Article By Jake Salesky, Isabel Glass, Ryan Engel
Mar 13, 2025
In August, we published our view on the investment opportunity for hardware start-ups, underscoring our belief that hardware is both misunderstood and undervalued by the venture community. Our conviction in the space has only strengthened since.
In August, we published our view on the investment opportunity for hardware start-ups, underscoring our belief that hardware is both misunderstood and undervalued by the venture community. Our conviction in the space has only strengthened since; In a market where differentiation can increasingly be hard to define and where network effects are quickly voided by fickle consumers, hardware is the key ingredient for defensibility.
Reflecting on the last year in venture capital, many of the biggest trends centered around hardware. While it’s clear that 2024 was highlighted by investments in artificial intelligence, some of the largest beneficiaries of the AI boom have been hardware companies – notably the chip makers (Nvidia), server manufacturers (Dell), and data center power and cooling infrastructure providers (Schneider Electric). Similarly, AI has triggered venture enthusiasm in robotics upstarts (Apptronik) with over $6B of investments in 2024, a 19% increase from the year before (1).
Hardware at the center of consumer health-tech
In consumer health-tech, the big winner of 2024 was Oura. The smart ring maker expanded its offering beyond sleep tracking through acquisitions before finishing the year with a $200M Series D round, valuing the company at $5.2B (2). As Dexcom doubled down on its OTC glucose monitors, it’s clear that the consumerization of healthcare and personalized health data is expanding to the mainstream, with wearable technology as a critical conduit.
Wearable devices have been rising in popularity, with earwear and smartwatches dominating market share (over 60% and 30%, respectively) (3). Smartwatches have experienced an impressive 10% CAGR from 2021-2023, the largest contribution across wearable types and a signal that post-pandemic consumers are seeking a biometric marker and a means to gamify or otherwise monitor, track, and digitize their fitness gains.
Going forward, ring makers like Oura are expected to experience upwards of 17% CAGR through 2028, as consumers turn to aesthetic alternatives to conventional health-tech devices. Similarly, headwear is expected to make a dramatic push. As Apple and Meta’s VR/AR hardware accelerate the core technology’s capability, startups are emerging with a range of innovative VR use cases, particularly in healthcare (see: XRHealth’s recent string of acquisitions in digital therapeutics).
While software design has certainly captivated early adopters, the success story of wearable companies is incomplete without its hardware. Health-tech devices share similar consumer dynamics as retail brands in which product features alone aren’t enough to capture users; Instead, the powerful signal of sporting a brand that denotes belonging to a health-minded community is often the glue that retains users. Oura’s sleek chrome ring has successfully positioned itself as an article of quiet luxury and affords fashion-forward users the ability to wear their favorite high-end wristwatch while they monitor their well-being. Alternatively, Boston-based WHOOP has cultivated a community of devoted fitness enthusiasts that use the colorful, bulky band without a watch face to signal their membership to a pure-play wellness concept.
Health and wellness consumers are demonstrating a willingness to experiment with emerging brands and are excited to signal to others that they are on the forefront of health and wellness innovation; Hardware is and will be that signal.
Reaffirming Cade’s commitment
The intersection of hardware and consumer tech presents an opportunity for new brands to make meaningful strides in competitive markets. The convergence of wearable technology, AI, and consumer health trends positions health-tech hardware as the next frontier for innovation and early-stage venture capital returns.
Our recent investments showcase our excitement in capitalizing on these trends: Daylight Computer is leveraging transformative software and hardware to pioneer “digital wellness”; Akash Systems is setting the groundwork for the future of technology unencumbered by GPU heating; Function Health is leading the charge in consumer health, advancing longevity with the power of personalized data. Cade Ventures is committed to unlocking the next wave of health-tech solutions that consumers will fall in love with and converting start-up ideas into household names.
References
Cover photo generated by ChatGPT; Dexcom/Oura photo by Digital Health Wire