China’s BrainCo is betting on wearable brain technology

Elon Musk’s Neuralink, which places implants in people’s heads to compensate for disabilities, has become the poster child for so-called brain-computer interfaces (BCI). But some companies are betting that mass-market neural technology won’t require opening the skull at all.

BCI works by processing brain signals and converting them into commands so that external devices can be controlled by thought.

Funding for startups in this space represents a fraction of the capital flowing into artificial intelligence. But interest in the emerging field is growing as companies reach milestones such as allowing people with degenerative diseases like amyotrophic lateral sclerosis (ALS) to type or play video games using brain signals.

AI is a catalyst that increases signal processing capabilities. Some in the industry envision one day taking another leap: using the mind to control or connect with AI and robots.

The technology raises the stakes in the US-China rivalry. The Chinese government included BCI as a strategic “future industry” in its latest five-year plan. Regulators recently approved for commercial use what they call the world’s first minimally invasive BCI device, developed by Neuracle Medical Technology to restore some hand function after spinal cord injuries.

As companies like China’s StairMed and NeuroXess advance implants, the non-invasive space is gaining momentum – from the Sam Altman-backed Merge Labs to China’s Gestala, both of which are pursuing ultrasound-based approaches.

BrainCo, one of the so-called “six little dragons” of tech startups in the eastern city of Hangzhou, makes prosthetics and wearable devices using BCI technology.

Rui Ma, founder of media and research platform Tech Buzz China, said that while today’s proven BCI applications can dramatically improve the quality of life of severely impaired patients, the far larger market likely lies in expanding human capabilities.

But she added: “I don’t think anyone even comes close to understanding that … augmentation is like science fiction at this point.”

BrainCo was founded in 2015 and emerged from Harvard Innovation Labs. BrainCo specializes in the non-invasive side.

The implanted and noninvasive approaches are different routes to different problems, said BrainCo partner and senior vice president Nyx He in a recent interview with CNBC. Some diseases can be treated only by interfering with the brain, she said, but BrainCo believes many others – particularly where drugs are not enough – can be treated through non-invasive methods that are easier for people to accept and access, with lower risk and cost.

The company’s U.S. Food and Drug Administration-approved bionic hands read an amputee’s neural and muscle electrical signals and translate intended movements into finger movements. The wearables include a sleep aid that uses low-intensity electrical pulses to stimulate neurochemicals associated with stress relief, according to BrainCo.

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

The key challenge for non-invasive methods, He says, is to capture and decode brain signals that are subtle and noisy when read from outside the skull. BrainCo developed a dry electrode sensor to capture the signals and an AI algorithm to decode them.

He outlined the company’s roadmap in stages: Start with those who need the technology most, such as amputees in markets covered by insurance; expansion to include conditions such as ADHD and depression; Then target the mass market with consumer electronics.

Eventually, BrainCo plans to license its BCI platform to other companies developing brain tech products – a deal it expects to become the company’s largest revenue driver.

The startup’s plan reflects considerations emerging at the national level. In a commentary in state media this week, a Chinese Academy of Sciences researcher who specializes in non-invasive BCI laid out a similar path: from medical applications in the near future to applications in autonomous driving and smart manufacturing to mass-market consumer products.

Investors disagree about the best technological approach. But most agree that the real test is whether companies can develop products that offer significant improvements — and that consumers will pay for.

Some argue that only implants can bring success. “Noninvasive is like trying to capture light in distant galaxies,” said Alex Zhavoronkov, CEO of biotech company Insilico Medicine.

Others see promising results in new, non-implanted techniques. Thomas Tsao, co-founder of Gobi Partners, a venture capital firm that invested in Gestala, said ultrasound-based approaches offer a more holistic view of the brain without surgical risk.

Growing investment could help the industry reach a tipping point, Tsao said, but added that the final market size is virtually impossible to quantify and many future use cases are hard to imagine today.

Jefferies said in a July 8 report that invasive implants and ultrasound-based methods represent the “most promising” frontiers, noting that traditional non-invasive systems continue to be limited by how clearly they can capture and interpret brain signals. However, the bank added that BrainCo’s proprietary sensors, AI decoding algorithm and commercialization track record give the company an advantage.

Industry players say the best approach depends on the use case: recording or stimulating brain activity, targeted to patients or consumers, short-term or continuous use, targeted to superficial or deep brain regions, and how much burden users are willing to bear.

While American neurotechnology is funded by billionaires, China enjoys the support of the central government.

In Beijing in August last year, seven ministries jointly issued an implementation plan for the BCI industry, targeting key technological breakthroughs by 2027. In June, the Anhui provincial government released an action plan to accelerate BCI development in research, production and industrialization.

Some startups in China, facing pressure from state-affiliated or risk-averse backers to report revenue, have turned to selling devices or consumer products, Tech Buzz China’s Ma said, while U.S. investors favor the “world-changing bet.”

According to Jefferies, China’s BCI market is initially booming with non-invasive rehabilitation technologies that face fewer regulatory and clinical hurdles.

“China has now integrated BCI into its industrial policy apparatus,” said Paul Triolo, partner at consulting firm DGA-Albright Stonebridge Group. “Beijing is not just thinking about a breakthrough technology, but about the entire supply chain.”

The country’s focus is also broader, he said, from stroke rehabilitation to prosthetics to cognitive assessment.

This coordination extends to hospitals and universities. Shanghai has paired BCI startups with Huashan Hospital, expanding access to patients and neurosurgeons. Chinese health authorities also created a separate insurance category for BCI last year, which experts say could help scale the technology.

Like AI and semiconductors before it, BCI – with its sensitivity to sensitive personal data and privacy – could become a geopolitical flashpoint as it matures. Performance-enhancing uses also raise ethical concerns.

He said BrainCo’s company does not collect customer data, which is stored on users’ devices, not transferred to the cloud and deleted after each use. Information such as concentration values could also be stored locally on concentration training devices, He said.

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

He said the company’s goal is to provide solutions to those in need, whether in China or the United States. “I don’t think I’ll stop at borders for that.”