Mars Market Insights Wearable Tech: Leveraging Canadian Innovation to Improve Health

MaRS Market Insights Wearable Tech: Leveraging Canadian Innovation to Improve Health

MaRS is a member of Authors

Hadi Salah, Industry Analyst, Life Sciences & Healthcare, MaRS Market Intelligence Emily MacIntosh, Market Research Analyst, MaRS Market Intelligence Nirusan Rajakulendran, Market Research Analyst, MaRS Market Intelligence

To download the original report, please visit www.marsdd.com/news-insights/mars-reports/.

For further information, please contact Hadi Salah at [email protected].

Disclaimer: The information provided in this report is presented in summary form, is general in nature, current only as of the date of publication and is provided for informational purposes only.

MaRS Discovery District, ©March 2014 Table of Contents

Quantifying life: The rise of the Quantiﬁed Self movement 4

Wearables 5 What are wearables? 5 A brief history of wearables 6 Applications: Wearables for health 8 Table 1. Incumbents: Wearables for health 9 Health and wellness wearables: Benefits 10 Benefits to physicians and other health providers 10 Benefits to health payers 11 Benefits to patients 11 Health and wellness wearables: Shortcomings 12 Target customers 15

Market landscape: Global market for wearables 16 Market segments 17 Wearables for ﬁtness and sports 18 Wearables for medical and health 19

Canada’s wearables startups and innovators 21 Startup proﬁles 22 Researchers 31 Startup challenges 33 Manufacturing 33 Value proposition 33 Design and style 33 Privacy 33

Investment snapshot 34 Investor proﬁles 35

The future of wearables 39 Predictive guidance 39 Multiple functionalities in a single device 39 Wearables as a platform 39 Many losers, few winners 40 Prices drop, new business models emerge 40

References 41 Quantifying life: The rise of the Quantiﬁed Self movement 4

Quantifying life: The rise of the Quantiﬁed Self movement

Quantified Self, also known as lifelogging, That is what Quantified Self is all about. Tracking is the use of technology to capture, ourselves enables us to understand such things as why we gain weight, how we learn, what irritates measure, track and analyze data from a us and what makes us happy. This leads to greater person’s daily life. The types of data that self-awareness, which can spur us to improve the can be captured and tracked are infinite in status quo. What has changed over time is how we number, and the data collected are unique track our data. Instead of pen and paper and journal to the individual. For example, it could entries, technology has rendered tracking metrics simpler and automatic. Our repertoire of Quantified include environmental data to understand Self tools is large and continues to grow—from ideal temperatures for personal comfort, straightforward software and mobile apps to devices one’s calorie intake in a day, the amount such as smart scales to wearables that are continu- of exercise had, or the number of tries it ously worn by the user. took to learn a new process. Users tend to use software tools, apps and devices

intermittently, recording data when they feel like it. Although the inception of the Quantiﬁed Self It’s an inconsistent and possibly biased approach. In movement can be traced back to Gary Wolf and contrast, wearables have exploded onto the scene Kevin Kelly of Wired Magazine who coined the in the last year mainly due their continuous and term in 2007, humans have been tracking their automatic tracking functionality, helping Quantiﬁed activities for decades, even centuries. One example “Selfers” log their metrics with minimal effort. This is Benjamin Franklin who, in his autobiography whitepaper explores wearables as an emerging published in 1791 1, described tracking 13 personal technology, with an emphasis on how it may impact virtues in a daily journal and marking his progress health and wellbeing. in 13 different charts, one for each virtue. Franklin’s motivation in quantifying this was to monitor self- improvement and to accomplish his ambitions. Wearables: What are wearables? 5

Wearables

What are wearables?

Wearables are small electronic devices, often consisting of one or more sensors and having computational capability. They are embedded into items that attach to the body, such as a user’s head, feet, arms, wrists and waist. They can resemble a watch, eyeglasses, clothing, contact lenses, shoes or even jewellery. Wearables either capture data or present data. The types of data collected could be as simple as the number of steps taken in a day or as complex as ECG or brainwave measurements (Figure 1). For output, wearables can convey information to the user through a variety of means, from the blinking of an LED light to a complex display of data.

Figure 1: Incumbents: Examples of wearables, their location on the user, and sample data collected.

Google Glass

Lumo Back Calories Burned StepsTaken 1,302 6,538

Stress Level Body Temperature pts OMSignal 86 37°

Sleep Blood Pressure 8.5HRS 120 HRS 4.0REM 80 Fitbit

Heart Rate Adidas 845745 miCoach

352 University Avenue | Toronto, Ontario A brief history of wearables 6

A brief history of wearables

Wearable computers have been around for several Since the 1970s, the miniaturization of components, decades. Two early pioneers are Georgia Tech’s the switch to digital from analog, superior computing Thad Starner, and Steve Mann. Starner strongly power, better battery technology and capacity, the advocated the potential of wearable computers incorporation of wireless connectivity and reduc- while completing graduate work at MIT and later tions of overall costs have resulted in an eruption working as a technical lead/manager on Google’s of new products entering the market. In 2014, at Project Glass. Mann is often described as the the Consumer Electronics Show (CES) in Las Vegas, “father of wearable computing” 2 for building a wearables emerged as a top trend, with new prod- head-mounted computer device as a high-school uct announcements from most major electronics student in the 1970s. Mann currently researches companies, and new startups covering a plethora of wearables at the University of Toronto. applications, with health and fitness being a key cate- gory 5 . A brief summary of notable events related to Credit is also due Ed Thorpe and Claude Shannon, wearables is shown in Figure 2. who invented a cigarette pack-sized pocket computer that was designed to predict roulette wheels in the early 1960s 3 —one of the first wearable computers. Later that decade, Hubert Upton, while working on a personal project, invented eyeglasses that were designed to aid with lip reading for hearing-impaired individuals 4 . This exemplified the potential health and wellness application of wearable technologies. A brief history of wearables: Figure 2 7

Figure 2: A brief history of wearables. 1960s 1970s 1980s

Ed Thorpe and Claude Shannon HP releases the HP 01 Steve Mann builds the invented a cigarette pack-sized calculator watch WearComp1 – a backpack-based pocket computer that was system capable of displaying data designed to predict roulette on a head-mounted micro display wheels. The device was easily and wireless communications concealed in a shoe. 1990s 2000s 2010s

Steve Mann developed the First generation iPhone is A plethora of consumer “Wearable Wireless Webcam” released, revolutionizing wearables hit the market, pocket computing. including Nike FuelBand, Fitbit, Google Glass

Sources: 1980 Mann, Steve (2013): Wearable Computing. In: Soegaard, Mads and Dam, Rikke Friis (Eds.). The Encyclopedia of Human-Com- 1960 http://www.slashgear.com/cracked-glass-why-wearables-are puter Interaction. 2nd ed. Aarhus, Denmark: The Interaction Design the-next-security-maelstrom-04284709/ Foundation. http://www.interaction-design.org/encyclopedia/wear- able_computing.html 1970 http://www.media.mit.edu/wearables/lizzy/timeline.html 1990 http://www.interaction-design.org/encyclopedia/wearable_ computing.html Applications: Wearables for health 8

Applications: Wearables for health

Health and ﬁtness, and other medical applications, are areas where wearables are expected to play a transformative role. However, the application of wearable devices has potential in any industry where hands-free data collection is highly valued. Wearables can be generally divided based on consumer or non-consumer applications. These two categories can be further segmented based on the particular sector the product targets.

