The Market of Interventions for Sleep
Making sense of the market for treating, improving, and enhancing sleep.
Introduction
In the mid 1940s, health officials in the UK noticed a startling trend: more people were dying of heart attacks. Dr. Jerry Morris, an epidemiologist working in London, set out to understand why. Working off a hunch that the problem was related to occupation, Dr. Morris analyzed data from 31,000 employees of the London Transport Executive - men of similar social class - and discovered that bus drivers had twice the risk of dying from a heart attack compared to bus conductors. The only difference? Conductors were unavoidably active, forced to ascend and descend hundreds of steps on the double-decker buses each day, while the drivers were unavoidably sedentary, forced to remain behind the wheel shuttling passengers. Morris had revealed what is today common knowledge: exercise extends lifespan.
Published in 1953, Morris’s study, “Coronary Heart-Disease and Physical Activity of Work”, was a watershed moment in the history of healthcare. But moreover, it helped set the scientific foundation upon which an entirely new industry could be born: fitness.
Promoted by popular influencers like Jack LaLanne and fueled by Cold War patriotism, the fitness industry witnessed explosive growth over the second half of the 20th century. Nike was founded in ‘64, Gold’s Gym in ‘65, and Schwinn lauched their first indoor exercise bike in ‘68. Today, companies like On, Equinox, and Peloton continue to innovate in fitness market categories created in the decade following Morris’s seminal study.
At Supermoon, we believe a similar chronicle is evolving in another health and wellness industry: sleep. The field of sleep science was born in 1953 - the same year Morris published his London busmen study - with the discovery of REM sleep by Dr. Nathaniel Kleitman and Eugene Aserinsky, along with parallel work by Dr. William Dement recording brain activity during sleep with the electroencephalogram (EEG). Yet it wasn’t until the early ‘70s that scientists began correlating sleep and health outcomes. Case reports of “serious complications and sudden death” in patients with Pickwickian syndrome (obesity hypoventilation syndrome associated with obstructive sleep apnea) and speculation regarding the link between sleep apnea and sudden infant death syndrome (SIDS) encouraged investigation into the pathophysiology of sleep apnea, culminating in Dr. Christian Guilleminault et al.’s publication of “The Sleep Apnea Syndromes”, which defined sleep disordered breathing and characterized its role in disease manifestation. Nevertheless, the “Morris moment” for the nascent field of sleep science was still to come.
In 1989, as the term karoshi was becoming common parlance in Japan to describe the alarming number of white-collar workers “dying from overwork”, Dr. Allan Rechtschaffen and his colleagues at the University of Chicago published a groundbreaking study on the effects of sleep deprivation in rats, research that for the first time established the critical importance of sleep to good health. Rats subjected to sleep deprivation developed skin lesions, became hypermetabolic, acted erratically, and ultimately died within 2 to 3 weeks. Rechtschaffen et al.’s study, “Sleep Deprivation in the Rat”, was a pivotal moment for the sleep science field, and much like Morris’s busmen study did for fitness, helped provide the scientific basis for the sleep industry to emerge.
Paralleling the contemporaneous innovation that occurred at the start of the fitness industry, a number of today’s sleep market incumbents all entered the market around the same time, coinciding with scientific discoveries in the ‘80s and ‘90s like Dr. Rechtschaffen’s. Mattress Firm was founded in 1986, Sleep Number (fka Select Comfort) in ‘87, ResMed in ‘89, SleepMed (fka DigiTrace Care Services) in ‘91, Tempur-Pedic in ‘92, Sound Oasis in ‘93, Sleep Country in ‘94, and SleepData in ‘95. While Mattress Firm and Sleep Country brought national mattress retail to the US and Canada respectively, a category once largely dominated by local mom and pop shops, the other new entrants pioneered new market categories entirely, including CPAPs, ambulatory EEG, memory foam mattresses, and hardware-enabled bed systems, categories that capture large swaths of the sleep market today.
Although the market continued to grow moderately throughout the first two decades of the 21st century, the explosive growth we’re witnessing today has only just begun. Toward the end of the last decade, sleep entered the public conversation. Books like Why We Sleep and The Sleep Revolution drew attention to the science and importance of sleep, while aggressive marketing campaigns by DTC “bed-in-a-box” companies like Casper heightened consumer awareness of the market. The proliferation of consumer wearable devices like WHOOP, Oura, and the Apple Watch is enabling consumers to “visualize” their sleep for the first time, providing a mirror to evaluate change over time and incentivize sleep improvement through product purchases, clinical treatment, and healthy lifestyle behaviors. Endorsements of healthy sleep and sleep products by professional athletes, teams, and leagues are helping validate the category in the eyes of the consumer, while similar endorsements by high-performing CEOs are helping validate sleep health for the professional class. These trends accelerated during the pandemic; as health concerns, isolation, and mental health took their toll, consumers turned to interventions to alleviate their anxiety and allocated personal savings toward improving their bedroom environments. The sleep renaissance is well underway.
