Supersapiens: Not Boring Memo (Audio)

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Hi friends 👋 ,

Happy Monday! 

Ankur Nagpal, the founder of Teachable, is one of the founders / early stage investors I respect the most. We’re co-investors in Composer and Antara, and he’s nice enough to send me the updates for his fund, A$AP Capital. Each one is full of more impressive companies than the last. 

So when Ankur told me he had the perfect deal to do together, my ears perked up. He sent me the deck for Supersapiens and introduced me to the company’s founder and CEO, Phil Southerland. Once we spoke, it was an easy yes. Supersapiens is a product I’ve been waiting for for a decade.

We’re excited to bring you this deal, and an experiment on a new way for accredited investors to participate in the deal (hint: it involves no carry).

Let’s get to it.

Supersapiens: Not Boring Memo

The Supersapiens Investment Thesis

I try to be healthy. I wear an Apple Watch, workout with Future, track my steps (around the house), and monitor my sleep. And then I eat chips. If what gets measured gets managed, carbs have gotten a free pass. Well, until Supersapiens showed up. 

Supersapiens gives athletes continuous insight into their energy levels through a biosensor and app that provide the most accurate continuous glucose monitoring on the market. Top European endurance athletes including Ironman winners, champion cyclists, and record-holding runners trust the product, and the company is preparing to launch in the US, and to at-home athletes like me, with a large research trial rolling out this year with up to 10,000 participants. 

It’s entering the market at the right time. Premium wearable health and fitness tech is gaining widespread adoption, with WHOOP’s recent $1.2 billion valuation as the most recent example. What WHOOP is to heart rate variability (HRV) monitoring, Supersapiens plans to be for continuous glucose monitoring (CGM). It faces competition in the space, most notably Levels, but brings a differentiated product and a cornered resource to bear. 

Like WHOOP, Supersapiens has the best tech on the market, in this case through an non-exclusive partnership with Abbott. Abbott is the leader in the CGM space, having sold over $5 billion of its Freestyle Libre CGM for Type 1 Diabetes in the past three years. It launched the Libre Sense in partnership with Supersapiens in December 2020 to bring CGM to non-diabetic athletes. 

Everyone knows that diet has a massive impact on health, fitness, and performance, but CGM is the first product that gives people real-time insights into how both exercise and food impact their body. CGM will be the next big trend in wearables, and Supersapiens is the patron of the CGM peloton. 

Ankur and I are thrilled to invest in Supersapiens, and we’ll explain why by covering: 

* Wearables and CGM

* Supersapiens Story and Product

* The Abbott Agreement

* Targeting Athletes (and Everyone is an Athlete)

* The Supersapiens Team

* Business Model and Early Traction 

* Risks

* Opportunity

The world in which Supersapiens is successful at bringing its product to a broad swath of the population is a world in which people are aware of the specific impacts that food and exercise have on their body, more energized, and healthier. 

Wearables and CGM

The fitness tech market is on fire. In the past year alone: 

* Google / Fitbit. In late 2019, Google announced that it was acquiring Fitbit for $2.1 billion. The deal just closed in January.

* Apple. Apple generated more than 50% of global smart watch revenue in the first half of 2020 for the first time. 

* Mirror. In July, Lululemon acquired connected-fitness startup Mirror for $500 million.

* WHOOP. In October, WHOOP raised a $100 million round at a $1.2 billion valuation. 

* Future. That same month, Not Boring sponsor Future raised a $24 million Series B. 

* Peloton. The connected fitness company has been one of the pandemic darlings. Since its March trough, PTON is up 6.6x to a $43 billion market cap.  

Important measures like heart rate, activity levels, and sleep are tracked, dissected, and served up in real-time. We can get world-class training in the comfort of our own home. But monitoring the impact of our most important input — the food we put in our body — has been largely inaccessible. 

I’ve worked in finance, then at a startup, and now write a newsletter and run a syndicate. I’m as cliché as it gets, so of course, I read Tim Ferriss’ The 4-Hour Body as soon as it came out in 2010. One of the things that still stands out from the book is that Tim measured his blood glucose levels. I remember wishing that I had that data on myself, but thinking that Tim Ferriss was much richer and more into biohacking than I was, so I’d have to make do without it. CGM was clearly important, but so far out of reach. 

