A mindful mix of themes, trends and continuums
The latest deep-dive from Claret Capital Partners analyses the wellness industry and the current trends that define it.
For several decades the health and wellness industry has influenced change at a fundamental societal level as consumer behaviours – and even entire health belief systems – have been created from the marketing of products and services designed to help people become the best versions of themselves. The sector has undergone many changes in the past decade, with tech advances, consumer awareness, social media – and most recently, the global pandemic – accelerating these changes.
Analysing the $1.5 trillion sector has its challenges, not least as the wellness industry continually diversifies and takes on new meaning. However, with insight provided by founders from Claret Capital Partners’ portfolio companies, as well as entrepreneurs, thought-leaders and fellow investors, we’ve broken the space down into the following trends:
The Blurred Line Between Wellness and Healthcare
Wellness: “The active pursuit of activities, choices and lifestyles that lead to a state of holistic health.” Global Wellness Institute
Healthcare has traditionally been defined as the provision and delivery of medical care services by licenced professionals, whereas wellness is a much looser concept of physical fitness, mental health and social wellbeing. The distinction between the two, however, has become increasingly blurred. There is a growing realisation that medical care itself only accounts for 10–20% of the contributors to health outcomes, with social determinants making up the remaining 80–90%.
Commercially, wellness treatments have typically been funded as discretionary payments from the pocket of the consumer. But as greater recognition that wellness inputs impact health and economic outputs, the pathways to alternative payers and reimbursement are beginning to multiply, fuelling the convergence of health and wellness, and unlocking new routes to commercialisation.
Building on Human-focused Technology
Technology has unquestionably altered our accessibility to wellness services and products, and begun to break down barriers such as geography and affordability. There is more choice in what we consume and how we consume it. Data-driven care and unprecedented levels of measurability allow us to assess ourselves in a more sophisticated way: tech can empower us as wellness consumers in ways that we were not before.
It is not just accessibility that tech has enabled: it is expected to play a critical role in tackling more complex topics, where deeptech and deep science are likely to be central to any step change in more misunderstood or complicated areas such as anxiety, depression or sleep.
Each industry leader we spoke to believed that the continued innovation from technology was fundamental to the future of the wellness space, although most recognised that a blended solution, of tech “hand in glove” with humans, is essential. In an industry where human touch and verbalisation of topics will remain important, tech should complement talented experts to achieve more, not replace them.
“Checking in with someone increases adherence and decreases churn.” (Investor)
Personalisation is Key
A ‘one size fits all’ approach to wellness services is broken: consumers expect a bespoke service when interacting with wellness providers and brands. Each interviewee expressed the critical importance of taking a personalised – even hyper-personalised – approach to wellness, with many entrepreneurs commenting that it was a critical foundation of their business.
“In other spaces personalisation is huge; why should it be different when it comes to our own body and our health?” (Founder)
Technology sits at the forefront of personalisation – the ability to collect data, segment and target individual demographics and their needs has paved the way for services and products to launch and accommodate previously underserved markets, from menstrual-cycle-syncing workouts and meal plans, to erectile dysfunction and mindfulness.
“If you can create a product or service that users genuinely engage and interact with, the latent demand can be massively powerful.” (Investor)
Like many other trends in wellness, personalisation is also on a spectrum – one investor we spoke with questioned how many start-ups are merely representing individualisation through a repackaging of existing solutions, versus those using proven science to genuinely advance towards truly personalised wellness services.
An Inequality of Adoption
Consumption of the wellness industry remains polarised, despite a generally positive perception in the media over the last eighteen months. Whilst the concept of ‘those who do and those who don’t’ is nothing new, entrepreneurs with whom we spoke identified a compounding divide in behaviours. Simply put: Pandemic-enforced lockdowns fuelled some individuals to create ever-healthier habits, and resulted in others falling even further behind.
As noted previously, wellness is predominately viewed as discretionary spend. Despite tech’s achievements in increasing accessibility, inequality in society means inability to purchase and access remains skewed by age, education, gender, income and digital inclusion. The elderly represent just one of the many demographics particularly underserved by the market. Wellbeing in later life is already being threatened by increasing rates of loneliness and mental health problems.
