Decoding the rise and rise of wearables

Preventive Healthcare is dubbed to be the next trillion-dollar industry aided by factors such as growing health awareness, health-tech devices to track your health over time, and a high prevalence of chronic health diseases wanting people to prevent the problem in the first place? rather than cure the problem to increase their healthspan.

We at WEH Ventures are bullish on the space and believe that multiple companies can come up in the space catering to different aspects of preventive healthcare.

There are several revenue pools in the preventive healthcare space-

-> Fitness and wellness - This includes spending on physical activities that help you exercise and get your body in shape. This includes spending on sports, gym, yoga, etc. to become or stay fit over the long term. Apart from this, it will also include spending on mental and workplace wellness, which has seen increased focus by corporates now.

-> Health tracking - More and more consumers are now trying to track their health actively. This includes those doing purely from a preventive perspective such as using a fitness band, smartwatch, ring, or even a mattress cover to track your health.

-> Food and Supplements - This includes taking the right food and supplements to help your body get the required nutrition to aid your exercise and improve your health.

-> Others - These would include things that indirectly aid preventive healthcare such as insurance, preventive diagnostic tests such as full-body tests, etc.

Each of the following is a big revenue pool in itself, however, in this article, I would restrict my analysis to only the health-tracking devices focused on wearables as a segment, one of the fastest growing ones globally and seeing new emerging players in the space

The evolution of wearables ?can be divided into 3 parts -

First Phase (2010-2016) - Fitness bands see a blitz scale growth, with Fitbit leading the way

The following era saw the rise of Fitbit as the primary player blitz-scaling from $5 mn in revenues in 2010 to $2.1 Bn in revenue in 2016. That is a 420x jump in revenue and 273% CAGR in 6 years.

Fitbit was one of the first movers in the space, with the main functionality being the ability to track your steps, distance travelled and calories burned over some time. While phones including the iPhone also had sensors to allow Fitbit to be more accurate.

By 2014, Fitbit had a 67% market share and was way ahead of its competitors in the race.

Fitbit went public in June 2015, raising $732 million and surging from a $4 billion company to $9.7 billion by the end of 2015.

However, this success was short-lived with the entry of Apple’s smartwatches

Second Phase (2016-2019) - Apple rises to become the leader in wearables globally

Since, 2015 with the launch of smartwatches, smart bands have been on a decline with the likes of Fitbit and Garmin losing out on the market share eventually becoming smaller players in a relative sense.

?One of the reasons has also been that smartwatches are not only able to provide useful info about various health parameters including tracking different types of workout, and heart rates, with some even capable of doing an ECG but also provide a lot of useful functional features such as Bluetooth connectivity with your phone, allowing you to take calls, read messages and even play songs. Thus, the functional use-case for smartwatches was much more as compared to a smart band. The only exception to the decline in smart bands has been Whoop, more on that latter.

Apple - Establishing category leadership in the wearable space

In 2015, Apple launched its smartwatches and since then has been a leader in the wearables pack with players like Xiaomi, Huawei, and Samsung not able to get more than 10% market share. This is despite the more premium price point that Apple smartwatches have as compared to the other brands. Still, it has been able to maintain a 30% market share over the years in terms of shipments, more importantly, not value.

The only recent entrants in the space have been Indian homegrown players like Noise and Firebolt in the smartwatch space which are still growing at a fast pace, however, are lower-value products as compared to Apple catering to a majority of Indian consumers and majorly focusing on the functional aspect rather than health as the main use-case.

?Fireboltt -? Catering to the mass demand for smartwatches

Founded in 2015 by Aayushi and Arnav Kishore. Fire-Boltt's product portfolio includes smartwatches, wireless earphones, and fitness trackers. The company has been successful in creating products that cater to the needs of the Indian market, such as the Phoenix Series and Ninja Call series, which have played pivotal roles in driving the brand's growth.

The company has launched 30+ smartwatches across price points, with a focus on affordable pricing and smart features. The brand roped in celebrities such as M S Dhoni and Kiara Advani as brand ambassadors, which has helped to increase its visibility and credibility.

Fire-Boltt has also been able to establish a strong supply chain and manufacturing capability in India as compared to other players, which has helped to reduce its costs and improve delivery times.

In FY 23 revenues, the company was expected to do 2400 crs in sales having done 500 crs in sales in FY 22.?

Noise - A home-grown bootstrapped player

In 2014, Noise launched as a bootstrapped D2C brand selling smartphone accessories like cases and covers on online platforms such as Amazon and Flipkart.