Each person’s body, optimal glucose levels, and responses to different foods are unique. By letting people track their glucose levels and adjust in real-time, CGM has immense benefits: 

* Energy Management. Our metabolism produces energy from the food we eat. For our metabolisms to work optimally, we need to keep glucose in a healthy and stable range, which we can’t do accurately without CGM. 

* Sustain Peak Performance. Glucose spikes and crashes can lead to fatigue, lethargy, lack of focus, and lack of energy. By monitoring how what you eat and when you eat it impacts your glucose levels, you can avoid spikes and crashes. 

* Stave Off Diabetes. Almost 100 million Americans are pre-diabetic, and most don’t know it. Understanding and adjusting early can help hold off diabetes. 

* Improve Recovery, Sleep, and Insulin Resistance. High glucose levels can hurt sleep, and I will do anything to improve my sleep. 

* Potentially Increase Longevity. Glucose imbalances can lead to a number of conditions that shorten lives; maintaining stable glucose levels can fight off diseases and may help you live longer. 

Take it from Supersapiens COO Todd Furneaux: 

In the decade between The 4-Hour Body and today, though, technology did what technology does: got cheaper, smaller, and more reliable. In 2014, Abbott launched the Freestyle Libre 10 Day CGM for Type 1 Diabetes, and has done over $5 billion in sales since 2018. Now, CGM is finally becoming available to the non-diabetic population. 

In November, CGM startup Levels raised a $12 million seed round led by a16z. You may have seen Levels on Twitter in the fall. Everyone who got the early version of the product posted the impact of different foods or drinks on their glucose levels. It was brilliant marketing and looked like a lot of fun. 

Levels is exciting, but it’s early, and sports a $399 price point for a one-month program “designed for health seekers to measure how their diet affects the way they feel, and their long-term health.” It also requires a prescription to use the product. 

Supersapiens is building a better, cheaper, faster CGM, available without prescription. 

Meet Supersapiens: Story and Product

Phil Southerland, Supersapiens CEO & Founder, has battled type 1 diabetes his entire life, and he’s winning. 

In 2004, he started Team Type 1, the first bicycle racing team comprised entirely of athletes with type 1 diabetes. In 2006, Southerland and Team Type 1 competed in the 3,000 mile Race Across America to raise diabetes awareness. They won the whole thing the next year, in 2007, and then again in 2009 and 2010. In 2008, the team professionalized, and today, Team Novo Nordisk is the world’s leading all-diabetic team of cyclists, triathletes, and runners. 

One of the secrets to the team’s success has been CGM. Because the team is made up of diabetic athletes, they used CGM for both medical and performance purposes. In early 2019, Phil set out to bring the performance and fitness benefits of CGM to non-diabetic athletes by founding Supersapiens. 

Southerland brought a strong relationship with Abbott into the founding of Supersapiens, having worked with the company through The Team Type 1 Foundation. In early 2020, for example, the two partnered to donate glucose meters and nearly 12 million test strips to help people living with diabetes in Rwanda.

In short order, after launching Supersapiens, the team:

* Signed a contract with Abbott

* Raised a $5.5 million seed 

* Built a killer executive team with highly relevant experience 

* Developed the only app built directly on Abbott’s sensor data 

* Partnered with Abbott on the launch of the Libre Sense Glucose Sport Biosensor

* Piloted the product with leading endurance athletes in Europe 

* Launched an IRB-approved, minimal-risk study in the US. 

Ankur got to participate in the study and try the product, and he said, “after two weeks of using the product personally, it’s completely changed several long standing habits.” You know what,  I’ll just turn it over to Ankur to tell you about his experience. 

I’ve been trying the product out personally -- and it’s been incredibly cool to see real-time glucose feedback. The product works with a seamless integration with the Abbott Libre Sense, which you apply to your arm in a matter of seconds -- which then live streams glucose data to your phone via Bluetooth. It’s a magical experience setting the whole thing up -- and then being able to monitor your blood glucose in real-time.