The consumer market segments for wearables include: 6

General consumer Fitness and sports Fashion and apparel Home automation and remote identiﬁcation Gaming and recreation

The non-consumer market segments include: 7

Defence and security Enterprise and industrial Healthcare

Wearables for health (including ﬁtness, wellness and medical applications) are some of the early applications that have already gained traction. Notable examples are shown in Table 1. Their success so far is not a surprise, as they have already shown clear beneﬁts to the user in a number of ways. Table 1. Incumbents: Wearables for health 9

Table 1: Incumbents: Wearables for health

Nike Founded in the US in 1964.13 One of the world’s best-known sports brands.

Product: Nike+ FuelBand, one of the best- known ﬁtness wearables on the market 14 Fitbit

Founded in 2007, Function: All-day activity tracking of calories headquartered burned and steps taken. 15 Activity is quantiﬁed in San Francisco. 8 using “Fuel”, a metric developed by Nike as Raised over $96 “a single, universal way to measure all kinds million from VC. 9 of activities” 16

17 Price point: $150–$170 USD Products: Two wristbands (Force and Flex) and two clip-on trackers (Zip and One), in addition to a wiﬁ-enabled smart scale (Aria).10 Jawbone The Fitbit Premium service provides users with additional training guidance and reports 11 Founded in 2006,

headquartered Functions: Tracks steps, distance covered, in San Francisco. calories burned, ﬂoors climbed, and sleep Raised $189 million quantity and efﬁciency in funding, valued at $1.5 billion. 18 Price points: $60–$130 USD 12

Product: UP wristband-based ﬁtness tracker

Function: Track steps, calories burned, distance covered, pace, active vs. inactive time, and sleep quantity and quality 19

Price point: $130–$150 USD Health and wellness wearables: Beneﬁts 10

Health and wellness Beneﬁts to physicians and other wearables: Beneﬁts health providers

1 Patient2 3 4 data5 6 for7 improved8 services An array of potential benefits stems from the Wearables enable patients to capture health data use of wearable devices for health. These tools that would otherwise go undocumented. This data can be leveraged whenever information or can be captured as the patient goes about his or her communication is required, a hands-free interface day-to-day activities, rather than under the stress of is helpful 20 and consistent monitoring is bene- a medical appointment. Physicians and other health ficial. Though wearables for health have not yet professionals can then use this newly available data achieved broad, mainstream usage, one can to improve the diagnosis, treatment and management already see the many ways in which they could of various illnesses, effectively increasing the quality benefit health providers, health payers, and of the services they offer. 21 individuals.

1 2 Hands-free3 4 5 6 7for8 efficiency in sterile/aseptic environments The hands-free nature of many wearable devices is beneficial to health professionals working in sterile environments because, when worn, they preclude the need for surface sterilization. For instance, in an operating room where hand washing is required, physicians and other staff can use Google Glass to continuously receive information throughout surgery without needing to use their hands. 22 Enabling multi-tasking through hands-free information or communication also assists these professionals by increasing work efficiency. 23

1 2 3 Training4 5 6 and7 8collaboration from the first-person point of view Wearables with video and audio capability will enable unique new training and collaboration opportunities for medical professionals. Users will be able to film procedures as they are performed, creating extremely effective first-person point-of-view medical training materials. Additionally, wearers can connect to other professionals, creating the opportunity for real-time collaboration (e.g., with specialists) during procedures, potentially improving patient outcomes.24 Health and wellness werables: Benefits 11

Beneﬁts to health payers

1 Wearables2 3 4 5 as6 levers7 8 to improve plan members’ health (and thereby decrease costs) Insurers and corporations are looking to wearables as tools to improve plan members’ health and thereby reduce costs. 25 Insurers such as California’s Blue Shield have offered incentives such as reduced premiums to plan members who use their speciﬁed wearable and demonstrate improved activity. 26 Other insurers have focused on incentivizing the use of wearables through point-based reward systems, or cash. 27 Similarly, some corporate wellness programs include wearables as a means of tracking daily activity as a part of group competitions or other motivational programs. 28 Regardless of the incentives chosen, these programs demonstrate the clear cost beneﬁt of using wearables to improve plan members’ health.

Beneﬁts to patients

1 Improved2 3 4 5 health6 7 8outcomes through sustained motivation It’s long been known that measurement (of both a baseline state and progress) is a key component to improvement. The same applies to health, with even basic pedometers showing a measurable impact through better health outcomes. 29 Consumers ﬁnd tracking their exercise and other health data motivating. In a survey, 52% of wearable owners indicated that they primarily use their devices to stay motivated. 30 Keeping track of accomplishments and seeing them visually represented inspires users to continue pursuing their goals. 31 Forrester Research found that with wearables incorporating techniques such as gamiﬁcation, social sharing and digital coaching, it “make[s] it easier for people to go to the gym every day.” 32 Health and wellness wearables: Shortcomings 12

1 2 Ease3 4 of5 data6 7 collection8 cost of sensors and other components, 35 combined Wearables for health will likely be attractive to with economies of scale, will ensure that the price individuals wishing to track their vital signs and oth- of wearables continues to decrease as their popularity er metrics throughout the course of their day or increases. particular activities. 33 The concept of Quantified Self is gaining in popularity and wearable devices1 2 3 4 Better5 6 7care8 have automated the data collection. Rather than Wearables, whether used by the patient or the focusing on estimating, measuring, documenting health professional, have the potential to improve and calculating individual metrics at particular medical care. In addition to the benefits that health points in time, users can simply put on a wristband professionals can leverage in the delivery of care to (or other) device. With this ease of data collection, patients, wearables can also benefit the wearer by users can acquire more data across broader time- helping them better quantify their health 36 and com- frames than could be achieved manually. municate it to their healthcare providers. Consumers’ newfound ability to track and share their own health 1 2 3 Highly4 5 6accessible7 8 technology data is also effectively democratizing medicine,37 With many devices’ price points landing around allowing patients to take control and demand the $100 mark, wearables for health are afford- better care. able tools, accessible to many. 34 The declining

Health and wellness wearables: shortcomings

Accompanying wearables’ potential beneﬁts are some current shortcomings. As a new technology, these tools require further reﬁnement before they are ready for broad, mainstream adoption.

1 Unaddressed2 3 4 5 6 regulatory7 8 and policy issues has already highlighted the issue: “As everything The regulatory requirements for medical devices from glasses to watches to thermostats become are well established worldwide, but new wearables Internet-connected, those gadgets become vulnerable are not required to play by the same rules. Wear- to malware and other security and privacy issues.”39 ables are designed to capture personal data and As the wearables space rapidly evolves and policy transmit it for analysis or sharing, but little has issues emerge, consumers will likely look to govern- been established with respect to responsibility for ment to establish roles and responsibilities relating when that information lands in the wrong hands. to matters such as privacy, security, data ownership, These new technologies are operating in a regula- and consent. tory and policy grey area. 38 MIT Technology Review Health and wellness wearables: Shortcomings 13