In 2017, within 3 years, it had achieved Rs 24 crore in sales, primarily from online retail but decided to pivot to Premium Segment. Recognized the need for brand-building and high-entry-barrier segment. Shifted focus to TWS (true wireless stereo) products in the premium market.

Thus, it launched Smartwatches and Wireless Headphones by the end of 2017. Rapid growth followed the pivot, establishing Noise as a market leader in India's smartwatch category.

Within three years of its pivot, it took the lead in market share in the smartwatch segment in 2020 and then maintained it for more than eight quarters.

It recently faced external capital ($10 million) from Bose Corporation valuing Noise at around $420 million.

Smart Rings (2018-Present)

The latest innovation in the preventive healthcare space has been smart rings

This has been brought forth by the need to wear something light and easy to wear while tracking your health. The rings as well as smart bands like Whoop which I have mentioned in detail below are focused more on an audience that wants to actively track their movements throughout the day.

In this case, as a user of smartwatches, I feel that they are great for tracking my movement while walking throughout the day. However, a smart band like Whoop is much better during the gym as most of the time I have to take off my watch while lifting weights and similarly, sleep tracking through rings is a much more convenient way to track as compared to wearing smartwatches.

The rings also provide you with valuable information with a focus on tracking sleep. They have been positioned as a sleep tracker to help you track your sleep and over time provide suggestions to improve the same

In the evolution, wearables have taken a more focused use on certain specific use cases as compared to the generic use case being solved for by smartwatches such as tracking different types of workouts (Whoop) or tracking sleep ( Oura or Ultrahuman). Thus, the average number of wearables used for a person might be two or more depending on the functionality as compared to sticking to one in the last decade.?

Oura - Creating a niche market focused on rings

Oura was the first mover and market creator in this space. Founded in 2013 and based in Finland. The ring was first introduced in 2015 and has since gone through several iterations, with the latest version being the Oura Ring Generation 3. The company has sold one million units

Celebrities as well as sports leagues have been fans of Oura for years now.NBA announced it bought 2,000 Oura Rings to monitor athletes. Celebrities like Jennifer Aniston , Prince Harry and Kim Kardashian West have also been spotted wearing the sleep tracker.

However, in recent years the trend has started catching on with a wider audience. Google search trends show a clear uptrend in smart rings being searched since Jan 2022. A major reason for this has been the entry of new players like Ultrahuman in the space. Thus, helping expand the category further. With Samsung, Noise, and Boat also planning to launch their rings in late 2024 or early 2025, the market is set to expand further.

One of the complaints that people had with Oura rings, for customers looking for a more value-for-money product was that the subscription was too expensive given that the customers had already spent on the ring.

The entry of Ultrahuman solved this problem.

Ultrahuman - Indian David to US Goliath

The company was founded in 2019 by Mohit Kumar and Vatsal Singhal, who were also co-founders at Runnr (Sold to Zomato for $40 mn)

The company initially came out with the Ultra Human M1 tracker which used continuous glucose monitoring to provide real-time data and insights on metabolic health, allowing users to make lifestyle choices to improve their metabolic health and prevent diseases. This allowed users to take active action about their health, rather than just tracking. The patch has also provided Ultrahuman with over 1Bn+ anonymous glucose data points to create the world’s first open glucose database (Link ) which it launched recently.

Ultrahuman also offers a range of digital tools and services, including AI-powered health analysis, personalized recommendations for nutrition, exercise, and supplementation, and access to a community of active members and certified performance coaches for its users without any additional cost.

In 2022, Ultrahuman launched its smart ring, which has seen good traction with consumers as shown by its traction. The company is currently profitable with a $31 million Annual Run Rate (ARR) and had projected an ARR of $50 million by March 2024 and is growing rapidly in the Middle East, Asia, Europe, and the US

Special mention - Whoop - Fighting against the wind and winning

The other smart band players that launched have dwindled, however, one of the key players to stand apart is Whoop. At a time when smart bands have seen a decline globally

Whoop has been able to buck the trend by being a specialized player in the smart band space by focusing specifically on sleep as a category.

?Founded in 2012, WHOOP offers a wearable wristband with detailed health analytics.The company last raised $200 million in a Series F round in August 2021 valuing the company at a $3.6 billion valuation

From 2011 until 2016, they made a very conscious decision to build for their “super users" or in more normal language: athletes only. They ended up with Michael Phelps and Lebron James in their cohort of the first 100 users.

