From iPhone to Apple Watch

Once every five to ten years, a new platform emerges that has the potential to create enormous opportunity and wealth for entrepreneurs. One of those platforms was announced yesterday: the Apple Watch. You might be excited to buy one, but if you’re an entrepreneur looking for the right opportunity to start a business, you might also start thinking about building an app specifically for the Apple Watch or one of its smart watch ilk.

Over the past 10 years, we’ve seen an increasing number of platforms emerge for application development. And while many platforms promise to give startups access to a huge audience of new customers, few are successful enough to provide such reach. As Apple, Google, and Facebook have been successful in building their own platforms, they’ve leveraged their massive built-in customer bases to assure that well-built apps can reach millions of people.

When Apple launched the iPhone in June 2007, there were no third party apps. A year later, Apple launched the App Store with 500 third-party apps. In June of this year, there were over 1.2 million apps available in the iTunes store.1.

As part of yesterday’s announcement, Tim Cook spoke about WatchKit, a platform available to third-party Apple Watch developers, and previewed two dozen apps already in the works. I wouldn’t be surprised if there were over a million apps in the wearables space a few years from now.

New Hardware Means A New Opportunity

Prior to the smart watch, if you wanted to introduce an app that could track calories burned, sleep habits, or a heart rate, you would need to introduce a hardware product in addition to your software app, or else you could build onto a smaller hardware platform like FitBit. With the advent of Apple and Android’s wearables, now all you need to focus on is the software.

You can assume that millions of people will soon be walking around with hardware attached to them, monitoring and recording data related to their health and lifestyles. The potential for wearable app development remains tremendous.

The amount of venture capital focused on this space is also likely to be huge. In 2013, investments made in mobile companies exceeded $3.5 billion2, and in the nascent wearables market, $570 million was invested as of June 20133. History may guide the investment activity we’re about to see in the wearables space. In 2008, Kleiner Perkins Caufield & Byers launched a $100 million fund devoted to investing in iPhone apps– an amount that was doubled 2 years later4.

The winners are not always first to market, but the early starters usually benefit from eager investors looking to cash in on the excitement surrounding new platforms. For example, Zoosk and Zynga raised massive capital by being first or nearly-first in their respective verticals on the Facebook platform.

Less Competition = More Visibility

We also know from past introductions of new platforms that startups releasing apps first are more likely to benefit from higher rankings in app stores while there is less competition. First entrants to market are also more likely to figure out how to game app ranking systems before the full rules for new ecosystems are fleshed out.

Where is the Opportunity?

I would focus on one of these three areas:

  • Fitness
  • Healthcare
  • Data mining

I’m most intrigued by the promise of the smart watch to fundamentally upset the ways that we think about healthcare.

The existing healthcare paradigm is that you should visit a doctor to find out if something is wrong with you. With hardware that is constantly worn or carried by a user, the paradigm will necessarily change. For example, the measurements for a person’s well-being (pulse, calories consumed, sleep patterns, etc.) can be abstracted in real-time and messaged to a cloud-based service. In turn, that information will be used to alert you when you should see a doctor. Here, the paradigm shifts from one that depends on patient self-awareness and action to one that informs the patient and allows them to act accordingly.

The results of this paradigm shift could be profound. For one, it would likely lower healthcare costs because doctors are only being seen when they’re needed, instead of when they are being scheduled. On a larger scale, it could result in longer life spans because people will be more likely to visit the doctor when something internal requires attention.

The Apple Watch and the WatchKit aren’t available yet. But if you’re intrigued by the wearables market and you have an idea that could be delivered through a wearable app, it’s time to accelerate your thinking. Early 2015 should be an opportune time to start raising capital in the wearables space.

The Takeaway:

With Apple announcing Apple Watch and the WatchKit platform, entrepreneurs should move quickly to take advantage of the coming stream of venture capital and the potential to innovate in the early wearables space.

– Andrew