How Did Scanadu Become #Scamadu?

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In a couple short years, Scanadu went from crowdfunding success and XPRIZE darling to managing mass consumer outrage. Here are a few lessons to be gleaned from their struggles.

In 2013, Scanadu broke the crowdfunding record for Indiegogo by raising $1.6 million from 8,500 backers in less than a month. They raised another $17 million from traditional venture capitalists. Despite some early delays, the product began to ship in 2015.

The Scanadu Scout promised to deliver readings for heart rate, body temperature, blood oxygen saturation, and blood pressure. The device had two sensors. Holding one on your forehead and the other with the left index finger, a circuit with your heart is created. The device reads the data, which takes less than a minute to collect, and sends it to your smartphone via bluetooth signal, where you can track trends in your data.

Early adopters loved their devices. The product iterated over the first two years and kept improving on both its form factor and data readings. However, there was one issue continually looming for the Scanadu Scout: When would this device receive its FDA approval?

Wait a minute. How did Scanadu raise millions of dollars in funding and acquire 8,500 paying customers for a medical device that hadn’t received FDA approval? Here’s how. The Scanadu Scout was an investigational device. By supporting the initial crowdfunding campaign, users were opting into a large two-year study that would allow Scanadu to collect data from the Scout and prepare its application to the FDA, as well as further the development of its other products. How much data could such a “study” generate? With 8,500 users, the company had access to over 5.6 billion data points. To be fair, Scanadu clearly and repeatedly stated the fact that the Scout was an investigational device and was being used for data collection for a study. However, much of that message was lost in the media hype around the Scanadu Scout. Furthermore, lay consumers of the device are unlikely to understand the risk of purchasing an investigational device and the risk behind both its readings and the likelyhood of it being decommissioned.

In November of 2016, the Scanadu Scout study had reached its endpoint. For reasons unknown, the company did not receive FDA approval for the Scanadu Scout. The FDA regulations require all investigational devices be deactivated once the study is complete. At this point, the company’s misalignment in expectations between its customers and the brand was realized. Customers of the Scanadu Scout were both shocked and outraged when the company issued a statement that the Scout would be deactivated by May 15th, 2017. Scanadu did not offer any compensation or voucher for future discount on products. They didn’t even apologize for bricking a two-year-old device. With little recourse, customers turned to social media with their frustrations and the hashtag #Scamadu Scout was born.

Scanadu lives on. In fact, it’s doing reasonably well. Having raised more funds from investors they are promising new products on the horizon. The company brilliantly managed to run a profitable(!) study, collect large amounts of data, show that their product had a market, and gain the trust of investors. Unfortunately, they’ve lost the trust of their customers, which is a heavy price to pay.

The lesson here is simple and obvious once you’ve engaged with enough startups or early technologies: Buyer beware. Timelines for delivery will always be delayed, the product will almost never function as you expect at first. Change (both positive and negative) comes quickly, and often with little notice. What can you do? Embrace the risk or wait to adopt; but if you take the plunge, don’t count on anything until you have it in your hands.


Image at the top: A woman tests the Scout at the mHealth Toolbox workshop in South Africa. Scanadu shut down support for its Scout device per FDA regulation on May 15.

ABOUT THE AUTHOR

Contributing Editor
Dr. Madhok began his career as an emergency physician at New York Presbyterian Medical Center before moving to the West Coast to pursue med tech startups. Madhok as served as the technical lead for EMCounter, the informatics chair at the Pediatrics for Physicians Network, and currently serves as the Chief Medical Officer at NS1ghter.

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