Neuralink Raises $280M in Financing While Federal Probes Linger

Neuralink, the brain-computer interface (BCI) maker backed by Tesla’s Elon Musk, yesterday announced via a post on “X” (formerly Twitter) that it raised $280 million in a Series D financing. In the Musk-owned social media platform post, the company reported that Peter Theil’s Founders Fund led the round.

“We’re happy to announce our $280M Series D round led by @foundersfund,” according to the post. “We’re extremely excited about this next chapter at Neuralink.”

Neuralink currently has two flagship products in development, an implant called the N1 and an implantation robot called the R1. The N1, which is about the size of a coin, is remotely rechargeable and comes with electrode-laced threads that go further into the brain. N1 was designed to enable the user to control a computer or mobile device remotely. Additionally, company researchers have previously said they were developing treatments that could either help improve or restore vision or restore movement in individuals experiencing paralysis.

“We’re confident there are no physical limitations to restoring full body functionality,” Musk said at its late November 2022 “show and tell” event.

The R1 robot, according to the company, is programmed to implant the BCI system in the brain while avoiding vasculature. In that same “show and tell” event, DJ Seo, vice president of implant and co-founder of Neuralink, said that 64 threads connected to the BCI could potentially be implanted in about 15 minutes.

“Imagine taking a hair from your head and sticking it into jello covered by saran wrap, doing that to a precise depth and precision, and doing that 64 times in a reasonable amount of time,” said Christine Odabashian, the leader of Neuralink’s hardware insertion team.

Over the last few years as the company vied for regulatory approval to start human trails, Neuralink was also embroiled in controversy after a late 2022 Reuter’s report uncovered damaging potential evidence of widespread animal suffering and death during the company’s research into the device.

The report revealed multiple internal staff missives complaining that animal testing was being rushed, resulting in needless suffering and death for its testing animals. Some complaints stated that Musk, who is CEO of the company, was pressuring employees to accelerate development despite resulting botched experiments. From 2018 through 2022, employees estimated that Neuralink had killed about 1,500 animals, including more than 280 sheep, pigs, and monkeys, noting that the figure was a rough estimate because the company did not keep precise records on animals tested and killed. Additionally, it also conducted experiments on rats and mice.

The number of animal deaths do not inherently indicate violations to standard research practices as US regulations don’t specify the number of animals companies can use for research. Human healthcare company’s routinely use animals for experimentation, and, during such experimentation, the animals are typically killed when testing has finished in order to examine the body post-mortem for additional research. Of note, according to regulatory filings, Neuralink passed all USDA inspections of its facilities.

This, however, is not the company’s only foray into controversy based on its animal treatment. In early 2022, animal rights group, Physicians Committee for Responsible Medicine, filed the first public complaint of Neuralink’s animal treatment with the state of California and a federal complaint against the University of California, Davis. The federal complaint was then referred to the USDA and resulted in the launch of the formal probe. When asked about the probe in December 2022, MD+DI received an email from the USDA Office of the Inspector General which said, "USDA OIG neither confirms nor denies the existence of any such investigation. We have no comment."

Another probe into potential animal welfare violations began in late 2022 by the US Department of Agriculture’s Inspector General at the request of a federal prosecutor. The probe focuses on violations of the Animal Welfare Act, which outlines how researchers should treat and test some animals.

While we don’t know whether the company’s questionable animal testing practices may have delayed FDA clearance to start human trials — though one can conjecture — Neuralink originally planned for human trials in 2020, and it took until May 2023 to clear the regulatory hurdle.

In a “X” post after the announcement of FDA clearance, Neuralink said, “[The FDA clearance] represents an important first step that will one day allow our technology to help many people."

It’s the clearance to start human trials that some see as the push that accelerated the additional funding for the company. In June, Reuters reported that the valuation of Neuralink, which was close to $2 billion in a private fundraising round two years ago, is now worth around $5 billion based on privately executed stock trades, boosted by bullish investors after the announcement of FDA clearance to conduct human trials. The news organization wrote that after the clearance, Neuralink shares were marketed privately to investors at a $7 billion valuation, equivalent to $55 per share, according to an email seen by Reuters. The email cited the clearance as grounds for the deal being “sweeter”.

In sharp contrast to other startups, the stock transactions at the $5 billion valuation had been carried by shareholders like employees and the Neuralink early backers instead of the company selling new share to investors. This was before the Series D financing was announced.

Some biomedical experts remain skeptical. "A study to assess safety and tolerability is in no shape or form valid to justify a $5 billion valuation," Arun Sridhar told Reuters. Sridhar is a scientist and entrepreneur who helped launch Galvani Bioelectronics, a developer of implants backed by GSK Plc and Alphabet Inc's Verily Life Sciences.

Additionally, Kip Ludwig, the former program director for neural engineering at the US National Institutes of Health, said he “optimistically” expects it to take 10 or more years for Neuralink to commercialize the implant.