“More than 40% of people living in care homes have clinical depression and roughly half of those that enter a care home never leave.” (Founder)
Yet the vast majority of wellness products and services continue to prioritise solutions and support for the younger, digitally native generations.
Wellness in the Workplace
One area that has seen a notable shift in emphasis is the corporate wellness market, which was estimated at $56.7 billion in 2020. The Pandemic and the emergence of the hybrid work model have led to an explosion in companies seeking wellness products for their employees. The subject of mental health and employee welfare appears no longer a ‘nice to have,’ but rather a key consideration for management teams battling to attract and retain top talent. Wellness and work can no longer be separated – poor mental health affects the performance of staff, and poor performance of staff hits both the top and bottom line.
A number of entrepreneurs with whom we spoke identified increased churn and attrition, particularly at the junior staff level (‘The Great Resignation’). There has been an almost existential reassessment of the role of work in our daily lives and as a result employers are building more corporate wellness programs and offerings into their employee packages, which are increasingly seen as non-negotiable by workers. A number of the companies we spoke with emphasised that employee welfare was at the core of their culture.
“It’s a cultural tsunami – lots of people are moving (jobs) after the pandemic as they do not feel their company has taken good care of them, or because they are questioning investing time in their career, whether it is worth it and where they want to be.” (Founder)
Taboo or not taboo?
The notion of being happy and healthy itself is not a new concept, but our understanding of “how to be well” has changed. We are now more empowered with information on how to act and solve problems, and entrepreneurs are spotting the opportunities to serve those needs. What has resulted is a) a mobilisation of more advanced solutions for the more “legacy” aspects of wellness (like fitness), where tech provides more choice, gamification and a higher quality offering, and b) a societal change in attitude towards previously “taboo” topics, which are now on the agenda.
Isolation-enforced self-awareness and growing proliferation in the media over the last eighteen months has increased the openness of conversation surrounding wellness topics. Celebrities, sports stars and tech business across Europe have been leading the charge on breaking down barriers and tackling these issues in a more holistic way. Our relationship with wellness is changing: issues that were once an unspoken taboo have entered the mainstream, such as mental health, sexual health or addiction.
“We are becoming more understanding and accepting of mental health and the issues and the pressures that everyone is facing – the world is a very different place to what is was even 5 years ago.” (Founder)
Challenges remain, however. Fitness, for example, is generally perceived as a broadly positive aspect of wellness. Yet whilst mental health and “newer” topics are making headway, certain subsets remain stigmatised and continue to attract connotations of sickness and disease. The next step could be to normalise the prevention of such issues for everyone, rather than just the treatment of those who are already unwell.
Investment is Healthy
The wellness industry continues to be highly attractive to venture capitalists and growth equity funds alike – in 2020 investors poured more than $1.5 billion into mental health start-ups alone. The total level of investment is difficult to quantify as wellness start-ups tend to blend across multiple sectoral buckets. Unicorns and mega rounds are frequent across the sector and its sub-verticals, from telehealth services providers such as Kry (Sweden – raised >€250m) and Babylon Health (UK – raised >£450m at a >£1.5 billion valuation), to mental health platforms such as Lyra Health (US – raised $200 million at a $4.6 billion valuation) and Calm (US – $75 million at a $2 billion valuation).
Companies we spoke with expressed a demonstrable uptick in investor interest, and/or have closed significant funding rounds in the last 12 months. Almost every founder experienced increased inbound requests and identified shifts in both the type and geography of investors.
“Every week there is something new in the inbox (from an investor).” (Founder)
Although the record highs of 2020 may be difficult to sustain, strong investor sentiment is expected to prevail in the wellness industry. And whilst more traditional healthcare models will continue to remain high on the agenda for some of the investors we interviewed, as wellness models unlock more scalable and effective distribution routes VCs will continue to seek out the hottest growth areas, and attempt to get ahead of the curve.
We would like to say thank you to the following for your insight: Claret Capital portfolio companies Urban Sports Club and Elder, the founders from Fiit, Numan, HelloBetter, Mojo, Zebrain, Synctuition and her.one, fellow investors at Octopus Ventures, XAnge and Vorwerk Ventures, plus those contributors who were unable to be named.
To connect with the Claret Capital Partners Team and to understand more about our work with Wellness industry organisations, contact us here.