Bounding the Market
The sleep economy encompasses a vast range of product categories, technologies, form factors, and business models, from consumer brands and enterprise applications to clinical services and medical devices. A highly interdisciplinary field, sleep science sits at the intersection of chronobiology, neurology, pulmonology, psychology, and dentistry, and draws from a wide variety of technical domains including neurotechnology, biotechnology, pharmacology, and computer science.
At Supermoon, we segment the sleep market spectrum into three broad categories: interventions - ways and means to treat, improve, and enhance sleep; insights - ways and means to track, monitor, and diagnose sleep; and infrastructure - ways and means to streamline, optimize, and enable sleep market businesses.
This grouping structure is not mutually exclusive, but it is, for the most part, collectively exhaustive. Many companies in the market offer products across segments, but we can generally always bucket a startup into at least one of these segments.
This profile focuses on the interventions category of the sleep market spectrum. It is not meant to be comprehensive (there are hundreds of startups in the sleep interventions category), but it should instead help provide an overview of the incumbents and startups building solutions to treat, improve, and enhance sleep.
Categories of Interventions
Interventions for sleep are as diverse as the sleep market itself. Further segmentation is required.
At Supermoon, we segment the interventions space into five categories: environmental interventions, behavioral interventions, OTC consumable interventions, interventions by disorder, and other interventions. At a high-level:
Environmental interventions help us create a healthy sleeping environment by enhancing our comfort and conditioning the climate for optimal sleep.
Behavioral interventions help us live sleep-healthy lives by coaching us on best practices, structuring our schedules, and providing activities, meditations, and games that help ease our anxiety.
OTC consumable interventions help us fall asleep faster by providing quick-fix pills, foods, beverages, and supplements.
Disorder-specific interventions help us sleep better by treating our afflictions and conditions.
Other interventions help us improve our sleep by utilizing emerging technologies to manipulate our minds.
The vast majority of environmental, behavioral, consumable, and other interventions are unregulated by the FDA, while the vast majority of disorder-specific interventions are regulated, “clinical” companies. Counterexamples include companies in the OTC consumables category that are FDA “regulated” under the Dietary Supplement and Health Education Act (or federally illegal…) and some of the companies in the snoring, tinnitus, bruxism, and jet lag subcategories of the disorder-specific interventions segment.
Market Evolutions
Sleepy categories wake up: Companies like Thuma, with their easily assembled platform bed frame, and Loftie, with their thoughtfully-designed alarm clock, are bringing new life to once-tired categories. Canopy hopes to see the same success in the humidifier segment that Molekule saw in the air purifier space, while Mute and Smart Nora are bringing fresh innovation to the snoring category, a category once-dominated by BreatheRight.
Dynamic interventions: Companies across the interventions space are developing closed-loop interventions that adjust on-the-fly to the user. Dynamic interventions for sleep are not novel: automatic positive airway pressure devices (APAPs) that treat sleep apnea by automatically adjusting airway pressure to the optimal level have been on the market for decades, while organizations like NASA have long-used adaptive environments to improve the sleep of their astronauts. Today, category leaders like Endel and Eight Sleep are using AI to dynamically optimize the acoustic and thermal environments in the bedroom for better sleep, while behavioral intervention companies like Full Sleep are tapping into sleep tracker data to inform their sleep coaching protocols. Companies like Aesyra and Neosensory are developing closed-loop interventions for bruxism and tinnitus, while a range of startups are following Muse’s lead in developing biofeedback hardware devices and VR software applications for meditation.
More than just CPAP: Positive airway pressure (PAP) is the gold standard treatment for patients with moderate to severe obstructive sleep apnea (OSA). Unfortunately, many patients are non-compliant with their PAP treatment, with non-compliancy rates hovering between 30-50% after 12 months. Recognizing the need for new forms of therapy that patients prefer, numerous startups are building sleep apnea treatments with novel form factors and mechanisms of action. Following the lead of Inspire Medical, a cohort of companies like Invicta Medical, Respiosa, AvivoMed, and others are developing medical devices that stimulate the upper airway to reduce apnea events throughout the night. Other companies like Signifier Medical Technologies, which is commercializing a daytime therapy for OSA, and Sommetrics, which is developing a negative pressure device, are charting new paths with unique treatment approaches.