1 2 Technical3 4 5 6difficulties7 8 1 2 3 4 Unwillingness5 6 7 8 to deliver insights, interpretation As with many new technologies, wearable devices or coaching are facing hardware and software issues that may Continuous tracking of one’s activities generates a hamper widespread adoption.40 The incorporation large volume of data in a short period of time. This of sensors and computing power into ever-shrinking data only becomes valuable though once it is “stored, devices designed to be worn on the body present managed, normalized, and interpreted”48 for (or physical challenges. A common concern is water- by) the user. Providing these insights and coaching proofing,41 since sweat or washing can introduce could, however, be interpreted as medical advice and damaging moisture into the wearable. Additionally, thus the product would enter the medical device the devices’ compact size can result in constrained space. Often, consumer-focused wearables are wary power reserves 42 or frustratingly small screens of moving into this area due to stringent industry and displays. 43 Hardware issues have already been regulations. As a result, “the user has to do a lot of observed in the market: in 2011, Jawbone’s UP work” 49 to overcome the existing “lack of actionable product experienced circuit board problems that context.” 50 Many wearables continue to bypass the impacted charging, data collection and, at times, development of robust guidance or coaching to avoid overall function.44 being classified as a medical device, and consumers are likely not achieving their potential because of 1 2 3 Poor4 5 data6 7 quality8 these business choices. While the performance and functionality of the sensors are key factors for health and fitness1 2 3 4 5 Impracticality6 7 8 of device designs applications,45 they are of critical importance for Growing evidence shows that up to one third of wearables classified as medical devices. These consumers who purchase wearables stop using products risk a recall by the U.S. Food and Drug the devices within six months.51 This is likely related Administration (FDA) and/or Health Canada if they to the impracticality of device designs, as consumers provide inaccurate readings.46 Some wearables have expressed strong interest in how devices feel currently on the market have produced noticeably when worn.52 The use of wearables may simply prove incorrect data, leading consumers to question too awkward and unworkable for broad adoption. the utility of the devices. One product that has Beyond the “feel,” users are also likely concerned generated this type of user complaint is the Nike+ about social acceptance: “wearing a screen to the FuelBand, which “undercounts or overcounts right of one’s nose may appear a little strange,” 53 certain types of activity.” 47 Companies must focus and “making odd, random gestures, pointing, jabbing, on improving data quality to ensure next-generation plucking, and talking [to oneself]” are not yet part of devices meet consumers’ expectations. expected social behaviour. With time, however, these activities may become as accepted as our common- place use of mobile phones and other technologies.55 Health and wellness wearables: Shortcomings 14

1 2 3 4 5 6 Unfashionable7 8 designs 1 2 3 4 5 6 7 8 Preying upon human insecurity Though efforts are underway to counter this, Humans have survived on this planet for thousands many existing wearables are not attractive devices. of years without the need for modern wearable tech- ZDNet (a leader in IT news and analysis) went as nology. History shows that humans do not require far as to call many devices “ugly” and noted that these tools in order to be healthy, yet consumers “tech companies aren’t always the best purveyors are still motivated to purchase them, likely due to of fashion.” 56 Other descriptors of wearable design worries about health and mortality. It is important have included “clunky” and “dorky.” 57 Consumers to recognize the drivers behind different wearable prefer products that do not look like devices, or applications— and to address these with the best at least have “the design aesthetics of a company of intentions. like Apple.” 58 As Frost & Sullivan emphasized, “the more aesthetic elements (e.g., branding, design, and comfort) of consumer goods need to be given serious attention if tech companies are to achieve mainstream adoption among consumers.” 59

1 2 3 4 5 6 7 The8 cost of inactivity This drawback is directly related to the healthcare payers’ usage of wearables. If these devices can show an individual’s health and fitness efforts and reward them accordingly, then the devices can also be used for the opposite purpose. As Forrester Research concluded, “as fitness wearables track the activities of more and more employees, for-profit healthcare systems will both reward adherents to an active and healthy lifestyle ... and punish non-adherents.” 60 Although the shift to more personal responsibility for one’s health may seem generally positive, it could also prove detri- mental to those who, for one reason or another, cannot achieve the activity benchmarks defined by payers. Target customers 15

Target customers

As relatively new products, wearables are generating initial interest among a select group of consumers and health professionals. The demographics of the target consumer are summarized in Figure 3.

Figure 3: A typical target customer for wearables CURRENT DEVICE OWNERS

Average age of 36,62 on the contrary analysts are also predicting expected 4% future shift: Baby Boomers63 OF ONLINE ADULTS

Nearly equal interest 8 Million from males & females64 65 US CONSUMERS have traits that imply they’d be interested Higher household incomes 67 in purchasing a wearble device for fitness61 than average consumers

Likely to already own a FUTURE DEVICE OWNERS smartphone.69 Open to new technology & applications70

As prices decrease, 25 to 44 More women income will not be years old buying wearables a predictive factor 68 in range Health status and interest:

Healthy and health-conscious 71

Tom Emrich, a wearables expert and super user, puts it well: Unhealthy, but striving to be healthier “As we see more fashion come into play, this may become one technology that’s used more by females. A lot of [wearables] are Regular consumer of organic considered jewelry. If devices become more fashionable, it’s a or natural products & likely to exercise in spare time 72 women’s market.” 66

Specialists and professionals Currently, the majority of wearable devices are Professional early adopters are likely to be similar in consumer-targeted products. As the market matures, profile to consumer early adopters: well-educated, it is expected that new uses will emerge for existing high-earning Gen-Xers who are open to new technol- devices (e.g., viewing patient vitals on Google Glass ogy. However, despite choices by the early adopters, during surgery 73), and that new devices will be devel- products that can provide (and scientifically demon- oped specifically for certain professions (e.g., PUSH strate) the most benefit in relation to cost are likely for sport scientists). Some potential applications to be the ones purchased at the institutional level in for wearables in health professions include surgical healthcare. Adoption of certain technology by hospi- assistance, medical training, diagnosis and patient tals, research centres or universities will ensure that monitoring.74 Due to the diverse potential applications, the selected devices gain a demographically broader healthcare has become the largest non-consumer user base. segment for wearable technologies. 75 Market landscape: Global market for wearables 16

Market landscape: Global market for wearables

As noted, the wearable devices market numbers vary as analysts work to grasp this evolving has grown dramatically over the past few market. For 2014, sales estimates by research firms ranged from less than 50 million units to more than years as advancements in electronics, 200 million units annually.79 Looking ahead to 2018, material sciences and sensor technologies ABI forecasts that annual shipments will increase to have allowed innovative startups to create 485 million units. In contrast, MarketsandMarkets, relatively inexpensive devices. Other driv- another research firm, predicts that by 2018 the total ers, such as consumer interest in personal shipment of wearable electronic products will expand to 134 million units.80 health and fitness, have helped to propel

this market forward. In terms of global revenue, market research estimates range from $4.65 billion81 to $9.17 billion.82 Firms Consumers have responded with their wallets. varied greatly in their projections for 2018, ranging 76 For example, Pebble has sold about 190,000 units, from a conservative $6 billion 83 to an optimistic Samsung sold over 800,000 units of their Smart- $30.2 billion.84 (Figure 4) Watch in just two months,77 and Nike has sold

78 between one to two million FuelBands. Figure 4: Estimated range for the wearables market 2014-2018 The market for wearable devices is both broad and varied. These devices range from simple wristwatches $30.2 B that count calories (like the Nike Fuelband) to continuous glucose monitors (like the MiniMed Paradigm® from Medtronic) to heads up display, or HUD, monitors (like SNOW2 from Recon Instruments). Manu- facturers are developing creative ways to ﬁt these devices on and with the human body. This market is poised to accelerate over the next few years as $9.17 B innovative ideas come to market and consumer $6B interest and knowledge grows. $4.65 B

Initial estimates by market research firms confirm the growing interest in this field. However, the 2014 2018 Market segments 17

The wide disparity in market numbers shows that in- of the internet, when there was a lot of early hype dustry experts are still uncertain about the wearable although most of the expectations were only realized technology market. Some analysts believe that con- after a decade or so of growth.85 In order for man- sumer interest in this market is overinflated and that ufacturers to translate “hype” into sales, they must it will take some time for interest to grow. JP Gown- focus heavily on educating their consumer base der, Vice President and Principal Analyst at Forrester on the true benefit of a wearable device. A recent Research, believes that “…the wearables market is, survey conducted by IDC affirms a similar message in fact, suffering from a bit of a hype bubble.” In his that consumers are still unsure about the true value blog, Gownder draws a comparison to the early days proposition of wearable devices.86

Market segments

Consumer applications are the largest component of the overall market. BCC Research published the most comprehensive study on the topic, projecting the market to grow from $6 billion in 2014 to $22.1 billion in 2018. The non-consumer market accounts for the rest: $3.2 billion in 2014 and $8.1 billion in 2018 (Figure 5).

