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WHOOP is the $3.6 billion startup giving members access to personalized, high quality, biometric data...
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The wearable technology market is estimated to be worth $116 billion in 2021 and is anticipated to reach $265 billion in the next 5 years, growing at a CAGR of 18% from 2021 to 2026. Such a large, expanding, and virtually untapped market has attracted the likes of big tech from Snapchat’s Spectacles and Facebook’s Oculus to the more mainstream wrist technologies of Google’s Fitbit, Apple’s Apple Watch, and Amazon’s Halo. The breadth of the wearable technology market is great, so to go one step further, startups as well as the aforementioned tech giants are diving into the fitness tracker business that is expected to reach $62 billion by 2023, according to Allied Market Research.
There is a lot of activity going on in the space, both organically and through M&A. Apple CEO Tim Cook has made it known that his goal is to make health and wellness Apple’s greatest legacy and launched the Apple Watch Series 6 with the slogan, “The future of health is on your wrist”. With a similar vision, Google has recently completed its $2.1 billion acquisition of Fitbit to spur its mission of ambient computing and putting its services everywhere, including your wrist.
But in the midst of this battle for market share lies the personalized health-as-a-service company, WHOOP. Founded in 2011 by Will Ahmed, WHOOP offers a subscription service to its personalized health tracking platform via the WHOOP strap (its wearable health tracking device).
Aging and deterioration no longer have to be accepted as inevitable. Personalized health tracking is a critical step towards anti-aging and longevity and WHOOP has established itself as a serious contender in the space.
Contesting tech’s biggest names in customer acquisition is no easy feat, but flush with cash following its $200 million Series F valuing the company at $3.6 billion, WHOOP has its foot on the gas and is growing rapidly.
WHOOP is clearly doing something right so I decided to dive into the company’s strategy and business model.
Let's get into it.
WHOOP’s goal is to unlock human performance by delivering personalized fitness, sleep, and recovery data to users, in real time. The company’s WHOOP Strap 4.0 sensors use LEDs (three green, one red, and one infrared), a 3-axis accelerometer, and advanced algorithms to capture the most nuanced heart rate and movement data to provide the user with 24/7 bodily feedback.
The Strap 4.0 collects data across 7 different metrics, 100 times per second and takes in about 140 megabytes of data on a person per day.
The sensor itself is basically a compact, 3-in-1 substitute for a chest strap (Heart Rate Monitor), an electrocardiogram (EKG), and a PSG machine (used in sleep studies), monitoring:
Heart Rate Variability
Blood Oxygen Levels
WHOOP embraces the idea that you can only manage what you can measure and puts expansive, but user-friendly biometric data at the fingertips of its users.
Acting as your personal health coach, it packages and presents the data to users in a proprietary, usable way, giving scores on Sleep, Strain, and Recovery. You can also export your wellness trends to give to your physician.
Sleep: The company states, “Sleep is one of the most important things you can do to improve recovery, boost the immune system, and make fitness gains. WHOOP recommends hours of sleep needed for optimal recovery and tracks sleep stages, disturbances, respiratory rate, and more.”
8 hours of sleep is not the baseline for every person. How much sleep your body needs is unique to you based on how you’ve been sleeping and how strenuous your day is. WHOOP provides insights on the quality of your sleep as well as how much sleep you really need.
Strain: Strain is a measure of how much stress you are putting on your body and can be affected by things like exercise, mental and emotional stress, working, commuting, daily chores, anxiety, running errands, parenting, etc. WHOOP provides a score of 0-21 and gives feedback as to how much strain is optimal for your body to take on with targeted exertion goals based on the state of your body’s recovery.
Recovery: Know when your body is ready to perform and when it needs rest. WHOOP gives a Red/Yellow/Green rating as well as a recovery score on a scale from 0-100% as a guideline to plan your day and stay healthy. The more recovered you are, the more you can achieve with your performance.
At the end of each month, your Monthly Performance Assessment will show you what’s detracting from your performance, and what’s improving your overall well-being.
