AI has made health apps easy to copy, so many digital health startups are turning to hardware. In a new opinion piece for The Engineer, Oscar Daws explains why a device won’t protect you on its own, and what will.
In brief:
- – AI lets one or two people rebuild years of software in months. In digital health, the software itself is no longer your moat.
- – Hardware only protects you if it’s essential. If it’s an optional extra, a competitor will copy the app, skip the device and still win your customers.
- – If a smartwatch or phone could add it in its next release, you’re on borrowed time.
- – Defensible hardware usually comes from an unused biomarker, a known biomarker measured better, a lab technology made to work at home, or other inventive approaches.
- – Design can impact data quality, by making it more or less likely that the user will engage with the device properly.
- – Patents, clinical validation and medical device status raise the barrier further.
Why is software no longer a moat in digital health?
One of our start-up partners recently rebuilt its entire software platform with AI in a couple of months. The original build had taken a development team years.
For a long time, proprietary software protected digital health businesses: clinical workflows, decision trees and complex analysis built into an app. Now the latest AI tools let one or two people rebuild all of it in months, or less. You can see it in the flood of near-identical mental health and wellness apps.
Is hardware the answer for healthtech startups?
Only if it’s essential. The new thinking in healthtech is “hardware as the moat”: add a physical product and you’re harder to copy. A device does take longer and cost more to copy than code. But if it’s an optional extra, a competitor will copy the app, skip the hardware and still win your customers.
To protect a business, the hardware has to elevate the product: from measurement to diagnosis, or from wellness to treatment. Then it stops being an accessory. It becomes the way the digital system measures the body or acts on it.
Next, check it against the devices people already carry. Phones and smartwatches have optical sensors, accelerometers, microphones and cameras, and each release improves them. If your device offers something a wearable could add next year, it’s on borrowed time.
Where should digital health founders start?
By looking for reasons the hardware shouldn’t exist. Most companies start the other way round, looking for reasons to build a device. Only once you’ve ruled out every alternative, and custom hardware is the only effective way to solve the problem, have you found something that could be defensible. Completely new science is rare, and it’s hard to get clinicians and customers to trust it. There are other more realistic routes including a known biomarker measured in a new way (or accurately enough to support new conclusions) and miniaturisation – making lab-bench technology work in someone’s home.
“It seems counter-intuitive, but you should start by looking for all the reasons hardware shouldn't exist.”
Oscar Daws - Founder, Tone Product Design
Why does medical device design matter as much as the sensor?
Because in at-home testing, the person using the device is part of the system. Take an at-home microbiome test. The lab sequencing might be excellent, but in the hands of an untrained person in their bathroom, the results can be very different.
The collection device decides the quality of the data, and whether people use the test again. Good medical product design fixes this. A device that’s simply easier to use gives a better experience and more reliable results.
What should founders ask before building hardware?
Start with a blunt question: if someone copied your software tomorrow and gave it away free, why would customers still choose you? It’s the question your Series A investors will ask.
Then work through three more:
- – If a competitor added a hardware layer, what could they do that you can’t? Would customers find it more useful than your app?
- – If a competitor gained medical device status, what could they claim that you can’t? Would users value it?
- – Is the value to users and the business worth what the barrier costs to build?
We suspect few app-only founders can answer these comfortably. Those who can’t are relying on marketing, timing and speed to market, and those advantages are getting weaker.
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