Canada’s health wearables coming in from cold

Canada’s own version of Silicon Valley for fitness and health wearables is flourishing along the tri-city corridor of Montreal, Toronto, and Waterloo. The close proximity of these cities to the U.S. has allowed cutting edge wearables makers to quietly develop and test-drive technologies in Canada before launching them on the much-larger American consumer market. However, U.S. investors are finally beginning to take notice of the action up North.

Canada generated $109 million in electronic and semiconductor venture capital deals in 2015, according to the Canadian Venture Capital Association (CVCA), and wearables comprised a significant portion of that activity. The CVCA said more American VCs than ever are coming north for investments, attracted not only by the 30% lower Canadian dollar and low startup valuations, but by the groundbreaking technologies being developed.

“We have less ‘me too’ types of products and companies,” said Hadi Salah, Health Ecosystem Partnerships Manager at MaRS Discovery District, a government-supported medical and technology research and commercialization hub. “The majority of our companies are doing something that is unique, innovative, and best-in class…you will not see Canadian companies creating the next step-counter wearable to compete with FitBit.”

He says the Canadian health and fitness wearables market is much less crowded than the U.S., so there is a higher signal to noise ratio. Another advantage for Canadian wearables is that there are many local services available to help with productization strategies, from colleges with low cost services available to startups, to the proliferation of incubators and innovation hubs.

“Many of our startups have realized that it is more productive to do design, prototyping and even manufacturing locally versus going overseas,” said Salah. “Quality and communications barriers, plus navigating a foreign country have all been obstacles to scaling up quickly and efficiently.”

Capital for health wearables lacking

However, like most of the Canadian startup scene, wearables suffer from a major scarcity of investment and corporate venture capital, with telco Telus being the only corporate VC consistently investing in health technology.

“The challenge is how severely under-capitalized the ecosystem is here — without fuel in the tank, it’s hard to go anywhere,” said Zayna Khayat, Health System Innovation Senior Advisor with MaRS. She adds that capital is needed to develop robust clinical evidence and outcomes evidence, which can’t be done on the cheap.

But the scarcity of capital has turned out to beneficial in one manner, in that it has forced Canadian health wearables to be leaner as a result.

“Because we have a capital crunch and it is so hard to sell into the Canadian health market, our health tech startups are capital efficient and high quality,” said Khayat. “The bad ones get weeded out quickly via forces of natural selection.”

Khayat adds that the robust wearables ecosystem is also due to the quality and density of biomedical R&D along the southern Canadian corridor.

At the eastern end of the corridor, Montreal has a well-established smart clothing ecosystem that enjoys innovation support from the provincial Quebec government, Real Ventures’ FounderFuel accelerator and institutional investors like Caisse de Dépôt.

A major Montreal startup is OmSignal which makes smart shirts and bras for elite athletes that track oxygen levels, steps taken, heart rhythm and heart rate. It has raised almost $15 million so far, with $10 million of that from Bessemer Venture Partners. Also turning heads is the Hexoskin biometric shirt which measures physical activity, cardiorespiratory activity and sleep, and has been used by NASA, top athletes and military clients. Developer Carré Technologies raised $3.2 million to date in private funding and is accelerating Hexoskin’s medical certification for the digital health market.

At the middle of the corridor is Toronto, a bustling wearables hub clustered around MaRS and the nearby University of Toronto. As the country’s largest city and financial capital, Toronto is home to many of Canada’s top venture capital funds and institutional investors.

Health wearables have some notable entrants up north

A Toronto notable breakout is the brainwave-sensing Muse headband that helps users manage stress, boost cognitive function and meditate, with potential safety improving applications for clinical drug trials. Muse maker InteraXon has attracted more than $17 million in funding from the venture arm of the OMERS pension fund and high profile investors like actor Ashton Kutcher.

As well, robotic exoskeleton maker Bionik Laboratories has attracted $13 million in funding with its medical technology that addresses mobility impairments.

On the western end of the corridor is Kitchener-Waterloo, home of the Blackberry phone and a community that punches well above its weight in scientists and engineers thanks to the University of Waterloo. As well, the innovation ecosystem benefits from the Waterloo Accelerator Centre and from the government-funded Communitech which supports over 1,000 tech companies.

Thalmic Labs has generated a lot of buzz with its Myo gesture-control armband which has a range of applications from controlling prosthetic limbs to orchestrating presentations. The Myo has attracted nearly $16 million in funding, with Intel Capital and Spark Capital leading a $14.5 million investment. Other notable Kitchener-Waterloo wearables include: Airo (nutrition, exercise, stress and sleep tracker); Pervasive Dynamics (medical wearables providing diagnostic grade information); and SeeHorse (wearable monitoring devices for tracking the vital signs of horses).

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