China’s BrainCo bets on wearable brain technology

Elon Musk’s Neuralink is a brain-computer interface (BCI) that replaces disabilities by implanting it in people’s heads. But some companies are confident that mass-market neural technology will eliminate the need to open the skull at all.

BCIs work by processing brain signals and converting them into commands, allowing external devices to be controlled by thought.

Funding startups in this space is only part of the capital flowing into artificial intelligence. But interest in this nascent field is growing as companies achieve milestones, such as allowing people with degenerative diseases such as amyotrophic lateral sclerosis (ALS) to type and play video games using brain signals.

AI is a catalyst for increasing signal processing capabilities. Some in the industry imagine one day taking another leap forward: using the mind to control and connect AI and robots.

This technology raises the risk of conflict between the United States and China. The Chinese government included BCI as a strategic “future industry” in its latest five-year plan. Regulators recently approved commercial use of what they call the world’s first minimally invasive BCI device developed by Neuracle Medical Technology to restore hand function after spinal cord injury.

While companies like China’s StairMed and NeuroXess are pushing implants, the non-invasive space is also gaining traction, from Sam Altman-backed Merge Labs to China’s Gestara, both of which are pursuing ultrasound-based approaches.

BrainCo is one of the so-called “Six Xiaolongs” of high-tech startups in eastern Hangzhou, which uses BCI technology to manufacture prosthetic limbs and wearable devices.

Rui Ma, founder of the Tech Buzz China media and research platform, said that while today’s proven BCI applications can dramatically improve the quality of life of severely disabled patients, a much larger market is likely to be in augmenting human capabilities.

But she added: “I don’t think anyone is close to making that happen…Expansion is like science fiction at this point.”

Founded in 2015 and born out of Harvard University’s Institute for Innovation, BrainCo flies the flag on the non-invasive side.

Nyx He, partner and senior vice president at BrainCo, told CNBC in a recent interview that implantable and non-invasive approaches are different routes to different problems. She said that while some symptoms can only be addressed by penetrating the brain, Brainco believes that many other conditions, particularly those for which drugs are inadequate, can be treated in non-invasive ways that are more acceptable and accessible to people, and with lower risk and cost.

The company’s bionic hand, approved by the U.S. Food and Drug Administration, reads electrical signals in the amputee’s nerves and muscles and translates intended movements into finger movements. The company’s wearable products include sleep aids that BrainCo says use low-intensity electrical pulses to stimulate neurochemicals associated with stress reduction.

BrainCo has raised 2 billion yuan ($280 million) in a funding round co-led by IDG Capital and Walden International, a venture firm founded by Intel CEO Lip-Bu Tan.

He said the central challenge of the non-invasive method is capturing and deciphering brain signals, which are subtle and noisy when read from outside the skull. BrainCo developed a dry electrode sensor to capture the signal and an AI algorithm to decipher the signal.

He outlined the company’s roadmap step by step. Start with the people who need the technology the most, such as amputees in the insured market. It also extends to medical conditions such as ADHD and depression. Next, target the mass market with consumer electronics.

Eventually, BrainCo plans to license the BCI platform to other companies developing brain technology products, a business she expects to become the company’s largest source of revenue.

The startup’s plans reflect ideas emerging at the national level. In a commentary in state media this week, researchers at the Chinese Academy of Sciences specializing in non-invasive BCI laid out a similar trajectory, from near-term medical applications to use in self-driving cars and smart manufacturing, and ultimately to mass-market consumer products.

Investors are divided on the best technological approach. But most agree that the real test is whether companies can develop products that offer tangible improvements and that consumers will pay for.

Some people claim that only implants can be effective. “Non-invasive is like trying to capture the light of a distant galaxy,” said Alex Zaboronkov, CEO of biotechnology company Insilico Medicine.

Some are pinning their hopes on new non-implantable technologies. Thomas Tsao, co-founder of venture capital firm Gobi Partners, which has invested in Gestara, said the ultrasound-based approach allows a more holistic view of the brain without surgical risks.

Tsao said increased investment could help the industry reach a tipping point, but added that quantifying its ultimate market size is virtually impossible and many future use cases are difficult to imagine today.

Jeffries said in a July 8 report that invasive implants and ultrasound-based methods are the “most promising” frontiers, noting that traditional non-invasive systems remain limited in how clearly they can capture and interpret brain signals. However, the bank added that BrainCo’s proprietary sensors, AI decoding algorithms and commercialization track record give it an advantage.

Industry participants say the best approach will depend on the use case. This depends on whether the device is designed to record or stimulate brain activity in patients or consumers, whether it is used for short-term or sustained periods, whether it targets superficial or deep regions of the brain, and how much strain the user can tolerate.

If America’s neurotech is funded by billionaires, China’s has central government backing.

In Beijing last August, seven ministries jointly announced an implementation plan for the BCI industry, targeting significant technological progress by 2027. In June, the Anhui provincial government announced an action plan to speed up BCI development across research, production, and industrialization.

Tech Buzz China’s Ma said that while some Chinese startups, facing pressure to show profits from state-linked and risk-averse backers, have turned to selling equipment and consumer products, U.S. investors prefer “bets that change the world.”

So far, the BCI market in China is growing first with non-invasive rehabilitation techniques that have low regulatory and clinical barriers, Jeffries said.

“China is now incorporating BCI into its industrial policy structure,” said Paul Triolo, a partner at consultancy DGA Albright Stonebridge Group. “Beijing is thinking in terms of the entire supply chain, not just one breakthrough technology.”

The country’s focus also ranges from stroke rehabilitation to prosthetic limbs and cognitive assessments, he said.

This collaboration also extends to hospitals and universities. Shanghai City partners with BCI startup and Huashan Hospital to expand access to patients and neurosurgeons. Chinese health authorities also created a separate insurance category for BCIs last year, which experts say could help scale up the technology.

Like AI and semiconductors before it, BCI is sensitive to personal data and privacy and could become a geopolitical flashpoint as it matures. When used to improve performance, it also raises ethical considerations.

BrainCo’s He said the company does not collect customer data, and that data is stored on users’ devices, not sent to the cloud, and erased after each use. Information such as concentration scores could also be stored locally on the concentration training device, he said.

When asked about tensions between the world’s two technology powers, she put politics aside.

He said the company’s goal is to provide solutions to people in need, whether in China or the U.S. “I don’t think we’re going to stop at the border to do that.”