Figure 5: Market size for consumer and non-consumer applications by application and region, 2014-2018 2014 | $9.2B 65% 35%

CONSUMER NON-CONSUMER $6.0B $3.2B

APPLICATIONS REGIONS APPLICATIONS REGIONS

GENERAL CONSUMER NA HEALTHCARE NA $2.5B (42%) $2.3B (38.3%) $1.1B (34%) $1.5B (47%)

FITNESS & SPORT EU DEFENCE & SECURITY EU $2.0B (33.3%) $839M (26%) $2.4B (40%) $1.0B (31%) APAC APAC GAMING & REC $1.1B (18.3%) ENTERPRISE & INDUSTRY $636 (20%) $623M (10%) $1.1B (34%) ROW ROW HOME, AUTO & REMOTE ID $525M (9%) $220M (7%) $281M (5%)

FASHION & APPAREL $110M (2%)

2018 | $30.2B 73% 27%

CONSUMER NON-CONSUMER $22.1B $8.1B APPLICATIONS REGIONS APPLICATIONS REGIONS FITNESS & SPORT NA $5.1B (23%) $7.6B (41%) HEALTHCARE NA $1.1B (34%) $3.4B (41%) GENERAL CONSUMER EU $6.9B (28%) EU $13.2B (60%) DEFENCE & SECURITY $2.3B (28%) $1.0B (31%) APAC GAMING & REC $5.3B (22%) APAC $2.0B (9%) ENTERPRISE & INDUSTRY $1.8B (22%) ROW $1.1B (34%) HOME, AUTO & REMOTE ID $2.3B (9%) ROW $1.4B (6%) $715M (9%)

FASHION & APPAREL $395M (2%) 2014 | $9.2B 65% 35%

CONSUMER NON-CONSUMER $6.0B $3.2B

APPLICATIONS REGIONS APPLICATIONS REGIONS

GENERAL CONSUMER NA HEALTHCARE NA $2.5B (42%) $2.3B (38.3%) $1.1B (34%) $1.5B (47%)

FASHION & APPAREL $110M (2%)

Wearables for ﬁtness and sports 18

Figure 5 (Contd): Market size for consumer and non-consumer applications by application and region, 2014-2018 2018 | $30.2B 73% 27%

FASHION & APPAREL $395M (2%)

Wearables for ﬁtness and sports

Fueled by the Quantified Self movement, wearables these tools help motivate users to realize personal for fitness and sports have captured the attention goals such as maintaining a healthy weight and get- of enthusiasts and consumers alike. Wearables for ting the proper amount of sleep. These devices help this market sector measure data such as heart rate, consumers gain a deeper understanding of their own step count, calories burned, breathing rate, balance, body and, in the process, recognize the necessary explosive strength, and much more. These devices next steps to improve their overall health. are generally simple in form and function and are marketed towards professional and amateur athletes, The fitness and sports segment is currently expe- coaches, parents of athletes, and health-conscious riencing fierce competition as companies like Nike, consumers. Customers are interested in fitness devices Jawbone, Fitbit, Philips and Samsung battle for space. like the Fitbit Flex and the Jawbone UP because The total market size is summarized in Figure 6. Wearables for medical and health 19

Figure 6: Market for sports and ﬁtness wearables, 2014-2018

2018 2014 $2.4B . NA 44% EU 38% APAC 11% ROW 8% $5 1B NA 41% EU 36% APAC 12% ROW 11%

Wearables for medical and health

The potential applications of wearables for medical the University of California San Francisco, is currently and health purposes are vast. For the patient, a using Google Glass in the operating room.88 Glass wearable device can collect information on heart is a wearable device with a head-mounted display rate, brain activity, sleep patterns, glucose levels, that allows users to record and view videos and images, blood pressure, stress levels and more. And such browse the web, and run third-party applications. Dr. a device enables better sharing of insights with Theodore uses the device to view pre-loaded X-ray physicians and/or caregivers. For example, the and CT scan images while performing surgery. For BodyGuardian Remote Monitoring System® by Dr. Theodore, Google Glass allows him to focus on Preventice® is a wearable cardiac sensor that the patient at all times and not leave the operating allows physicians to monitor patients’ biometric room or switch to another system in order to view signals. This FDA-approved device monitors medical images. 89 non-lethal arrhythmias in ambulatory patients and delivers this information wirelessly to healthcare Wearable devices used for medical and health professionals. 87 Wearable devices are opening the purposes are often relied upon to provide vital door for physicians to oversee and deliver care information and thus assurance about accuracy and outside the clinic. reliability is critical. In most cases, wearables used in a clinical setting must receive approval from a Physicians and other healthcare workers are also regulatory body. These devices generally provide a experimenting with wearable technologies in their greater level of accuracy over ﬁtness devices and practice. As an example, Dr. Pierre Theodore, a are customized to meet the needs of the healthcare lung surgeon and assistant professor of surgery at provider and patient. Wearables for medical and health 20

Healthcare is currently the largest market segment for this market segment (as seen with ﬁtness in the non-consumer application of wearables. devices) will come from North America (52%), fol- (Although by 2018, it is predicted that the enterprise lowed by Europe (26%), Asia-Paciﬁc (16%) and the and industry market segment will take the lead. 90 ) rest of the world (7%). 92 The global healthcare market revenue for wearable devices is estimated to reach $1.1 billion in 2014 and The total market size for medical and healthcare grow to $2.9 billion by 2018. 91 The majority of revenue wearables is summarized in Figure 7.

Figure 7: Market for medical and health wearables, 2014 - 2018

2018 2014 $1.1B $2.9B NA 52% EU 26% APAC 16% ROW 7% NA 44% EU 25% APAC 20% ROW 11% Canada’s wearables startups and innovators 21

Canada’s wearables startups and innovators

In Canada, the wearable device startup and researcher ecosystem is thriving. World-class startups have emerged in recent years from different corners of the country, with clients across the globe. Leaders in this industry are proﬁled below. Startup Proﬁles: Airo Health 22

Startup Proﬁles

Airo Health

Funding: Undisclosed Revenue: Pre-revenue Number of employees: 5 HQ: Waterloo, ON

Device: AIRO Application: Nutrition, exercise, stress & sleep tracker Body location: Wrist Release date: Mid-2015 (expected) Price: $199

Founders: 1 Naman2 3 4Kumar,5 6 257 1 8 2 Emmanuel3 4 5 6 DeVries,7 8 24

Airo Health began as a University of Waterloo project Business model and then spun off into a startup. Leveraging the For consumers, Airo Health is considering a “one-time Velocity Garage mentorship and resources, the two price [for the wristband] with free online services.” founders began developing AIRO. This wearable, Though post-procedure aftercare and other medically- described as “one band for all your health goals,” focused markets are promising, the company has noted is intended to help users manage and control the that the business model may need tweaking: “As soon four pillars of one’s health: as you move into the healthcare space, the stakeholders completely change. It’s almost a given that 1. Quality of diet different business models will have to be used to 2. Effectiveness of exercise traverse that territory.” 3. Management of stress 4. Nature of sleep Timing With the growing awareness of health and factors Target customer that influence it, founder Naman Kumar feels that it’s Airo Health is targeting its first product to health- “the perfect time to bring out a device that essentially conscious individuals between the ages of 18 and gives [individuals] control over their own health. 56 who “want to live better and want to understand Wearable computing is the most convenient way for what’s going on with their own bodies.” everyday folk to have access to this kind of a utility and facility.” Startup Profiles: PUSH Design Solutions Inc. 23

PUSH Design Solutions Inc.

