Editor’s note: Julie Papanek is a principal at Canaan Partners where she invests in healthcare startups.
As attention shines down on fitness trackers and smartwatches, one of the biggest opportunities for wearable devices remains shadowed in the corner — medical wearables. Medical wearables present colossal opportunities, but they tend to frighten entrepreneurs and elicit polarizing sentiments from investors. As a healthcare and digital health investor, I am often asked my opinion on the subject, and can unequivocally say that I love wearables.
However, that does not mean I pursue every wearable investment that comes my way. The startups that catch my eye meet specific criteria shaped by the years I spent developing novel medical products that the FDA approved and payers reimbursed. When it comes to saying yes to medical wearable startups, here are the key things I look for:
When considering a medical wearable startup for investment, I focus on what type of data the product collects and if it is an endpoint. A primary clinical endpoint is defined as “an event or outcome that can be measured objectively to determine whether the intervention being studied is beneficial to a patient.”
For example, how long a patient survives is the primary endpoint for most cancer products, and reducing blood pressure is the primary endpoint for hypertension. Endpoints demonstrate that the product delivers value, and most importantly, whether other companies’ products deliver value as well.
Endpoints are not only the source of truth in healthcare, they are also the gatekeepers. Improving a primary endpoint in a clinical trial can unlock FDA approval, reimbursement by payers, and market share when physicians recommend the product to their patients.
For these reasons, a wearable company that accurately tracks primary endpoints commands power in the medical market. For instance, Empatica‘s wristband is designed to accurately measure the onset of seizures, which in the long run could determine if one anti-epileptic medication works better than another or when an ambulance should be sent to someone’s home. I’m betting that pharmaceutical, medical device companies and hospitals will pay wearable startups for that type of value.
Aspiring medical wearable entrepreneurs should start by figuring out the strongest endpoints for the disease they want to impact. One good strategy is to look up clinical trials for the last 3-4 medical devices or drugs approved for that disease. Also check out this resource on endpoints from the FDA.
Bulletproof Data Management
Accurate data can be the difference between life and death, which means your data-collection methods have to be ironclad. Consumers need to know that they can trust the data from your product, as does the FDA, larger medical community and investors.
Preventice provides an always-on, remote-monitoring wearable that measures arrhythmias outside of the hospital, as well as a dashboard that lets physicians and caregivers know when to reach out to help an individual with cardiovascular risks. It is imperative that the company measures each heartbeat correctly and securely stores patient data in order to avoid creating false alarms or introducing security risks.
Targeting your product to the medical community requires a high bar for how you measure and manage your data. Wearable startups will need to integrate design and quality controls, hire a regulatory affairs employee or consultant, and spend money on legal fees. While these obstacles may seem high, overcoming them means you can sell your product at a premium to medical companies. You have also created a high barrier to entry for competitors. The opportunities are huge, so going through the FDA and selling to medical companies is not a barrier to investment for me.
Designed for Engagement
The reality is that customers won’t use a product for long unless it proves worthwhile. So how do you keep users engaged with their medical wearable? By creating a feedback loop that extends beyond medical benefits. The device needs to be convenient, save time, and improve self-image. Consumers do not like to think of themselves as patients and want to minimize the energy focused on their disease. As we saw with Google Health’s failure, active data entry is not viable.
Aspiring medical wearable entrepreneurs should start by figuring out the strongest endpoints for the disease they want to impact.
Passive data tracking, just-in-time nudges, and clean design are must-haves for medical wearables. Chrono Therapeutics’ SmartStop is a wearable nicotine replacement patch to help smokers quit. SmartStop delivers nicotine in programmable intervals to prevent cravings before they occur. Chrono takes design-centered thinking a step further by integrating consumers’ compliance and behavior data into a mobile-enabled cessation plan designed with guidance from the Mayo Clinic.
The Right Partner
Turning a product into a business is actually quite simple — get paid. The time is now for wearable companies to build corporate partnerships into their business model. Existing medical companies need to keep proving that their products offer reimbursable value even after they complete clinical trials and are FDA approved. Wearables enable them to collect “real world evidence” as people go about their daily lives.
Some companies are even expanding in population health management and healthcare services to ensure their products deliver on their promise. One case of this is Medtronic, which has expanded beyond cardiovascular devices into telehealth and remote patient monitoring services. Its Cardiocom business unit uses a number of wired products to provide telemedicine. Imagine what its platform would look like if it had 24/7 data from patients on key physiologic measures.
The right partner can also help startups by validating products in clinical trials, which is appealing to an investor. For example, pharma company UCB signed a deal with electronics company MC10 to test its “BioStamp” in clinical trials for new neurological therapies.
Selling to the medical community may seem like a daunting proposition, but I believe this is where the big opportunities lie for medical wearable startups. For one thing, consumer-focused wearables aren’t living up to their promise. Research from Endeavor Partners found that one-third of consumers abandon their wearables after just a few months. Clearly the appeal of tracking steps is not enough to keep people interested in these devices.
Furthermore, focusing wearable device development on the consumer market (specifically young, wealthy, and tech-savvy early adopters) means that, in the words of J.C. Herz, “wearables are totally failing the people who need them most” — the old, the chronically ill, and the poor. Medical wearables are one of the rare and exciting areas where technology can have a marked, positive impact on people’s lives while also making big money at the same time. I can’t wait to see more entrepreneurs taking on these challenges.