a16z Podcast | The Wearables Session

Market Landscape and Strategic Positioning

• Sector Segmentation: Wearables are diverging into distinct categories rather than converging on a "one-size-fits-all" device.
  • Fitness/Health: Focused on metrics like heart rate and activity tracking (e.g., Fitbit, Jawbone).
  • Health: Broader physiological monitoring and medical applications.
  • Fashion/Communication: Ringly's focus on jewelry aesthetics and discreet notification management.
  • ID/Authentication: Devices acting as biometric identifiers for access control and payments (e.g., NIMI bracelet).
• Product Lifecycle: Consumer purchasing behavior for wearables is expected to mimic the clothing industry, with consumers buying multiple devices (e.g., fitness, work, social) to match seasonal trends and specific occasions.
• Apple's Impact: Upcoming Apple watch rumors are viewed as a catalyst for the industry, though the specific feature set remains uncertain.

Functional Philosophy and User Experience

• Screen-Less Design: Ringly intentionally excludes screens to maintain a discreet, jewelry-like form factor, communicating via light and vibration to reduce information overload.
• Notification Management: The primary value proposition is filtering and prioritizing notifications (e.g., distinguishing boss calls from kid texts) rather than replicating the full smartphone interface on the wrist.
• Critique of Current Trends: Many current smartwatches are criticized for being "platform plays" that shrink phones onto wrists (Dick Tracy style) rather than solving specific use cases.
• Technological Maturity: The industry is compared to the early 1990s computing era; while early devices may be gimmicky (like the Apple Newton), the fundamental shift toward networked devices is inevitable, with a 10-year lag to reach mass utility similar to the internet.

Network Effects and Use Cases

• Four Connection Pillars: Wearables can connect to:
  • Devices: Passing notifications/actions between the phone and wearable.
  • The Self: Biometric sensing for mood and activity tracking.
  • Other People: Proximity-based communication and social awareness.
  • Physical Space: Interacting with IoT environments (lights, thermostats, security) to adapt settings to the user.
• Data Acquisition: Wearables and beacons will enable physical retailers to capture granular data on customer behavior (preferences, movements) currently missing from online analytics.
• Energy Efficiency: Enterprise applications can leverage wearables to optimize building energy use; examples include dynamic temperature control based on room occupancy, potentially saving ~20% of energy usage.

Enterprise vs. Consumer Adoption

• Enterprise Leadership: Unlike the last 15 years where consumer tech led enterprise, wearables may see enterprise adoption first due to centralized control over infrastructure and incentives.
  • Health Incentives: Large companies (e.g., eBay) self-insure and have a financial motive to reduce healthcare costs by promoting workforce health via wearables.
  • Security and Maintenance: Early enterprise use cases include security badges, remote expert guidance for field repairs (e.g., oil rigs), and medical applications.
• Google Glass: Cited as a prime example of potential strong enterprise applications over immediate consumer utility.

Capital, Manufacturing, and Distribution

• Funding Evolution: Hardware startups now leverage Kickstarter and pre-sales alongside venture capital, reducing reliance on traditional VC gatekeepers.
• Hardware Costs: Prototyping is expensive (e.g., $8,000 per board for miniaturized devices), necessitating significant capital investment.
• Direct-to-Consumer Model: Selling directly via a company website eliminates the ~50% retail margin, allowing for:
  • Higher quality materials and manufacturing costs for a given retail price.
  • Viability at lower sales volumes compared to the high-volume requirements of retail distribution.