Unlike the Apple Watch and other wearables, you never need to take the WHOOP strap off. A 60 minute charge will provide 5 days of battery life and to charge the strap, you simply slide the battery pack on. Though it isn’t waterproof, the company claims that if your body can handle it, so can the WHOOP Strap.
One of the downfalls with wearable tech to date is that consumers lose interest and stop using the hardware after only a few months.
While WHOOP is a hardware product, the first point of differentiation from other wearables is that the hardware is free when you purchase a WHOOP app subscription. This stands in stark contrast from the alternative offerings with large price tags. Using a SaaS model makes their cash flows much more predictable as they have a very loyal customer base who pay for the service every month.
Subscriptions come in 6, 12, or 18 month terms, for $30, $24, or $18 per month, respectively.
WHOOP is still a private company but we can infer from online reviews and their valuation tripling in 10 months, their net dollar retention is strong (people are renewing their memberships) and user growth is accelerating.
By offering a subscription service and providing a great product that users love, WHOOP also has the opportunity for a significantly higher LTV (Lifetime Value) per customer than competitors who charge exorbitant prices for each device.
Route to Power:
In all fields it is true that strategy begins with invention and to sustain a competitive advantage a great product is a necessary prerequisite; building an incredible product is all the more necessary in wearables when users wear your product 24/7.
WHOOP has built a devout user base by listening to their customers and continuously iterating the product to fit their needs.
2 of WHOOP’s first 100 customers were Lebron James and Michael Phelps, two of the greatest athletes in history.
The strap is now used by elite athletes in all sports from golf to CrossFit as well as corporate employees, blue collar workers, and anyone looking to take control of their health.
Last year the NFLPA partnered with WHOOP to provide straps to all active NFL players.
The picture below shows Strain Data from Kansas City Chief QB and WHOOP investor, Patrick Mahomes:
Reducing uncertainty with brand recognition is a great strategic component to acquire new users but against tech behemoths like Apple and Google, excellent branding alone will not be sufficient for WHOOP to retain its current user base and expand into new markets.
WHOOP has said that with this injection of capital they will continue to focus on R&D to enhance their product, begin international expansion, acquire tech companies to evolve membership offerings, and WHOOP Live.
Product enhancements and establishing an international presence are both great but neither are sufficient to sustain a long term competitive advantage.
The downfall of a subscription service is that if a user does not love the service, switching costs are extremely low at the end of the term. WHOOP needs to make strategic acquisitions to position itself as the one stop shop for personalized health and biometric data.
Communities have formed within the app where people can compete with one another and hold each other accountable. This function is still very raw and WHOOP should expend resources to build it out. Communities create product moats and network effects such that every new user increases the value of the service to all existing and future users.
WHOOP’s greatest opportunity comes in WHOOP Live, which is intriguing in a couple of ways.
First, the Live feature increases user engagement by overlaying real-time data onto your videos to analyze your body’s response to specific forms of training. Secondly, the company has begun to integrate WHOOP data into live sports broadcasts through the Live feature.
Now you can see your favorite player’s biometric data as they attempt a game winning free throw or a putt to win The Masters.
Verdict: WHOOP has built an incredible wearable technology device and established itself as a contender in the health tracking industry. The caliber of athletes that use the product as well as the loyalty of the WHOOP user base is a testament to how great the technology is.
Because they are a SaaS business, I cannot begin my subscription until I receive the WHOOP strap which takes about 2 weeks. As other companies iterate their products, distribution efficiency is going to play a key role in WHOOP’s growth and could be the cornerstone that differentiates whether they own the market or just participate in it.
WHOOP is still far from a household name and will need to make strategic acquisitions to appeal to a larger segment of the health tracking market and further engrain itself into the daily lives of its members.
It's almost impossible to predict where a company will go based off of where it has been but with a mission oriented team and a visionary founder at the helm, WHOOP is well positioned to continue its route for market share.
Until next time ✌️,
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