Perspectives: Opinions from our network of advisors, investors, operators and analysts on the risks and opportunities they see.

Spencer Gerrol is the founder and CEO of SPARK Neuro, a neuroanalytics company that measures emotion and attention to optimize advertising and entertainment.

Years ago, I read a study on memory that illustrates the value of a good story.

Two groups of people were given 30 words to memorize. The first group was simply given a list of the words. The second group was given the same 30 words, but they were placed within the context of a story. Immediately after memorizing the words, each group was tested to see how many they remembered.

Surprisingly, both groups were able to recall 99% of the words.

But the experiment wasn’t over. The researchers waited a few minutes, and then tested the groups again. This time, the group that was told the story did well, averaging 93% of the words. What may shock you is just how poorly the other group did. Without the story, scores fell to 13%.

Long-term memory is substantially improved when people are able to relate a memory to a narrative. But as our team at SPARK Neuro has discovered, it’s not just the story itself that’s important — it’s the emotional responses the story triggers.

Emotions are what really determines whether people pay attention to content, and crucially, whether they remember it for minutes, hours, or days afterward.

That’s why we’re using neuroanalytics to help companies understand exactly which story elements create the emotions that captivate an audience and create a lasting impression.

The SPARK Neuro test reveals how people truly connect to a specific piece of content.

The problem with focus groups, copy testing, and other traditional advertising methods is that they’re unreliable.

Getting people in a room, showing them a 30-second ad and then asking them how they felt about it doesn’t provide good, actionable data. People just don’t self-report well.

That’s why we’re tapping into what’s truly happening in people’s brains and bodies while they’re watching an ad or movie trailer. To measure these reactions, we rely on electroencephalography (EEG), galvanic skin response, facial coding, and eye tracking.

From the data we collect, our team is able to determine exactly when an audience is truly engaging, becoming emotional, or even getting bored.

If you’re wondering why no one has done this before, it’s because these machines don’t print out results that say “happy” or “sad” on them. The tests generate massive, complex data that are indecipherable to anyone without a PhD in neuroscience. But what’s unique about SPARK Neuro is our proprietary algorithms, which are capable of taking all that data, analyzing it, and producing something that a company or advertising agency can read and immediately understand.

Since the results are statistically significant, the data is incredibly valuable for content-producing companies.

When you start talking about monitoring emotions and measuring feelings, people tend to get a little skeptical.

Skepticism is healthy — and I encourage it. We make our methodologies transparent because we don’t want the industry to become subject to pseudoscience or other nonsense.

The reliability of our studies is extremely high, and once companies begin working with us, they quickly see how transformative our service is for evaluating their content. Instead of fighting over how to interpret what was said in a focus group, they have access to real, actionable results derived from neuroanalytics and proprietary algorithms.

Brain data is very rich, so the test doesn’t require hundreds or thousands of people to generate accurate results. We would never conduct a study with fewer than 50 people, but because the data is so extensive, we don’t need to run studies with several hundred or a thousand people.

Advertising and entertainment are currently benefiting from this technology—but the possibilities are nearly endless.

I’ve been very open about the fact that advertising is not our endgame.

It is, however, a great place to start. The advertising and entertainment industries have been employing the same methods for 50 years — and they’re broken. Focus groups and surveys simply can’t tell you with any statistical significance what people actually pay attention to and engage with.

Advertising is the perfect industry for us to start in because there’s such a need for our services. It’s also a space where we can generate revenue and scale in a short amount of time. Some companies will always stick with what they know, but we’ve already built a long list of clients that includes Anheuser-Busch, GM, Hulu, JetBlue, Paramount, and Walmart.

The results are already speaking for themselves.

I founded SPARK Neuro in January 2017, and within eight months, the company was profitable. Because of that quick accomplishment, we had the confidence and leverage to raise a $13.5 million Series A — attracting investors like Thiel Capital, Michael Eisner, and Will Smith.

Today, we offer studies that can vary in cost from $10,000 to $500,000. I realize that’s a huge price range, but each case is unique, with the cost depending on several variables like sample size, scope, and budget. Our primary clients are companies that are already spending tens of millions of dollars on a given ad campaign that are very willing to make sure every second of it counts.

As we continue to scale, we’re planning to offer a wider range of price points and begin testing more people in a day. The larger our test groups, the more data we accumulate and the more advanced our algorithms become. Every day we’re in operation makes it increasingly difficult for any competitor to catch up.

Right now, our focus is entirely on growth — increasing revenue, innovating our product, and developing scale. We know from experience that SPARK can be profitable, although, at the moment, that’s not our goal. Like any startup, our current investors don’t want profitability, they want growth. Fortunately, we’re well-positioned to meet those expectations.

We’re also in a unique position because we aren’t faced with the classic startup dilemma — spending money as fast as possible and hoping for a billion-dollar valuation. Our business model already provides sustainable revenue to keep us operating and allows us to move into new industries outside of advertising.

We’re currently pushing into politics, military applications, and even counterterrorism work. But the final goal is, and always has been, a move into healthcare and medical applications. When the time is right, our ability to collect and analyze data will be essential to early diagnosis and tracking disease progression and change. But for now, the opportunities for research within advertising — a $50 billion industry in the U.S. alone — are where our focus is.

One of the most important questions we’ve been asked is: Does our product stifle creativity? In truth, this product is really about empowering creatives and their ideas. Instead of a bunch of biased opinions, creators have access to the true measure of their work — the emotions it elicits.

At SPARK Neuro, we believe that when companies understand how people react to what they’re shown, they can present customers with creative, moving, and effective content people will think about long after they’ve stopped watching.

Click here to explore the companies and opportunities featured in this article