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BEST INDUSTRIES 2013

Thinking of Starting a Business? Check Out Consumer Health Technology

New apps and devices are bringing diagnosis and treatment straight to the end consumer.
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The Affordable Care Act put a spotlight on the surging cost of health care. That has opened a huge opportunity for companies developing tools to make health care--especially preventive and diagnostic care--more accessible to the masses. Increasingly, such products and services are being delivered online, through mobile apps and Web-connected devices.

The Market Is Big...and Mobile

Apps and devices that encourage consumers' overall wellness have proliferated over the past few years. Two leading products, Nike+ and Fitbit, include wearable sensors that capture their users' vital signs and movement and sync that data to apps on which their users can track their fitness status. Another fast-growing category of apps connects consumers with health care providers. For instance, ZocDoc, which has attracted nearly $100 million in funding, enables its users to research and book appointments with local doctors online. Other health apps aim to address the diagnosis, treatment, and ultimately prevention of diseases. WellnessFX, which launched last year, runs a mobile platform that offers recommendations for lifestyle changes based on the results of its users’ urine and blood tests, which the company supplies.

Mobile apps and devices will continue to drive growth in the consumer health technology industry. The segment’s market value will reach $6.6 billion by the end of this year, according to the research firm MarketsandMarkets, and will top $20 billion by 2018.

How to Get Noticed

New companies can stand out by pursuing services that enable consumers to make sense of the large sum of personal health data already in existence. For instance, the New York City-based company Curious is developing an app, currently in private beta testing, that uses data from platforms such as Fitbit to help its users answer questions about their health, such as “Does urine acidity correlate with body pain?” Even Google, which recently announced its launch of Calico, a company focused on solving aging-related health problems, may be entering the fray. Though few details about Calico’s operations have been revealed, industry observers have speculated that the new venture will analyze consumer data to expedite medical research.

Skills You'll Need

Given that many health apps on the market rely upon the collection and analysis of consumers’ personal information, aspiring entrepreneurs seeking to enter the field should have a strong facility with data. At the same time, developing apps geared toward consumers with minimal medical knowledge requires a nuanced understanding of health concerns, most readily found among former health practitioners. As a result, founding teams for health technology companies are usually interdisciplinary. “Understanding how to build a database is very different from knowing the science behind health care,” says Halle Tecco, the CEO of Rock Health, an incubator specializing in digital health. “Very few people have both skill sets.”

Prior industry knowledge will also lend entrepreneurs an advantage in navigating the many regulations that govern the industry. Companies that handle users’ personal data must comply with privacy standards set by the Health Insurance Portability and Accountability Act, or HIPAA. Additionally, companies that provide diagnostic tools or make health-related claims may soon require approval by the FDA before they can launch their services to the public, especially with recent studies raising doubts about the accuracy of certain screening apps.

Above all, in order to be successful, consumer health companies must eliminate the intimidation factor often present in conversations about health and medicine. The most popular apps and devices on the market, such as Nike+, have achieved this goal through an emphasis on design. Some companies have even gone so far as to acquire other firms for their design prowess. Aza Raskin, the designer who founded the mobile app company Massive Health, now serves as a vice-president of Jawbone, which acquired his company in February.

Areas to Avoid

Aspiring health-tech entrepreneurs should steer clear of products that focus solely on sleep. Two start-ups with an exclusive focus on sleep science, WakeMate and Zeo, eventually shut down after high-profile launches. Many wellness apps and devices have taken a broader approach by including sleep tracking as just one of many product features. For instance, Lark, a company that originally focused on sleep science, has since expanded its product offerings to address diet, exercise, and other aspects of health and wellness.

Where to Find Funding

Venture capital funding for health technology has continued to rise, with companies in the industry raising $849 million in the first half of 2013, according to Rock Health. But few health technology companies attract seed funding, as most investors prefer to fund companies that have already shown significant progress in product development. As a result, more companies are turning to crowdfunding platforms like Kickstarter to raise initial funds. Crowdfunding sites dedicated to the industry, such as VentureHealth and MedStartr, have also begun to emerge.

Possible Challenges

Establishing a sustainable business model remains a big hurdle for consumer health companies. Health care costs in the United States top $3 trillion, but consumers typically pay only 12 percent of that cost. “We still haven’t answered the question of who pays,” says Tecco. “We’re not used to paying out of pocket.” Though consumers have shown willingness to buy sleekly designed hardware, most health apps currently on the market are free. Many companies have sought to monetize their products and services by adding premium features, such as live consultations with doctors.

Despite business models, other tech companies have been eager to scoop up start-ups with promising products. Insurance firms and electronic medical record companies have been particularly active in acquisition deals. In February, for instance, the medical-records company PracticeFusion bought 100Plus, a personalized platform that uses game mechanics to encourage better health habits, for an undisclosed sum.

The Quick and Dirty on Consumer Health Technology

Major players

Jawbone, WeightWatchers, Nike. Privately held companies include Castlight Health and ZocDoc.

Investors are very interested...

Digital health care companies raised $1.4 billion from VCs last year, up 46 percent from 2011, according to incubator Rock Health.

...So are strategic buyers.

That includes insurance companies and other tech firms. Aetna bought Healthagen, maker of the health app iTriage, in 2011.

Brace for red tape

Start-ups have to navigate a maze of regulations regarding consumer privacy and health claims. Certain apps, like diagnostic tools, may require FDA approval.

What's the ideal prior job?

Big Data engineer, doctor, or medical researcher. Design skills help, too.

Industry buzzword

Wearables: Sensor-based technology that tracks users' vital signs. Wearables comprise one of the leading segments in consumer health care.

Last updated: Oct 9, 2013




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