Nothing quite like watching your glucose spike insanely high after a meal of a million pieces of pao de queijo (freshly baked in Minas Gerais, Brazil) to completely question your entire relationship with bread. But I’ve been using it while at a surf camp, and was able to improve my (not entirely impressive to begin with) performance substantially by keeping myself adequately fueled, and controlling the intensity of the post-meal spikes by changing my dietary habits.

I’ll be participating in the study soon and you know I will be tweeting the results.

Here’s how it works: 

Supersapiens ships two sensors to customers, either one-time or on a monthly subscription. Each sensor is the size of a quarter, can be applied in seconds, and lasts 14 days. A monthly subscription costs $140 per month, certainly not cheap, but less than half the cost of Levels’ one-month plan. 

The application involves a little skin prick, but 91.6% of people in a survey said that it was painless. 

Once the sensor has been applied, it sends real-time data to the Supersapiens app. Supersapiens is currently the only external partner with access to Abbott’s SaaS product, so it has the most reliable and seamless data on the market. The app provides live glucose levels, insights, and snapshots that let users understand the impact of food and exercise on their bodies. 

The company is also developing a Coaches App that allows coaches to view their players’ stats all in one place, and Supersapiens is rolling out the Reader, a Bluetooth-synced wristband that can be worn during competition to provide easy visibility into glucose levels. 

Combined, Supersapiens is building the Energy Management Ecosystem. 

Supersapiens has the market-leading CGM for non-diabetic athletes, but it’s going to be an increasingly competitive space. That’s why the Abbott partnership is so key. 

Cornered Resource: Abbott Agreement 

The Supersapiens deal is unique among all of the early stage companies I’ve written about in that its key resource is its highly valuable contract with Abbott. 

I write about Hamilton Helmer’s 7 Powersa lot. The book covers the seven different types of moats businesses can build to protect margins from the erosive forces of competition. The seven are: scale economies, network effects, counter-positioning, switching costs, brand, cornered resource, and process power. 

I write about the first five often. On Monday, we covered Robinhood’s brand and counter-positioning. I write about cornered resources a lot less frequently, but they’re incredibly valuable when you can get them. A cornered resource is “preferential access, at attractive terms, to an asset that can independently create value”

For something to qualify as a cornered resource, it needs to pass five tests: 

* Idiosyncratic: repeatedly generates returns. 

* Non-arbitraged: doesn’t cost the company more than it makes. 

* Transferable: could create the same return at another company. 

* Ongoing: creates benefits over a long period of time.

* Sufficient: must be sufficient to create differential returns.

Supersapiens’ contract with Abbott is its cornered resource. 

Supersapiens has a long-term partnership with Abbott to distribute the Abbott Libre Sense, a CGM device specifically designed for athletes and fitness enthusiasts (vs. diabetics). They’ve built a powerful platform on-top to provide athletes real-time glucose uptake data.  

This partnership allows Supersapiens to buy the devices from Abbott at wholesale prices, be the sole provider for the software layer for the device, and, as a result, strengthen their competitive positioning against every other competitor in this space. 

The partnership with Abbott checks all five boxes: 

* Idiosyncratic: will allow Supersapiens to generate high-margin subscription revenue. 

* Non-arbitraged: Supersapiens buys and sells the sensors at industry-low prices. 

* Transferable: Abbott built a multi-billion business on a similar product. 

* Ongoing: the contract is for a sufficiently long time to build the business, and Abbott has auto-extensions.

* Sufficient: to be seen over time, but the math works.

It confers a couple of additional benefits.

* Supersapiens is able to run a true subscription business. Other providers, like Levels, purchase the device at much higher prices which makes it prohibitively expensive to sell a monthly subscription. As a result, they currently sell a one-off analysis, while Supersapiens can make the math work to offer a persistent $140 / month subscription. That creates recurring revenue and habit. 

* These devices are fitness devices and not medical devices. Other companies currently need to go through an annoying process of diagnosing these devices to customers. The Abbott Libre Sense is different in that it’s designed specifically for fitness and currently can be sold by Supersapiens in certain countries in the EU without a prescription. They are optimistic about their launch in the US as well.

With the Abbott contract in place, Supersapiens’ is focused on building excellent technology to deliver data and insights to customers, as described above, and marketing the product to an expanding universe of athletes. 

