Singapore state-fund Temasek Holdings has invested $40 million into healthcare startup Hello in a venture round, less than a year after the company, on Kickstarter, had raised $2.4 million for their Sense sleep monitor.
Hello produces a Sleep Pill, a device which clips onto a pillow to assess sleep quality through movement, sending data to a Sense bedside orb that measures bedroom conditions such as light, temperature and noise. It also doubles as an alarm clock.
The funding for Hello is significant, as it comes at a relatively early stage for this venture. This latest investment puts the valuation of Hello, which was launched by James Proud, a 2011 Thiel Fellow, in August 2012, at $250 million. Hello only recently completed shipping its first batch of products to almost 20,000 Kickstarter backers. So far, Hello has raised $52.9 million in funding.
Previous technology investments by Temasek include Alibaba, the Chinese ecommerce group, and Snapdeal, the Indian online retailer. In 2011, Northbrooks Investments, a Temasek subsidiary, joined a $30 million Series C round for PCH International, which provides custom manufacturing and supply chain services to technology firms.
Having access to investors with considerable capital reserves like Temasek could serve to provide a long-term advantage to Hello. With most Silicon Valley ventures focused on software and internet services, manufacturing and distributing consumer electronics is more capital intensive and requires more funding to sustain a runway.
This investment comes amidst Fitbit’s IPO and a drive into fitness tracking by technology behemoths like Apple and Google. A Fortune article has mentioned a potential market cap of $3.89 billion, while a Seeking Alpha report projected a possible market capitalisation of $20 billion post-IPO. For comparison, Crunchbase data shows that Fitbit raised $66 million from Series A to Series D.
Healthcare gadgets are providing a highly profitable domain, as exemplified by Fitbit, which had a gross margin of 50 percent in 2014. This came from 10.9 million devices being sold, generating $745 million in sales for the company.
With this in mind, the Temasek deal signals growing investor interest in healthcare technologies globally, and an area that investors may want to peruse alongside the Internet of Things (IoT), which healthcare technologies overlap with considerably.
IoT is forecast to see tremendous growth in the 2015-2019 period. The IoT market in manufacturing operations alone will is expected to grow from $42.2 billion in 2013 to $98.8 billion in 2018, a five-year growth rate of 18.6%
According to a Financial Times report, Proud founded and sold Giglocator, a prior venture, for close to $1 million in 2012. After this exit, he used the proceeds to found Hello. After plugging into Peter Thiel’s network, Hello raised $10.5m in 2014, as well as adding influential Silicon Valley executives to its roster as advisors or directors. For instance, Dan Rose, Facebook’s vice-president of partnerships, joined Hello’s board of directors in February 2015.
This investment comes as Hello seeks to expand into Asia, where most consumer electronics are produced. The funding is required, as Hello scales up and positions itself to compete with larger health-tracking technology companies like Fitbit and Jawbone.
Temasek declined to comment on Hello, but said it was active in the tech sector through funds managing early stage and venture capital investments (e.g. Vertex Ventures), and through its direct holdings. In an official statement, Temasek said, “We see opportunities in the tech sector which cater to our investment themes, particularly those around the growth of middle income populations and their demand for consumer and technology products.”