Funding: $900,000 Revenue: $150,000 Number of Employees: 10-12 HQ: Toronto, ON

Device: PUSH Application: Fitness & sports Body location: Arm Release date: Summer 2014 (estimated) Price: $149.00 USD

Founders: 1 Rami2 3 Alhamad,4 5 6 267 1 8 2 Mike3 4 Lovas,5 6 337 8 1 2 3 Suresh4 5 6Joshi,7 8 29

Toronto-based startup PUSH Design Solutions Inc. Initially the company went overseas to find a partner— focuses on providing professional athletes with sci- however, due to shipping delays, communication issues entifically validated data so that they can maximize and turnaround problems, the company is now seeking their strength-training exercises. Through the use of local suppliers. In our discussion with startups across a wearable device and a mobile application, athletes Canada, most felt that manufacturing and design were can track fitness metrics such as reps and sets, among the greatest challenges in this market. force, power, balance, speed and explosive strength. The PUSH armband allows athletes to review their Startup environment training and share their results with coaches, train- Canada is home to a number of innovative startups ers and friends. that are gaining international attention. We asked PUSH CEO, Rami Alhamad, what he thinks of this Target customer growing interest in wearables in Canada. His opinion? The device is currently being marketed to professional “It’s absolutely fascinating to be honest. To think that athletes, trainers and coaches. PUSH wants to ensure we’re such a small country, relatively speaking, com- that the product succeeds in the professional market, pared with our neighbours down south. And we are and then translate what they learn from the initial coming up with some of the leading wearable devices launch and scale the product for general consumers. out in the market right now!”

Challenges One of the key challenges for PUSH was ﬁnding the right manufacturing partner to deliver their vision. Startup Proﬁles: Engage Biomechanics 24

Engage Biomechanics

Funding: $240,000 Revenue: Pre-revenue Number of employees: 3 HQ: Toronto, ON

Device: PosturePod Application: Medical (prevention of pressure ulcers) Body location: Chest Release date: Fall 2014 (estimated)

1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 Price:8 Not available yet

Founders: 1 Andrew2 3 4 Eckford,5 6 7 3981 2 William3 4 5 H. 6Gage7 8

Engage Biomechanics was founded in 2012 as a Importance of partnerships for device York University spin-off. The idea for the device development stemmed from a chance conversation between two Mirvise Najafe, VP of Operations, emphasized the professors (the founders) and a nurse regarding importance of strong relationships with healthcare common issues in the long-term care sector. The facilities. He notes, “We work with them hand-in-hand wearable under development is designed to prevent to ensure integration with their systems. The part- pressure ulcers, commonly known as bedsores. The nerships that we build are a solid component to [our device will detect the position, posture and motion device] being a plausible solution.” of a bed-bound patient and will notify personnel when proactive intervention is required. In the Future of wearables future, Engage Biomechanics intends to launch Engage Biomechanics believes that, in future, single additional wearable technologies to aid in elder care, data sets will offer limited value and that instead the such as devices to help prevent falls and manage focus will grow into “predictions of certain events, wandering. or longer-term insights, both of which stem from an integration of multiple data sets.” Business model To appeal to institutional buyers, such as hospitals and long-term care homes, Engage Biomechanics is considering a subscription model. “We may not charge for the device upfront, but instead have a monthly subscription that includes the device, the maintenance and the SAP subscription.” Startup Proﬁles: Impakt Protective 25

Impakt Protective

Funding: $1.4 million Revenue: Under $1 million Number of employees: 4 HQ: Kanata, ON

Device: Shockbox Device: Playbox Application: Sports Application: (detection of head impact) Sports performance Body location: Body location: Head (helmet) Torso/chest Release date: 2011 Release date: Price: $149 Summer 2014

Founders: 1 Danny2 3 Crossman,4 5 6 7 4181 2 Scott3 4 Clark,5 6 437 8

In 2010, Danny Crossman and Scott Clark founded signed a contract with the Moscow hockey federation Impakt Protective, building upon helmet-based sen- so every eight- to eighteen-year-old in Moscow playing sor technology that Crossman had developed for hockey will be wearing Shockbox.” the military several years earlier. The company’s ﬁrst product, Shockbox, is a miniature sensor that Challenges is placed inside helmets. It is designed to measure Crossman points out that some Shockbox marketing the magnitude and frequency of impacts to the challenges stem from the fact that “traditional team head during sports. Its companion app then alerts sport is fairly old-school: it’s not a technology-rich the wearer if their brain has undergone an impact environment.” His view is that it is likely easier to that would put them at risk of concussion, prompting sell to individual athletes (such as skiers, runners them to remove themselves from play and seek and cyclists) who are more familiar with using sport medical attention. Impakt Protective’s next wearable, technology. Playbox, will leverage sensors to measure sports performance. Future of wearables in sport In the future, Impakt Protective believes certain Target customer wearables will be required for particular sports. The Shockbox product is aimed at team sport coach- Crossman notes, “Look at things like neck guards es, trainers, and (depending on the wearer’s age) and hockey: you have one NHL instance where the player or their parents. Impakt Protective has somebody got cut in the throat and now every kid in already had success selling their devices to organi- hockey wears a neck guard. Helmet sensors for the zations. Crossman explains, “We’ve got whole hockey head impact side will be regulated. It will be a man- leagues in Toronto using them. Alberta high-school datory addition.” football organizations are using them. We just Startup Proﬁles: InteraXon 26

InteraXon

Funding: $7.2 million Revenue: Undisclosed Number of employees: 35 HQ: Toronto, ON

Device(s): Muse Founders: Application: 1 Ariel2 3 Garten,4 5 346 7 8 Health & wellbeing 1 2 Trevor3 4 Coleman,5 6 7 348 Body Location: Head 1 2 3 Chris4 5 Aimone,6 7 8 35 Release Date: May 2014 Price: $299 USD MSRP

Toronto-based InteraXon is the creator of Muse: Finding Talent the brain-sensing headband. Muse is a brain ﬁtness Acquiring talent is one of the most challenging tool and wearable device that consists of a light- aspects of running a startup. However, for InteraXon weight headband with seven EEG sensors designed CEO Ariel Garten, identifying talent in Ontario was to detect and measure brain activity, just as a heart not a problem. “Many times people have asked me, monitor measures heart rate. The user’s brain ‘Oh, why don’t you go down to (Silicon) Valley?’” activity is converted into audio and visual feedback Garten explain, “And I respond with ‘no, there’s that is displayed on a tablet or smartphone. With competition for talent in (Silicon) Valley, and here real-time information, users can understand how (in Ontario) we have very, very talented engineers their brain is functioning and adjust their mind to and some of the best machine learning groups in achieve better results. the world.”

