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Raleigh-based Valencell's technology powers new wave of wearable fitness products [The News & Observer (Raleigh, N.C.) :: ]
[February 26, 2014]

Raleigh-based Valencell's technology powers new wave of wearable fitness products [The News & Observer (Raleigh, N.C.) :: ]

(News & Observer (Raleigh, NC) Via Acquire Media NewsEdge) Feb. 26--RALEIGH, N.C. -- Technology startup Valencell saw the potential of high-tech, wearable devices aimed at the fitness market years before the rest of us, long before "wearables" become a tech buzzword.

But it took thousands of laboratory tests and millions of dollars before the Raleigh-based company was positioned to exploit its prescience.

Valencell devoted its first five years of existence to painstakingly developing its patented PerformTek Precision Biometrics, which enables wearers of headsets, armbands and the like to accurately monitor key health data such as heart rate, respiratory rate, blood oxygen level and aerobic fitness wherever they go. Then it spent another two years marketing its technology to consumer electronics companies.

Now comes the payoff.

At the International Consumer Electronics Show in Las Vegas in January, three companies -- LG Electronics, Blaupunkt Personal Audio and Intel -- announced plans to incorporate Valencell's technology into upcoming products. They followed on the heels of consumer electronics companies iriver, which launched PerformTek-powered earbuds in the U.S. in October, and Scosche Industries, which announced a deal to use Valencell's technology in November.

More are on the way. Co-founder and president Steven LeBoeuf said Valencell will be announcing other deals with "very recognizable, popular consumer brand names" over the next few months.

Valencell is betting it can both fuel, and benefit from, an expected explosion in wearable devices -- "2014 will be the year that wearables become a key consumer technology," according to market research firm Canalys.

LeBoeuf predicts "there will be hundreds of thousands of products sold this year" that are powered by PerformTek. "And next year, there will be millions." Valencell will earn a royalty from the sale of every one of those products.

Founded in 2006, Valencell raised $8.2 million in venture capital and $3 million in government grants while it developed technology that produced a dozen patents, with 30 more patents pending.

Today the company has 16 full-time employees. All of them have an engineering or science degree "with the exception of our vice president of finance. And thank God he doesn't," joked LeBoeuf, who has a doctorate in electrical engineering from N.C. State University.

The company anticipates hiring up to 10 additional workers this year.

Valencell's technology is a step forward from the current crop of fitness-oriented wearable devices, which are dominated by what are essentially high-tech pedometers or require the user to wear a chest strap.

Owen Kwon, vice president of business development at iriver, said his company looked at competing technologies but didn't find anything that measured up to PerformTek.

"What attracted us to the technology is its precision," said Greg Keushgerian, executive vice president of global sales and marketing at Blaupunkt Personal Audio. "All these other wrist bands and all these other technologies are not really delivering the most accurate data." A hallmark of Valencell's technology is that it doesn't interrupt your normal activity. If you are using PerformTek-powered earbuds, for example, you can still listen to music and talk on the phone while exercising.

According to Valencell, nearly 125 million Americans exercise regularly and nearly 75 percent of frequent exercisers wear an audio headset to listen to music while working out.

Valencell's technology operates by shining an LED light on your skin -- in your ear, for example, or on your arm. A tiny portion of that light actually penetrates your skin and bounces off your blood vessels, creating a waveform that is detected by an optical sensor to measure your blood flow with each heartbeat. That leads to readings on key metrics such as heart rate, calories burned, respiratory rate, blood oxygen level and aerobic fitness, or VO2 max.

The tricky part, for Valencell, was developing algorithms that would enable accurate measurements while people are exercising -- whether indoors or outdoors. That's because movements impact the blood flow and because environmental factors, such as whether you're exercising in the shade or the sunlight, affect the light.

Valencell attacked this problem by eliminating what LeBoeuf calls "the noise," or the extraneous factors that get in the way.

"The best way to eliminate the noise is to characterize it first, understand what it is and then remove it," he said. "We spent, literally, seven years and thousands and thousands of lab tests to learn how to characterize the motion noise and the sunlight noise." Valencell also uses motion sensors to measure the likes of steps taken or distance traveled.

Users can see this data in real-time -- a must for athletes who "want to make certain they are in the right heart rate zone to have an optimal workout," said Mark Felice, vice president of business development and licensing.

Accurate measurements are such an important part of the Valencell story that the company commissioned independent laboratories to examine the technology. They found, said LeBoeuf, that it's just as accurate as the electrocardiograms that physicians use.

Such accuracy doesn't come cheap. Whereas some companies' royalties fees amount to pennies per device, Valencell receives dollars per device, said LeBoeuf. He declined to be more specific.

That cost is justified, he added, because "the intellectual property we provide is the cornerstone of the product." Some Valencell licensees haven't yet announced pricing, but the iriverON earbuds have a suggested retail price of $199. Scosche, which plans to start shipping its arm-band-based Rhythm + heart monitors next month and plans to launch its more advanced Rhythm Smart + device later this year, has set its prices at $79.99 and $99.99.

Felice said if PeformTek-powered devices were priced too low it would send the wrong message to consumers.

"People wouldn't believe the biometrics," he said. "They (would question), is this really clinically validated?" Early on, Valencell decided that the best path forward was developing technology that it could license to others rather than making the devices itself.

That decision enabled the company to focus on developing the technology without distraction. Becoming a device maker also would have meant "a tremendous amount of funding and a higher risk," LeBoeuf said.

The licensing model also allows Valencell to spread its bets among different companies and among different "form factors" -- which is industry jargon for the size and shape of a device.

One downside of adopting the licensing model rather than becoming a consumer brand, said IDC analyst Jonathan Gaw, is that Valencell could be vulnerable "if another technology comes along that is slightly better or even almost as good (and) much cheaper." Currently Valencell is in earbuds and arm bands, but the technology has broader applications.

"This year, you will see other form factors announced," LeBoeuf said. "If you can imagine a form factor, chances are we can be in the form factor." All the PerformTek devices announced so far are wireless, but the company's deal with Intel will change that. Intel announced its partnership with Valencell as one of several products and initiatives "aimed at accelerating wearable device innovation." Intel's "smart earbuds" technology, which it developed with Valencell, adapts PerformTek to wired devices by enabling the earbuds to be plugged into any audio jack.

Intel plans on making this technology available to device makers but hasn't yet disclosed details or a timetable.

Currently the market is awash with rumors that Apple is working on an "iWatch" that would include fitness sensors.

"Apple is kind of the elephant in the room," said Canalys analyst Daniel Matte.

But LeBoeuf said he's not worried.

"Why would Valencell be worried in a market where we provide the core technology?" he asked.

That raises the question of whether Valencell already is working with Apple, a question LeBoeuf isn't answering.

"I cannot confirm or deny whether or not we have a relationship with Apple," he said.

But, LeBoeuf added, "Any time you see ... a rumor that a company might be launching a biometric product, there's a really good chance that Valencell is either powering that product or will soon be powering that product." ___ (c)2014 The News & Observer (Raleigh, N.C.) Visit The News & Observer (Raleigh, N.C.) at Distributed by MCT Information Services

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