Targeting Athletes (And Everyone is an Athlete)

Supersapiens is a company built by and for endurance athletes. Its first target market is the two million people in the EU endurance space - triathletes, cyclists, runners, CrossFit athletes, soccer players, and more. Out of 3,000 people the team surveyed in this target market, 80% were very interested in using the product. 

This market is large enough to build an excellent business at Supersapiens’ price and margins. There are more endurance athletes in the EU than there are type 1 diabetics in either the EU or the US. But the worldwide market, for endurance athletes and fitness more broadly, is orders of magnitude larger, and that’s what Supersapiens will go after. 

The company believes that everyone is an athlete in some way, and that even those who aren’t working out every day can benefit tremendously from monitoring and regulating their glucose levels. I wouldn’t call myself an athlete today, but I can’t wait to see if Supersapiens helps me sleep better and approach writing with more energy. In high school, when I was a competitive cross country runner, I would have absolutely begged my parents for Supersapiens to give me an edge. 

The size of the prize is enormous. The TAM for just US and EU endurance athletes, at $140/month, is $7 billion. The TAM of the world fitness market is much larger -- $310 billion -- but it will certainly require a lower price point to capture over time. 

Part of the challenge for Supersapiens will be educating consumers on the benefits of not just tracking their glucose, but of using the best CGM available. With Apple rumored to be rolling out optical CGM in the next generation of the Apple Watch, there will certainly be a large swath of consumers for whom Apple’s less accurate version works just fine. 

That said, this is not a winner-take-all market, it’s a very clearly segmented market, and Supersapiens has a plan to work its way from the early adopter endurance athletes to the mainstream.

The company’s go-to-market is similar to another company that fought Apple with a focused product that does its one thing better than Apple’s multi-purpose watch:  WHOOP. It will start with the best athletes, the ones who need the product to do their job better, and in turn, demonstrate the product’s benefits to a wider audience. Early users of the product include a ton of incredibly impressive, internationally renowned endurance athletes including Hannah Ludwig (top cyclist), Jake Smith (3rd fastest British half marathoner), Katrina Mathews (1st place IMFL), Chris Leiferman (1st place IMFL), and Ryan Atkins (Spartan Race Ultra World Champ).

Building and marketing in this world is what Southerland does best. Team Novo Nordisk has 270k followers on Twitter and 8.1 million fans on Facebook. For Supersapiens, Southerland and team are working on a five-pronged approach across owned media, earned media, an ambassador program, affiliates, and digital marketing. 

It’s an intense approach for such a young company, but Southerland has pulled together an experienced team to make it happen. 

The Supersapiens Team 

Just a year in, the Supersapiens team is 34-people strong across technology, marketing, design, science, finance, and sales. It’s a big team for a company this young, but that’s the nature of a company with a cornered resource: the market and product are de-risked, and the game is all about relentless execution. Thankfully, the team is full of endurance athletes. Relentless is what this team does. 

One thing you’ll notice in looking at the team is that this doesn’t look like the typical Silicon Valley-style company we normally talk about here. They’re not. 

Based in Atlanta, the Supersapiens leadership team is full of people with experience at places like the UN, The Home Depot, J&J, National Research Institute, InterContinental Hotel Group, and RiteAid. A few of them have worked together on Team Novo Nordisk. Like a cycling team, the Supersapiens team understands the plan and the role that each plays in it. You’ll notice there are no Chief of Staff or Design Ninja roles here. 

Supersapiens is also backed by an impressive roster of medical advisors with expertise in physiology, metabolism, performance, nephrology, and translational medicine. Importantly, the company’s Team Sports Advisors are a who’s who of influential leaders in professional sports, including Yankees GM Brian Cashman, Spurs CEO RC Buford, and former Falcons GM Thomas Dimitroff, who now chairs the group. 

These people understand the benefits of CGM for their team, and will serve as examples that others look to. On Invest Like the Best, former Sixers GM Sam Hinkie said: 

We would do a bunch of analysis and it would say, "You should do this this way. You should play the game this way." Our early check was we just checked if The Spurs did it. If the Spurs did it, we're like, "Okay, that might be right."