Target Customers Startup Hurdles The target customers for Muse are individuals who For Ariel and her team, some of the challenges are looking to decrease stress and improve cognitive that they faced early include identifying a manu- function. Examples of customers include students facturer, managing their inventory, and community who are looking to do better on their exams, parents management. with children who are looking to reduce stress, executives who want to be able to perform more effectively in the workplace and the elderly who are hoping to improve and maintain their cognitive function as they age. Startup Proﬁles: Kiwi Wearables 27

Kiwi Wearables

Funding: Undisclosed Revenue: Undisclosed Number of employees: 5 HQ: Toronto, ON Investment: $160,000

Device: Kiwi Move Market segment: Developers, Makers, Builders Body location: Arm, wrist, ankle, collar & chest Release date: July 2014 Price: $125 USD (pre-order price)

Founders: 1 Ali2 Nawab,3 4 5 CEO,6 3271 28 3 4 Zaki5 6 Patel,7 8 32 1 2 Olivier3 4 Mayrand,5 6 71 28 253 4 5 Ashley6 7 8Beattie, 32 1 2 3 John4 5 David6 7 Chibuk,8 25

Toronto based startup Kiwi Wearable Technologies significant market interest from B2B players. For both Ltd. focuses on solving problems for developers markets, Kiwi is working to ensure that a reliable and and builders in the wearable technology space. stable product is developed and shipped quickly to The company initially started with a development fully address their needs. kit that allowed developers to stream raw sensor data in less than 2 minutes, and now has built Technology up an open wearable technology stack that lets Kiwi is focused on developing open technology sys- developers build applications without advanced tems that incorporate privacy by design. The team knowledge of embedded electronics, kinematics focuses on using existing and scalable components or signal processing. The founding team has a blend to their solutions to ensure that they can be used as of experience in design, software development, further down the value chain as possible by develop- embedded systems, big data and general ers. Kiwi is also building technology that blends into a management consulting. user’s daily lives by being significantly less obtrusive than the wearable devices available today. Target Customers The target customers for Kiwi are developers, who Developer Community are interested in prototyping, building and operating Kiwi has a rapidly growing community of early adopters, their personalized wearable technology applications. who have purchased developer kits and provided These individuals or organizations are familiar with feedback in addition to building innovative applications rapid prototyping, 3D printers and basic web pro- on the Kiwi platform which include 1) smoking cessation gramming languages. In addition, Kiwi is also seeing app 2) electronic pillbox and 3) soccer free-kick appli cation amongst others. Startup Profiles: Lynxio 28

Lynxio

Funding: Undisclosed Revenue: Pre-revenue Number of employees: 1 HQ: Toronto, ON

Device: Lynxio Application: Physiotherapy Body location: Knee Release date: Undisclosed Price: Undisclosed 1 2 3 4 5 6 7 8

Founders: 1 Michael2 3 4 Vaughan,5 6 7 268

Lynxio is the brainchild of Michael Vaughan, a Passion and drive recent graduate from OCAD University’s Industrial Entrepreneurs start a business for many reasons. Design program. Lynxio’s vision is to create a knee For some, it is the challenge of creating something brace that will empower patients and give them a innovative. Others see it as a business venture and greater sense of ability and freedom. To do this, the opportunity to be financially successful. Asked Vaughan is working to create a device that will about his motivation in creating Lynxio, Vaughan allow patients to track and record their physio- described that for him the appeal lies in “opportu- therapy regimen and share the results with their nities to keep people safe from themselves or from physiotherapist. their environment, and in helping people get better quicker and more efficiently.” Challenges Having a design background, one of Vaughan’s key Market gaps challenges as an entrepreneur is learning how to run a There is a growing interest in the wearables market, business. Vaughan is actively looking for experienced although some gaps still need to be addressed to business partners. In the meantime, he is leveraging enable widespread adoption. Vaughan feels that resources at MaRS and OCAD University to launch current wearable prices are too high and that the his business. devices are generally targeted toward consumers with disposable income. He noted that wearables need to provide intrinsic value to the customer, and that most consumers will not purchase them just because they are new and trendy. Startup Profiles: Carré Technologies Inc 29

Carré Technologies Inc

Funding: $750,000 Revenue: Undisclosed Number of employees: 20 HQ: Montreal, QC

Device: Hexoskin Application: Fitness, health, and sleep tracking Body location: Torso (shirt) Release date: 2013 Price: $399 (additional shirts are $175)

Founders 1 Jean-François2 3 4 5 6 Roy,7 835 1 2 Pierre-Alexandre3 4 5 6 7 8 Fournier, 35

Co-founders Roy and Fournier initially established Current Gaps their company in 2006, intending to perform critical Fournier expressed a lack of manufacturing capacity analysis on health data. They quickly discovered for components and materials for wearable health that the devices to collect this data did not yet products. Despite the growing demand, Fournier be- exist, so they set out to create their own wearable. lieves that “there are no manufacturers that deliver the The device, Hexoskin, is a shirt with fabric-embedded technology at the right price with the right quality.” sensors, designed to be worn during a workout or throughout the day and night. This wearable is Data Ownership and Use capable of monitoring heart rate, breathing, steps, Data collected from Hexoskin is stored on the company’s calories, and more through its unobtrusive textile servers, and is leveraged for research and product sensors. Hexoskin is used by the Canadian Space improvement. The founders feel that this storage Agency and has been worn by medalists at the option provides the most value to customers. However, Sochi 2014 Winter Olympic Games. the company recognizes that data is still owned by the customer because “People should have the right Future of Wearables to own their health information.” Outside of the clinical environment, heath data is scarce. The creators of Hexoskin want to challenge that: “Our job is to have millions of people wearing smart shirts for health monitoring. With this data we will learn how to help people with their health and prevent disease instead of just curing it” says Fournier. Ultimately, they hope Hexoskin “Changes the way medicine is practiced around the world.” Startup Proﬁles: OMsignal 30

OMsignal

Funding: $1.2M Revenue: Pre-revenue Number of Employees: 18 HQ: Montreal, QC

Device Name: OMsignal Shirt Application: Fitness and stress tracker Body Location: Torso (Shirt) Device Release Date: Mid-2014 (expected) Device Price: Not disclosed

Founder(s): 1 Stéphane2 3 4 Marceau,5 6 7 44,8 CEO1 2 Frederic3 4 5 Chanay,6 7 843

Stéphane Marceau and Frederic Chanay founded Incorporating Predictive Features Montreal-based OMsignal in 2011. The co-founders Marceau expressed that the machine learning and had each become frustrated with elements of the algorithms needed to add predictive features to health system, and were inspired to create a device wearables are already in existence. He said that the to track and improve one’s own health. As a result, difficulty in incorporating these features actually OMsignal developed a bio-sensing shirt intended to stems from a lack of data: “The tough part is to get help users become their best and healthiest selves. the dynamic data set in the cloud by getting millions The machine-washable smart apparel combines fit, of people continuously bio-streaming their data. The compression, moisture wicking, and odor control mathematics are easy once the data set is there.” into a single garment. Using the OMsignal shirt, individuals can track heart rate, breathing, steps, Future of Wearables calories burned, and the unique OM index (relax- OMsignal believes that wearables (particularly con- ation/lack of stress). nected clothing) will become ubiquitous and a baseline expectation. Marceau envisions that wherever a Application vs. Platform Focus customer may shop, he or she “Won’t even ask and OMsignal has elected to build a platform because the clothes will be connected to the device that helps the founders “Want to enable this data set and the him or her live a fitter, healthier, happier life.” applications surrounding it.” The company is planning to allow developers to create their own applications that leverage the data collected by the OMsignal shirt. Researchers: Dr. Carolyn McGregor 31

Researchers

Dr. Carolyn McGregor, Health Informatics Research, University of Ontario Institute of Technology

Research focus and approach: health informatics, intelligent clinical decision support systems, stream computing, temporal data mining, critical care health informatics, neonatal health informatics, cloud computing in healthcare, patient journey modelling, women in computing and IT.

