We are continually refining our thesis on healthcare, from looking at clinical-grade at-home diagnostics to biotech and therapeutics. Our previous posts on this topic haven’t included digital health and wellness apps, but these consumer-facing products certainly play an important role in transforming healthcare and democratizing its access.

The consumerization of healthcare through apps continues to pick up steam, and what was once labelled the “quantified self” movement is starting to see mainstream adoption. We all want to be healthier, whether it’s through exercise (Strava, Runkeeper) or meditation (Headspace, Calm) as examples.

Apps can also overcome the common friction points associated with going to the doctor’s office or seeing a health professional (therapist, nutritionist, trainer): cost, lack of accessibility, and stigma. They make treatment and monitoring much more convenient – whenever and wherever a user needs it. And, smartphones and watches are ubiquitous with increasingly more sophisticated sensors and trackers to collect more data on our activity.

At Version One, we’re excited to see what new apps will emerge to help us with our health and wellness goals. We don’t have any specific products in mind, or any specific categories within physical/mental health and wellness, for that matter. But from an investor’s perspective, here are the questions we ask when looking at an app:

• What type of app is this? Is it aspirational (nice to have), treatment-focused (need to have), or monitoring (somewhere in between)? The type of app will affect engagement and business model.
• What is the daily / frequent use case? How engaging is the app and how “actionable” is it?
• Are users willing to pay for it? How (i.e. freemium / subscription, one-time download fee) and how much? How do we get to a good LTV:CAC ratio?
• How do we overcome the natural churn problem? When users feel like they have “healed,” or are in control of their situation (in monitoring or treatment cases), or are discouraged (in aspirational cases), there is a risk that they will no longer use the app. How do you address this?
• What is the best way to get your product out to market? At Version One, we’ve written about how we like bottoms-up distribution. However, going direct-to-consumer can be expensive here in terms of CAC, an unwillingness to pay (potentially lower LTV), and natural churn. This monetization and acquisition problem is probably why we’ve seen many startups take the B2B2C approach. However, the challenge with a top-down distribution is that when an app is recommended by your payer (for example, insurer or employer), it’s going to feel forced. People inherently don’t like to be told what to use – what employee wants to be told which app to use in their personal lives, even if there are strong incentives? The question is: how do you build something delightful with a top-down distribution?
• What about defensibility? Are there network effects around people: is there a community / social component to the app that is engaging? Are there network effects around data: is there unique information being collected?

 Are you building a digital health and wellness product? If so, we’d love to talk to you and think through how your app can scale. Scaling is key if we are going to make a lasting impact on the healthcare system and democratize resources to make everyone a healthier version of themselves.