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VCs Love Mobile Health Devices and Apps

Mobile Health Apps

Venture Capitalists are voting with their dollars when it comes to products and applications that target the mobile segment. Fifty companies in the mobile health segment have attracted $310 million in VC funding this year from January to August, compared to $229 million raised by 42 firms during the same period last year, according to a recent research report by Rutberg & Co.

The mobile health area refers to the marriage of healthcare applications with mobile devices such as wearable monitors and smartphones. It can be further divided into two sectors:

  • Regulated products: Devices that are used for diagnosis or treatment of medical conditions need approval from the Food and Drug Administration (FDA). Examples include blood sugar meters for diabetes, oxygen equipment, and drug delivery devices. Obtaining FDA approval is a time-consuming and costly process, but the rewards can be substantial.
  • Consumer products: Devices such as Fitbit and Jawbone Up are sold directly to consumers, and do not require FDA approval. These are not sold as medical devices, but as lifestyle devices designed to track a user’s fitness.

During the first 8 months of 2013, the top three recipients of VC funds in mobile health segment were Proteus Digital – a smart-pill maker, Fitbit, maker of popular fitness measurement bands, and Withings (acquired by Nokia Health), another maker of fitness bands. Whereas Proteus’s product – a tiny silicon chip embedded in a pill that is activated by stomach acids upon swallowing and communicates with a smartphone – is a regulated device, Fitbit and Withings are consumer devices that do not require FDA approval.

In the mobile health app space, Healthtap, MyFitnessPal, and Medivo (now Prognos) led the funding race. The table below shows the top investments in the mobile health sector:

Mobile Health Investments
Source: Rutberg & Company (September, 2013)
“Overall, we believe healthcare will be revolutionized by mobile, and we are bullish on the macroeconomic impact from venture-backed startups,” says Rajiv Chand, Managing Director and Head of Research at Rutberg and Company. However, he adds a sober note: “We caution that it is very difficult to grow companies within the sector and that although several companies are emerging as breakout leaders, most are struggling with adoption and/or revenue growth. Of note, the tremendous innovation in mobile health startups is impressive.”

Google Glass and iPhone 5s Create New Platforms

The recently introduced iPhone 5s incorporates an M7 motion coprocessor, which can track a user’s activities. App developers can take advantage of this popular device to create apps that monitor a user’s activity level and provide feedback on how to reach one’s fitness goals.

Similarly, Google Glass is creating its own ecosystem of developers with innovative new applications that present data in a new way to the users. Augmentics – developer of a Google Glass application for physicians – has recently raised a stealth seed round.

Interesting opportunities exist at the intersection of different market spaces. BioBeats has raised $0.7 million for an app that combines health and music. It listens to a user’s heartbeat and produces music that matches it. It also tracks biometric data.

The message for entrepreneurs is loud and clear: Listen to the VCs’ pulse, and develop apps that create unique value in the mobile healthcare space.

Shyam is a consultant and mentor to entrepreneurs. He has over 3 decades of international technology industry experience. He earned his MBA from Oregon State University, and Bachelor of Technology from Indian Institute of Technology. View details.

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