Dr. McGregor began her career in Australia, focus- for a lot of these wearables is what to do with the ing on business- and finance-related information data so it becomes information that creates value systems. She then shifted her focus to healthcare, for the individual.” establishing and growing the study of health informatics at the University of Western Sydney. Since Secondary uses of medical data from wearables 2007, Dr. McGregor has lead health informatics Though the public generally objects to its medical research in Canada. Her interest in wearables was data being sold or used by corporations, Dr. McGre- partly inspired by work on the topic of neonatal gor asserts that other types of secondary uses are critical care health informatics, where she encoun- viewed positively. Her research has confirmed that tered the problem that premature babies have “there’s a lot of public support for the use of the fragile skin that can be damaged by the adhesives data as long as it is for not-for-profit or research needed to connect monitor leads. Given their deli- or realization.” cate nature, Dr. McGregor felt that neonates could benefit from gentler monitors that did not need to Fostering innovation in wearables adhere, such as wearable sensors. Dr. McGregor highlights the need for a network connecting all parties involved in wearables for health. Data versus information in consumer-facing She notes that there should be more interaction devices between clinical experts and those who work on Dr. McGregor believes that raw data has little value wearable technology. In her opinion, “creating some for consumers. “Those raw physiologic signals aren’t sort of structure that supports and offers cohesion what I need—they don’t help me to understand how between the different groups” would greatly benefit well I am.” She explains that “one of the challenges Canada’s burgeoning wearables industry. Researchers: Kate Hartman 32

Kate Hartman, Social Body Lab, OCAD University

Research focus and approach: Critical engagement with technology, interdisciplinary practices, meaningful interactions, distribution of knowledge, & collaboration.

The human body is an open canvas at the Social Device-user interactions Body Lab. Located at OCAD University, the goal The Social Body Lab aims to create devices that of the Lab is to find meaningful ways for humans provide meaningful interactions. We asked Hartman to interact with technology. Director Kate Hartman to further elaborate on this concept. “The thing that leads a team of creative minds who tinker with we talk a lot about is whether technology contrib- technology and create innovative wearable devices. utes to or takes away from an interaction that you’re Hartman’s research and passion span a number of having. We have this proliferation of communication fields and include physical computing, wearable technologies, and in some ways it makes us more electronics and conceptual art. distracted, and in some ways it prevents us from really connecting with each other in a meaningful, Projects satisfying, multi-faceted way.” The goal of the Lab is The researchers at the Social Body Lab combine to investigate this idea further and find innovative art, design and technology to address challenges solutions to connect humans and technology in a and arrive at creative solutions. Some of the projects more meaningful way. focus heavily on design, while others centre on prac- tical ways to solve common problems. The Limber, Future of wearables a project that is currently underway is a system of When asked about her vision of the future of wear- wearable sensors that the Lab has created to reduce ables, Hartman responded, “I hope that by that point, repetitive stress injury among knowledge workers. we’ll see wearables that are more integrated and For details on Limber and other projects the Lab more sophisticated, and less obvious. It’s my antici- has underway, visit http://research.ocadu.ca/social pation and hope that we’ll look a lot like how we look body/projects. now, as opposed to some cyborg transformation. I see wearables ultimately bending to accommodate human interest and style rather than us going in some really sci-fi direction.” Startup challenges 33

Startup challenges

The wearable devices industry faces several unique challenges and hurdles that companies of all sizes must overcome if they wish to succeed. Through our research and discussions with investors, university researchers and Canadian startups, we have compiled a list of some of the key obstacles.

Manufacturing Value proposition Businesses in this industry are by nature hardware To attract and retain customers, companies must companies and thus encounter challenges that demonstrate tangible benefits. Collecting health software companies do not. Most of the startups we and fitness data has no intrinsic value unless it is spoke with cited manufacturing as a difficulty. For presented in a manner that the customer can under- entrepreneurs, it is not easy to procure the many stand and utilize on a daily basis. As more and more components that go into building a device. Finding devices enter the market and competition increas- the right manufacturer who is able to supply the es, selling a device that simply counts steps taken components at the appropriate specification and or calories burned will no longer suffice. To remain quantity is sometimes the greatest challenge for an competitive and encourage adoption, hardware man- early-stage company. Startups in this industry also ufacturers must partner with developers to release have to manage an inventory, which is often prob- value-add software apps that interpret and present lematic due to limited working capital and uncertain body metrics in a meaningful way. If wearable device consumer interest. Additionally, manufacturing and companies are not able to get developers to build apps inventory logistics make it more complex for hard- for their products, their device will ultimately fail. ware companies to pivot their business. Privacy Design and style Privacy and security is of paramount concern, espe- The style and aesthetics of the wearable device cially with wearable devices that collect health and affects its chances of widespread adoption by medical information. The recent privacy fears related consumers. Getting the overall look right is a major to Google Glass have intensified this issue, and if challenge. Ultimately, consumers want a device that the industry does not respond properly, consumer is not socially awkward to wear. While the product interest in wearables may diminish. Companies must must have a powerful processor and have a relatively clearly communicate to their target customers who long battery life, it cannot be intrusive and bulky to owns the information and how the information will wear. Companies need to achieve the perfect balance be used. In addition, they must ensure appropriate between design and function. security so that devices cannot be tampered with or hacked. Investment snapshot 34

Investment snapshot

Globally in 2013, wearables startups raised about $458 million across 49 investment deals, a signiﬁcantly more robust amount than in 2012, when approximately $250 million was raised across 19 deals.93 Health wearables comprised a signiﬁcant portion of that capital, accounting for about 30% of total money raised (or $136 million).94

Figure 8: Capital raised for wearables in 2013

$136M $8.51M CAPITAL RAISED BY HEALTH & AVERAGE SERIES A DEAL SIZE 30% FITNESS WEARABLE STARTUPS

OF DEALS WERE SEED/ANGEL $1.75M OR SERIES A CAPITAL RAISED IN 2013: 65% AVERAGE SEED/ANGEL DEAL SIZE $458 WHERE DID THE DEALS TAKE PLACE? MILLION San Francisco 40%

Massachusetts 13% YEAR OVER YEAR IN CAPITAL RAISED 80% (2012 - 2013) Investor proﬁles: Wearable Technologies AG 35

Investor proﬁles

Wearable Technologies AG

Founded: 2011 HQ: Herrsching am Ammersee, Germany Recent investments in wearables: 4DForce GmbH, Thimble Bioelectronics and SportsCurve GmbH Investment stage: Early-stage companies 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 Partners: 1 Christian2 3 4 Stammel5 6 71 82 Harry3 4 Strasser5 6 7 8

Based in Germany, Wearable Technologies AG Future of wearables (WT AG) is an early-stage investor in the wearable Schumacher expects that over the next few years, technologies market. In addition, the ﬁrm hosts three separate groups of consumers will emerge in one of the world’s leading innovation competitions the wearables market: a) Low-tech consumers; b) in wearable technology (Wearable Technologies general-purpose consumers; and c) pro-consumers. Innovation World Cup), provides strategy and technology consulting services and hosts international conference and trade show.