WHOOP became the official wearable of MLB, the NFL Players Association, and the Navy SEALS; a bunch of individuals who depend on optimal performance.

Another testament of Whoop’s ability to have a good customer love is people switching from Fitbit’s. Here’s a Reddit thread by 10 years Fitbit detailing why he switched to Whoop after just 30 days of using it -

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So, what does going through the history of the wearables space get us to?

Key Challenges and Learnings from the Space -?

?For anyone building in this space, certain key challenges and learnings can help from the examples of companies that have done well or failed after scaling quickly.

1. Industry may change in 4-6 years, Be prepared – Smart bands started in 2011 and stayed on top till 2016 when smartwatches started rising. In recent years, rings have become popular, with some customers switching from smartwatches to rings. Thus, customer preference keep on changing and anyone building in the space will need to have the ability to launch multiple products. Indian companies have been adaptable in this matter. Ultrahuman serves as a good example with multiple product lines such as patches, rings, and now Ultrahuman home. Most of these devices are also complementary rather than competing which helps to tap into the existing brand equity. Similarly, Boat and Noise are both entering the ring segment, seeing the growing demand despite being leaders in the smartwatch space.

2. Price point matters a lot – Wearables that have done well? in India can be segmented into two categories -

●????? Category 1 - Mass Products with basic features – Companies like Fire Boultt, Noise, and Boat would fall in this category. This category is categorized by high-price competition in smartwatches. Even the ring by Noise and Boat is expected to be priced much lower??? (< Rs. 10k) than the Ultrahuman ring to enable mass adoption.

●????? Category 2 - Premium product with advanced features – Companies like Apple and Ultrahuman would fall into this category. Here pricing does not matter but the community of users using the product matters more.

Thus, it is important to understand your target audience and cater your brand image according to the type of products that you are selling. For example, Channel selection may differ for Category 1 and Category 2. For Category 2, a D2C approach followed by EBO might work best whereas for a Category 1 player, cracking offline distribution may be of the same importance as D2C & marketplaces.

3. App drives engagement and can be a game changer if the product is commoditized to an extent - In most user reviews that I have read or seen, there are only slight physical differences between the Ultrahuman and Oura ring from the user perspective with the user experience mainly being characterized by the insights and recommendations that they get on the app. The accuracy of the insights and the relevance of the recommendations have more impact on the user and the retention of the user to the brand.

4. Subscription models for health-tracking devices are not as preferred by mass premium consumers - Premium consumers, may not worry about subscription-based services but mass premium consumers may want a hardware-only product. This was one of the key decision-making areas for the consumers that Ultrahuman was able to win by offering a lifetime free subscription as compared to the existing ring companies like Oura which charged a monthly subscription for viewing the detailed analytics from the rings with the subscription price being revised higher over time??

5. For premium products, important to go through the influencer marketing route - Multiple companies like Whoop and Oura have gone through this route of roping in influencers focused on fitness. This helps to associate the product with peak performance and reliability helping in creating brand equity in the early stages of growth for the business.

The second and more important question is what next or what are the opportunities one can look to -

The success of wearables companies has led to -

1. Majority of the people already have used one or more wearables either for health or non-health use-case
2. Creating a set of users who are actively focused on tracking their health
3. Customers willing to pay even a premium to get feedback on improving their health

For each of these consumers, different kinds of services can come up.

Here are some of the opportunities that I believe can be pursued in the space -

1. There is still space for a new mid-market brand for wearables to be established which might offer similar features to an Apple smartwatch but provide value pricing.
2. Consumers willing to pay a premium for their services, such as those who have already used a product like Ultrahuman/Oura ring, can be upsold more health-tech products for their homes. For example, the recently launched temperature-adjusted mattress covers might be a good example of catering to these consumers who are already accustomed to paying a premium. Similarly, Ultrahuman is launching the Ultrahuman Home to help you monitor and control your Home’s Health.
3. A supplement to the existing health-tracking infrastructure might be to create offerings based on customers' health-tracking data. For example, if CGM helps me to figure out my diet, an additional service that provides me with not only a meal plan but meals based on my previous health data. This might help me to not only track but improve my health over time.?

Happy to discuss with founders building in the space about how they think preventive healthcare will shape up and the opportunities that excite them.

We at WEH Ventures, have invested in a sports and fitness company called Game Theory and believe that as India grows, preventive healthcare spending is set to rise significantly. Anyone who is building in the space can reach out to me at [email protected]

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