mHealth Investment: Hype or hope?

With Epocrates' wildly successful IPO, and the startup of mobile developer Massive Health last week, pundits are projecting investment in mobile healthcare companies to mushroom this year.

But it may be the triumph of hope over experience. While mobile healthcare has its share of exciting new technologies, most are in the hands of small businesses. And small firms are highly vulnerable to the vagaries of recessions, unrealistic investor expectations, staffing problems and more--any one of which can sink even the smartest device or software idea.

Case in point: Obesity medical device company Muve, which developed a wearable clip developed in 2007 that both tracked the number of calories burned by users and gave inactive users an alert to get moving. Execs at the Minneapolis-based company spoke with MedCity News last week about their road to ruin and possible redemption.

Initially, Muve received market praise, winning the Minnesota Cup award in 2007 for "breakthrough business idea" of the year. Execs told MedCity that large vendor, Philips, courted the company for a time, and media attention was largely positive. The device even had the backing of healthcare heavyweight, The Mayo Clinic.

But various investment and lawsuit problems forced the company to shut down last year.

"I get asked every day; what happened?...How could that have possibly failed, when it had the Mayo Clinic involved and it was focused on obesity and it had every possible macro-economic trend working in its favor?" former CEO John Montague told MedCity.

While company has since re-branded--it now goes by the name Gruve--and rediscovered success, its employees, including new CEO Bob Gauthier, currently work for free, meaning there is little margin for error. Gauthier maintains he is cautiously optimistic.

For mHealth market watchers, the key takeaway from the Muve/Gruve experience is this: Carefully track the internal, not just external, challenges of startups and emerging firms. Seemingly small problems can quickly turn into big ones, and no one is immune from a fall from grace. - Sara