Xpanceo, a deep tech startup, raises $40M to focus on smart contact lenses

Smartphone sales have had their worst quarterly performance in over a decade, and fact that raises two big questions. Have the latest models finally bored the market with mere incremental improvements? And if they have, what will the next form factor (and function) be? Today a deep tech startup called Xpanceo is announcing $40 million in funding from a single investor, Opportunity Ventures in Hong Kong, to pursue its take on one of the possible answers to that question: computing devices in the form of smart contact lenses.

The company wants to make tech more simple and it believes the way to do that is to make it seamless and more connected to how we operate every day. “All current computers will be obsolete [because] they’re not interchangeable,” said CEO Roman Axelrod, who co-founded the startup with material scientist and physicist Valentyn S. Volkov. “We are enslaved by gadgets.”

With a focus on new materials and moving away from silicon-based processing and towards new approaches to using optoelectronics, Xpanceo’s modest ambition, Axelrod said in an interview, is to “merge all the gadgets into one, to provide humanity with a gadget with an infinite screen. What we aim for is to create the next generation of computing.”

Xpanceo was founded in 2021 and is based out Dubai, and before now it has been bootstrapped. Its team of more 50 scientists and engineers has mainly, up to now, been working on different prototypes of lenses and all of the hard work that goes into that. The move away from silicon and to optoelectronics, for example, has driven a new need for materials that can emit and read light that are ever-smaller, Volkov said. The company has likened developments of 2D materials like graphene to what it is pursuing with new materials for contact lenses.

“We have kind of developed our own niche [in 2D materials] and now we use this knowledge as a backbone for our contact lens prototypes,” Volkov said in an interview.

Alongside this, the company has developed an AI platform to help develop its frameworks. It describes “neural interfacing” as the technique it will use to give wearers of its lenses full control over applications without them needing to use “awkward” eye movements or extra controllers. (Some prototypes of other smart or connected lenses involve users lowering eyelids to change functions, for example.)

Initially, its prototypes cover three categories of usage. These are a lens that allows for night vision and 3D; a lens that offers measurement and precision vision (for example for clinical use); and a holographic lens for augmented reality experiences. Xpanceo’s plan is to use the funding to work on merging these functionalities into one lens, which it estimates will be completed by 2025 or 2026.

Volkov added that the company has applications in progress for 24 patents related to this.

The idea of a smart contact lens is not entirely novel; and some might even say it’s not very smart to pursue smart contacts right now because of the long time scale involved.

Mojo Vision, perhaps the biggest startup focused on the form factor, pivoted earlier this year to develop micro-LED panels for headsets and other small screens. At the time, it cited challenging market conditions (including raising money) as one reason to put its smart contact plans on hold. Last week, it announced an expanded Series A to follow through on its pivot.

Google once also had big plans in smart contacts, which it was developing via its Verily moonshot. That project was streamlined in 2018; with the last update on Verily’s work back in 2020, when it revealed a smart contact lens to accommodate presbyopia (the age-related condition where an eye cannot shift focus as easily between near and far objects). “Verily is now planning to take the accommodating contact lens into the next phase of development,” the company said at the time.

Apple also has been linked with smart contact lenses but in more tenuous ways. In 2021, Apple analyst Ming-Chi Kuo wrote a research report on the company’s roadmap, speculating Apple lenses would come, but not until after 2030. As patent watchers have spotted, it has in the meantime made some patent filings to cover bases in the area.

Smartphone leader Samsung, not to be outdone, also has a number of patents in the space, too, such as this one related to how a lens would ‘harvest energy’ to operate.

But there have been some developments that also feel like encouraging signals of activity.

Researchers in Singapore are working on ways of using “human tears” to power smart contacts. And there remains an appetite for exploring what might be the next new thing, even if it’s not a contact lens: Humane is attracting a lot of interesting investors behind its idea of a smart “pin.”

It was the fact that Xpanceo has moved ahead on more limited prototypes that gave the startup an opportunity with Opportunity Venture.

“We led this round of funding as a testament to the fact that Xpanceo has not merely an ambition but also a capacity to deliver on its product vision. We believe that now Xpanceo has all the resources needed to drive their R&D and product design forward, and do it even faster,” said the VC’s managing director Philip Ma in a statement. “Opportunity Venture (Asia) sees the potential in XPANCEO to define the next generation of computing and to become a major player in the world of personal tech in the post smartphone era.”

The competitive landscape, current market conditions, and the fact that they are working in some of the deeper reaches of deep tech, are not facts lost on Axelrod and Volkov. But they appear to be building with their eyes open, so to speak. Some of their background, I suspect, has given them experience in patience and playing the long game.

Axelrod, very tongue in cheek, describes himself and his co-founder as “typical Russians.”

Volkov was actually born in Ukraine, but he attended university in Moscow and more recently got his PhD at Aalborg University in Denmark. He is an academic and had been attached to institutions both there and in Moscow before Xpanceo got started. Axelrod’s family is actually from Kazakstan but many of them moved to Israel. Axelrod himself also has an Israeli passport, but he previously also lived in Moscow and had several startups and exits there, which is how Xpanceo, a costly hardware startup in the even more costly realm of deep tech, was initially financed as a bootstrapped effort.

(Those exits included esports company ESforce Holding, and AI robotics startup called Orbita Group, and machine vision startup Cognitive Technologies Group — all sold to Russian buyers and thus now under sanctions.)

“We decided to relocate Xpanceo long before the worst,” Axelrod said of the Ukraine war and other political events that led up to it.

Dubai might sound like an unlikely landing spot for a deep tech startup, but in another sense, thedecision to go to Dubai is not too unusual. More recently the city has picked up a reputation as a landing place for wealthy Russians, but even before that it was attracting others from Russia. That created a community of people to tap and live among. “We chose Dubai as one of the most open-minded places in the world,” Axelrod said. “It’s actually a great place to be.”