience in that sector. They understood it well; they understood their customers well.”

The term “nootropics” emerged in the 1970s after a clinical study showed the memory-enhancing effects of the compound piracetam, according to a study published on the National Institutes of Health website.

Supplements that fall into the nootropics category, aimed at improving cognition, range from older compounds, such as anti-oxidants, amino acids and ayurvedic medicine, to more recently developed products.

Nootropics are treated as dietary supplements by the Food and Drug Administration and do not need approval before they are marketed, according to the agency. So the purity, quality and claimed therapeutic effects can vary from one company to the next. The FDA intervenes only when problems arise.

For that reason, Modern AlkaMe aimed to create a platform that directed users to companies and products they vetted for purity and good manufacturing practices, with verified certificates of analysis from third-party labs.

“We want to point them in the right direction to safe products instead of companies with great marketing,” Ruhland said.

With little more than two Mac computers, a white table and a box of succulents, Ruhland and Welker set out to build their platform. At first the team considered outsourcing their product development. But the advice of their adviser made the pair rethink that strategy.

Their mentor, Atul Patel, now an executive adviser with Modern AlkaMe, is a serial entrepreneur who has worked in cloud software for more than 15 years. If they outsourced their platform’s development, he told them over the summer, they wouldn’t know where the kinks in the system were hidden. Scaling the business would be more difficult.

“If they have the intern or employee on staff they can walk over, meet the next day and say ‘Hey a client asked for this’ and it’s done – versus an outside guy who’s busy,” Patel said. “It’s the agility, flexibility; it’s the awareness of what’s truly going on inside your software.”

Next came the personal sacrifice.

Ruhland worked 110 to 120 hours each week, arriving to work in the early hours and staying late into the night. At times, he slept under his desk.

“I love to be able to work these hours because it means we’re getting so much done,” Ruhland said in August. “We don’t realize the fact we’re working. I hate to sleep because it means we’re not getting work done.”

Welker worked 90-hour weeks and turned down a high-paying finance job to launch Modern AlkaMe with Ruhland.

“In 10 years, that $100,000 will be gone,” Welker said of the salary he turned down. “But a new business may not be gone.”

To help carry the load, the company took on unpaid interns over the summer. At one point the team grew to 16 members, including mentors, advisers, employees and the interns, who worked for school credit.

“Everyone in the office really believes in what we’re doing,” Ruhland said. “Everyone is sacrificing, but they really believe in it.”

Because they couldn’t pay salaries, Ruhland and Welker talked about awarding some employees and consultants a stake in the company – an alternative many early-stage startups consider. But with the prospect of awarding equity came the possibility that less-committed employees might leave and take their equity with them.

After mulling how to divvy up the equity for about a week, the founding team decided to make it an even split among the co-founders. By December they would add two co-founders who were involved in development, so there are now four people with equal shares in the company.

Over the course of seven months in EvoNexus, Modern AlkaMe remained self-funded, its co-founders wary of taking on investors unfamiliar with nootropics or the software. An investor from outside their industry might undervalue their company or drive it in a direction the co-founders didn’t believe in.

A few would-be investors offered to close Modern AlkaMe’s seed round of $500,000, but Ruhland and Welker wanted to wait for the right person.

Investors familiar with a startup’s specialty offer “smart money,” connections to potential clients, and access to additional investors to grow the business, said Richard Sudek, the executive director of the Irvine-based Institute for Innovation and a member of the EvoNexus committee that chooses startups for the incubator.

Now, Modern AlkaMe’s founders are considering a new round of capitalto accelerate growth. Whatever the plan, the sacrifice, risk, or end result, the company’s core group is devoted to getting Modern AlkaMe off the ground.

“All we really care about with the founding team is they are in it 100 percent,” Ruhland said. “We don’t have anyone on the team that’s in it for a number or for a paycheck.”