Price points trend upward: In 2010, <$1000 mattresses captured 54% of the global mattress market. Today, the sub $1,000 segment accounts for just 40% of the market. Market share has been captured by the $2,000+ segment, which grew from just 19% in 2010 to over 30% today. Companies like Bryte and Sleep Number have introduced beds north of $6,000, while companies like Avocado and Doorne target the luxury category with products over $20,000.
Behavioral care goes digital: Cognitive behavioral therapy for insomnia (CBT-I) is the first line treatment for insomnia recommended by the American Academy of Sleep Medicine. Historically provided face-to-face and in-person by behavioral therapists, a range of companies have digitized CBT-I to provide asynchronous, app-based therapy. Some of these companies, like Pear Therapeutics (R.I.P.) and Big Health, have pursued a clinical path, classifying their products as digital therapeutics, navigating regulatory environments, and seeking reimbursement from public and private payers, while the vast majority are opting to go-to-market faster through DTC and B2B approaches. Some companies, like Crescent Health (recently acquired by BetterUp) and Dawn Health, provide a virtual interface for CBT-I and use human therapists, while others like Docbotic remove the human-in-the-loop entirely and rely on chatbots and automated protocols. A similar schism is developing in the parental coaching category, with some companies like Batelle and Lullaai offering human interventions and others like Napper and Pampers offering purely digital interventions.
Drugs in demand: Incumbents and startups alike are pioneering new pharmacological interventions for sleep. Many of these companies are targeting the orexin receptor; Merck (Belsomra, 2014), Eisai (Dayvigo, 2020), and Idorsia (Quviviq, 2022) have all recently developed orexin receptor antagonists for the treatment of insomnia, with others from Minerva Neurosciences/J&J and Taisho currently in clinical trials. Takeda recently won breakthrough therapy designation for an orexin receptor agonist to treat narcolepsy. Cannabinoid-based treatments are also a promising field, with Zelira researching a drug for insomnia and both Incannex and SciSparc developing cannabinoid-based drugs for sleep apnea. Promising late-stage startups like Apnimed, which recently reported positive results from its phase 2 trial, are eyeing the public market, while pre-clinical companies like Mosanna Therapeutics, developing a nasal spray for sleep apnea, are raising venture rounds to study innovative compounds and unique formulations.
Cautionary Tales
Novel interventions require significant product education: Categories of interventions like transcranial electrical stimulation, virtual reality biofeedback, and nutraceutical supplements demand high-touch product education. Successful businesses in these categories will thoughtfully navigate potential consumer concerns around electromagnetic radiation, comfort, adverse effects, and side-effect profiles. Supplement companies introducing new ingredients will need to explain their scientific bases and justify their inclusions in their products.
Finding the marketing sweet spot as a clinical company is challenging: The war isn’t won after you’ve received regulatory approval, nor is it won after you’ve received payer coverage. While these are important milestones in a healthcare startup’s journey, companies must ultimately win the war with providers, and marketing to providers is both challenging and complex. Some companies take a patient-focused, “ask your doctor if _ is right for you” approach; Inspire Medical, for example, has driven patient awareness through national television campaigns to the point where patients now literally ask their sleep providers if Inspire is a treatment option for them. Other companies focus on marketing to providers directly, but they need to be wary of “intended use creep” and often face uphill battles convincing providers to prescribe novel therapies. Regardless, healthcare companies in the sleep interventions market need to think critically about their marketing strategies to avoid cash constraints post regulatory and reimbursement milestones.
On the Horizon
Although the interventions market has seen a few high-profile flyers shut down this year (Pear Therapeutics, SleepMe), the category continues to offer enticing entrepreneurship opportunities. Everyone sleeps, yet most people don’t sleep well. With sleep monitoring and diagnostics becoming increasingly accessible through consumer wearable devices, home sleep tests, and virtual care pathways, consumers and patients alike increasingly demand interventions to improve their sleep and treat their sleep disorders. Many sectors are still dominated by legacy incumbents with products that have been on the market for decades, sectors that can be disrupted by nimble startups that better serve the unique demands of specific customer cohorts with novel form factors, mediums, methods, and business models. Combination treatments for example, such as an oral appliance used concomitantly with a drug, may be able to better target the pathophysiology of a sleep disorder like OSA than one intervention acting independently.
Stay tuned for my next sleep market profile covering the insights category: companies developing solutions to track, monitor, and diagnose sleep.
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Supermoon is the only venture capital firm in the world focused exclusively on the sleep technology and healthcare market. If you’re building in the sleep interventions market or interested in partnering with one of our portfolio companies, I’d love to chat. You can reach me on LinkedIn and Twitter, or email me directly at gj@supermooncapital.com.
Very thorough and sustantive information. Great piece. Always important to keep up with challenges and solutions in the sleep sector