Startup challenges Florian Schumacher, a trend scout at WT AG and the founder of Quantified Self Germany, believes that the greatest challenge for startups in this market is that many “underestimate the difficulties of manufacturing a wearable device. That’s why we’ve seen so many startups either fail with their first generations, their first production batch, or in estimating the effort [needed] to get the whole production done.” Investor profiles: Daniel Debow 36

Daniel Debow

Co-Founded: previously founded Workbrain and Rypple HQ: Toronto, ON Recent Investments in Wearables: PUSH, Thalmic Labs, Bionym Investment Stage: Seed Partners: N/A

Daniel Debow is a Canadian entrepreneur and angel Social Adoption of Technologies investor. As an entrepreneur, Daniel co-founded Discussing the adoption of new wearables, Debow Workbrain, workforce management software, and emphasized that society has greater impact on usage Rypple, a social performance management platform than the devices’ technical capabilities. Referencing – both of which were targets of acquisitions. Current- Diffusion of Innovations, he stated, “The issue is not ly, Debow is Salesforce.com’s Senior Vice President, just about the technological adoption, it’s the social leading marketing for the group and re-branding adoption. People need social proof, they need proof the human capital management products under the from other individuals.” Daniel emphasized that name Work.com. As an active angel investor, Daniel entrepreneurs can overcome this challenge partly is motivated to foster the tech ecosystem in Ontario by selling to speciﬁc vertical uses. by making many smaller seed-stage investments.

Funding a Start-up Through Pre-orders When asked about pre-orders, Debow expressed that they can be “An enormously smart move,” for startups, particularly for those with significant hardware production costs, such as wearables. He commented that this appeals to him as an investor because it “Takes away a significant amount of revenue risk.” Investor profiles: Round 13 Capital 37

Round 13 Capital

Founded: 2012 HQ: Toronto, ON Recent Investments in Wearables: None to date Investment Stage: Series A Partners: 1 Bruce2 3 Croxon4 5 6 7 8 1 2 John3 4 Eckert5 6 7 8 1 2 3 Scott4 5 Pelton6 7 8

Based in Toronto Ontario, Round 13, is venture Advice for Startups seeking VC funding capital firm that is focused on investing in innovative There are a number of things that startups in this technologies in the information, communication and market can do to increase their chance of securing entertainment (ICE) industry, and have expressed VC funding. When approaching a VC, Scott advises interest in wearables. The firm is currently raising that startups should have a good understanding capital and will start investing in companies later of the size of the market, and whether they will be this year. manufacturing the device locally or overseas. In addition, Scott states that companies in this market Investment opportunities in wearables should have a good understanding of how much Scott Pelton, a partner at Round 13, believes that the working capital is required to run the business. Scott market for wearables is very lucrative with potential also believes that a perfectly executed crowdfunding for growth. In terms of investment potential, devices campaign can greatly help startups secure follow- that are able to collect multiple health and fitness on funding from VCs and other investors. metrics and provide some level of interpretation are the most attractive. Investor profiles: Mistral Venture Partners 38

Mistral Venture Partners

Founded: 2013 HQ: Ottawa, ON (Can) and San Jose, CA (USA)

1 2 3 4 5 16 27 38 4 5 16 27 38 4 5 6 Recent7 8 Investments in Wearables: OM Signal Investment Stage: Seed Partners: 1 Code2 3 Cubitt4 15 2 6 37 48 Sreedhar5 6 7 Natarajan8 1 2 Mike3 4 Scanlin15 26 3 7 48 5 Bernie6 7 Zeisig8 1 2 3 Gordon4 5 6 Smythe7 8

1 2 3 4 5 1 6 2 7 3 8 4 5 6 7 8

Mistral Venture Partners is a VC firm that focuses on Due-diligence investing in early stage companies in the Internet Cubitt emphasizes the need to have an excellent IP and mobile sector. The firm is hands on and works strategy in place, prior to seeking funding from a VC closely with their portfolio companies to provide firm. Cubitt explains that the wearables market is operational guidance and business expertise. Their becoming incredibly competitive and crowded, and ongoing support and international network means expects to see a “wave of litigation” in the next few that early stage companies are able to accomplish years. For investors, a key component of their due milestones faster and with less capital. diligence is determining if there are any patents that limit a company’s freedom to operate. Startup challenges Code Cubitt, Managing Director at Mistral Venture, explains that one of the major challenges for startups in this space is the sheer complexity of designing a device that requires multiple fields of expertise. Companies in this space often require experts from diverse fields like human physiology, fashion, textile, programming, and engineering and often it is a challenge trying to get all of these different areas to come together and collaborate. The future of wearables 39

The future of wearables

This report was researched using secondary resources and published studies. We also interviewed more than 20 stakeholders: investors, startups, academics and users. Secondary research reveals that wearables have been around for years. They hold tremendous potential to impact user’s lives in terms of their health, how they interact and communicate, and how they accomplish tasks and track data. The wearables market is expected to reach the billions of dollars. But what lies ahead? The industry leaders we spoke with shared some of their insights (outlined below).

Predictive guidance Multiple functionalities in a single device The current state of virtually all wearables, especially wearables for health, is that they track data and Today, the majority of wearables serve a single present trends. They help you ﬁnd out how you’re purpose or a number of related functions. They can doing and whether or not you’re meeting your goal— track the number of steps you take and how many and if you have enabled the social features, how you hours of sleep you slept. But if you want to use a stack up against your friend. wearable to track your heartbeat, control a light switch, measure your breathing, or authenticate your In the near future, we expect wearables to get even identity, then you need to wear three or four devices. smarter. Instead of tracking and displaying content That’s not an attractive proposition. We expect to see (i.e., a reactive task), wearables will be able to make new tools emerging that can manage a number of predictions and recommendations on how to improve user tasks. (i.e., a proactive task), based on data collected. These devices will guide the user to do things differently in order to reach a speciﬁed goal. Wearables as a platform

An increasing number of startups are exploring the possibility of allowing developers to access their devices and enhance their functionality. We expect this trend to accelerate, with more startups releasing application programming interfaces (APIs) for this purpose. We have also seen startups create products that are application-agnostic, built with the expectation that the developer community will design the “killer app” for their device. Future of wearables 40

Many losers, few winners

If the industry conference CES 2014 was any indi- cation, we will see hundreds of products enter the market in the next couple of years. The majority of these will be “me too” devices: products that do not offer new or innovative features. They will compete on price and design. We predict that the majority will fail, and that only the few that offer groundbreaking functionality will survive. The winners will be able to induce behavioural change in users, empowering general consumers to seamlessly move toward being stronger, healthier and happier, and enabling doctors to collaborate on and deliver more personalized healthcare. Successful wearable technology will also leverage the Internet of Things, with devices inter- acting with their environment.

Prices drop, new business models emerge

Today, the majority of consumer wearables cost between $80 and $300. We expect prices, along with proﬁt margins, to decrease. Entrepreneurs and startups will ﬁnd ways beyond selling hardware to monetize their innovations. The massive amount of data collected will be a source of revenue, as will predictive and actionable guidance of that data, perhaps delivered via an annual subscription. References 41

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