Luckily, the person who decides what the Spurs do is on the Supersapiens Team. If the Spurs do it, everyone else probably should, too.

Business Model and Early Traction

Supersapiens sells sensor subscriptions. (Listen to the audio edition to hear how this turns out)

In the US, it will sell sensors in three ways: 

* Trial Pack. Two sensors for $170 to test the product for a month (compare to Levels at $399). 

* Training Pack. Six sensors for $420, bought up front. 

* Subscription. Two sensors every month for $140 per month.

Supersapiens will also launch the Supersapiens Reader this quarter, targeted to competitive athletes who need to monitor glucose levels during races and games. 

The revenue side is a dream: high AOV subscription revenue. The cost side is, too. Supersapiens’ contract with Abbott gives it access to sensors at the lowest cost on the market, locking in strong margins for the life of the contract. 

Supersapiens will generate strong cashflows for the foreseeable future as long as it does its job and effectively distributes the product. To that end, early traction is promising. In the EU, it has 1,200 customers to date with a higher-than-anticipated number of them on subscriptions since launching in December. Demand for the product in the US looks strong too, with 15,000 people on the waitlist despite zero US outreach to date (it will begin a waitlist campaign at the end of Q1, if you want to get notified, enter your email on Supersapiens). 

The company projects that it will do just over $8 million in revenue in 2021 in the EU alone. 

That doesn’t mean the company is without risks, though. 

Risks

Early stage investing comes with major risks, and Supersapiens is no different. As with any early stage investment, the numbers suggest that you should expect any money you put into an early stage startup to go to $0. Compared to many of the opportunities we look at, Supersapiens is slightly de-risked because of the Abbott contract, but there are a few Supersapiens-specific risks that you should be aware of. 

* Apple Watch. There is a rumor that the next version of the Apple Watch will include glucose monitoring. While Apple’s tech will be much less accurate than Supersapiens’ (it will supposedly use optical monitoring), its involvement could limit Supersapiens’ opportunity among less serious athletes. That said, WHOOP built a $1.2 billion business while competing directly for wrist space with Apple. 

* Other Competition. Levels has gotten a lot of traction among well respected people in Silicon Valley and beyond. While Levels is going after a different target for now and has a different price point, GTM, and business model, if both companies succeed, they will face off in the future. 

* Difficulty Expanding Beyond Endurance Athletes. While Supersapiens can build a strong business selling to endurance athletes alone, the real bull case depends on its ability to expand to everyday athletes, which it has not yet proven it can do at scale. 

* Price Point. $140 per month is cheap for CGM, but it’s an expensive thing for many to add to their monthly budgets. 

* Exits. Supersapiens could do everything right and, depending on market conditions and acquirer appetite, still not find a good exit opportunity in a reasonable timeframe. 

There are certainly risks that neither I nor Supersapiens is currently aware of that could sink the business. This is not investment advice, and you should do your own diligence before deciding whether to invest. 

Opportunity

I have wanted to track my glucose levels since I read The 4 Hour Body, and I’m giddy with excitement for my Supersapiens sensors to arrive. I can’t wait to learn how what I consume impacts my performance, sleep, and energy levels. 

When Supersapiens is successful, more people will understand their bodies well enough to make smarter, healthier decisions, perform better, feel better, and maybe even live longer. 

With a solid business model backed by a cornered resource, as Supersapiens grows the market, it will grow its free cashflow too, and re-invest in building technology and products that make it even easier for athletes -- from Ironman winners down to keyboard athletes like me -- to perform their best. 

WHOOP, Future, and Peloton are just three recent examples that prove that people understand the importance of the combination of data and exercise, and are willing to spend to feel and perform better. 

I am thrilled to have the opportunity to co-syndicate this deal alongside Ankur. If you’re an accredited investor and would like to learn more, you can apply to join the Not Boring Syndicate by clicking the button below. I’ll be sharing more details -- including deal terms and the deck -- over on AngelList.

We want to try an experiment: accredited investors have the option to join Ankur’s syndicate and pay an annual subscription in place of the typical carry on this and future deals. He invests in some excellent deals, and is worth subscribing to:

That’s all for this week. Enjoy the weekend, and I’ll see you on Monday!

Thanks for reading,

Packy

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