TRAQ is raising capital via common equity with a valuation of $33.6 million. The company has received more than $32 million in government funding as the product was initially developed for the US Air Force. This amount of funds might somewhat justify the high valuation since the company has poured a lot of time and capital into the research and development process. Even so, the company has not commercialized its products yet and therefore has earned no revenue. Because the company has not started selling its products, investors cannot know how well the product works and how the market will react (i.e. the amount of excitement and demand for the product). Therefore, the company is being overvalued considering that it is pre-revenue.

The North American fitness trackers market was worth $17.4 billion in 2020. TRAQ’s main target is only the US as of now, and so its obtainable market size will be slightly smaller than that figure. The market is growing at a stellar annual rate of 19.5%. Given the market’s size and growth rate, this is a high potential market.

The fact that TRAQ rides the booming trend of at-home medical tests boosts its future potential even further. There are multiple reasons why at-home medical tests are gaining popularity among the masses. Some reasons are the long history of mistrust of the American healthcare system, the system’s high price point, and its inconvenience. As a result, at-home medical tests have benefits that consumers often favor more than a visit to a hospital. They are more convenient and private, less costly, and most likely cheaper. At-home medical tests might even be the beginning for uninsured Americans to gain access to healthcare. 

On the other side of the story, there are medical professionals that are skeptical about the accuracy of these at-home medical tests, especially when many of these tests don’t require FDA approval. Moreover, there was the Theranos scandal that first broke in 2015. The company claimed to be able to perform hundreds of laboratory tests, but those claims were not supported by the technology. Not only does this scandal show how there is a lack of regulation in the market, it also means people could be quite wary of these tests. Slower market adoption could result from this caution, and TRAQ will need to overcome this obstacle.

All in all, TRAQ’s market potential is promising, considering the huge market size as well as the rapid market growth rate. Consumer trends are also fueling an increased demand for at-home medical tests. But investors should still be aware of inherent risks in the market. 

TRAQ co-founder Joseph Wang graduated from University of Wisconsin-Madison and currently is a director of the Center of Wearable Sensors in University of California, San Diego (UCSD). He was a distinguished professor and chair of nanoengineering in UCSD for 14 years. 

Co-founder Patrick Mercier got his bachelor’s degree in electrical engineering from University of Alberta and both his master’s degree as well as PhD in electrical engineering and computer science from Massachusetts Institute of Technology (MIT). He was a research assistant at MIT focused on energy efficiency for biomedical applications. Then, he joined the board of directors for companies in the technology and medical devices space. Currently, he is a director and a professor in UCSD and specializes in energy-efficient microsystems for mobile, biomedical, wearable, and Internet of Things applications. 

Neither of these founders are not directly involved in TRAQ’s operations, though they still act as advisors. These founders have valuable knowledge that can be directly applicable for the company’s products. Moreover, they have long track records in the industry that could allow them to develop the right product to disrupt the market. They also have the necessary network to smooth market adoption. 

The company has hired a seasoned entrepreneur as the CEO. Jeff Slosar got both his bachelor’s degree in engineering physics and master’s degree in biomedical engineering from University of Michigan. He has been a C-level executive for numerous companies, including Triniti Corporation, SmartFoam, and NextWave Ventures. While most of these companies are not in a directly related industry, Slosar’s past experience proved his high ability in management and leadership. His background creates a nice mix of skills with the founders. 

The company currently has 10 employees. Some notable team members are Director of Research and Development Santhosh Padmanabhan and Lead Research and Development Engineer Thomas Cho. Prior to this venture, Padmanabhan was a senior scientist in MiCRA Biodiagnostics, a research company focused on sensors, on-site diagnostics for human and animal healthcare, bio and pharma technology, and analytical test services. Cho had a formal education in bioengineering and biomedical engineering in UCSD. These experiences should aid in accelerating product development and simultaneously validating the product’s quality. 

Overall, the TRAQ team is lean and quite impressive. The key members have complementary skills and knowledge, and the company has begun building out beyond the founders and CEO.

TRAQ exists in a competitive market with quite a few existing players. Some established players in the at-home tests market include Everlywell, MyLabBox, and LabMe. Since the product is not commercially available yet, the quality of TRAQ’s product is unknown. However, if it performs as well as expected, it has a distinct advantage over competitors. 

One huge differentiation factor is the speed in providing fitness, health, and wellness results in 30 seconds. Other tests can take days. Because TRAQ uses saliva, it also has an edge over blood tests. While the result’s accuracy almost reaches that of blood tests, the saliva test is non-invasive, painless, and less expensive. The company is also planning to add a lot more features to the product aside from measuring glucose, cortisol, cholesterol, lactate, ketones, and hydration. Some future features include actionable advice and linking customers to medical professionals. The test could supposedly even work for pets as well as livestock, opening up entirely new verticals for TRAQ. With these features, TRAQ’s product has plenty of potential upside – but full differentiation won’t be known until it enters the market.

TRAQ was originally intended for the research labs of the US Air Force, and it received more than $32 million in government funding. The government’s interest somewhat validates that there is a demand for this type of product. The product has successfully completed three clinical trials for measuring  energy, recovery, and hydration. TRAQ’s device is being tested by many groups, including the US cycling team, US Olympics and Paralympics, NCAA Division I, and sponsored triathletes. While the product shows promising early traction, it is still not out in the market, and the company has not even started production yet. Therefore, potential customers cannot be sure of the quality of the product or actual market demand.

TRAQ poses a high risk as an investment opportunity. First, medical professionals are still skeptical of the accuracy as well as efficacy of at-home tests. While regulations around at-home testing are currently quite vague,the government could easily  introduce standards, as these tests might become a replacement for blood tests. TRAQ will need to adapt and adhere to any changing rules or regulations as they occur.

Secondly, the company has not even started production yet. Therefore, TRAQ’s current valuation is high, creating investment term risk. Since the company is still in its early stage of product development, it will likely need a lot more funding in the future, especially because the research and development process is highly capital- and time-intensive. More funding means more dilution in equity percentage, and with the current high valuation, investors might get a smaller return on investment. Furthermore, the company should have no revenue since the product is not yet commercialized. While this is only speculation, the revenue written in the Form C could be the leftover of government funding. It is also concerning that the company has little cash on hand despite receiving $32 million in government funding. 

Lastly, it might take some time until TRAQ really takes off. There are currently lots of product features that are under development, which could be the product’s sustainable advantage to win over the market. The company might experience a slower market acceptance and adoption, further stalling growth. Consumers are likely to be more cautious of at-home lab tests because of the lack of regulation. TRAQ will need to earn trust from both consumers and medical professionals to see future success.

TRAQ is a risky investment opportunity. Despite being incorporated for five years, the company is still in the pre-revenue phase, and its medical testing device is still in development. Although its beta product is going through trials, it is uncertain how the final product will perform. The product’s accuracy is key to dominating the market. Unfortunately, TRAQ does not specify the accuracy on its raise page. 

For a company that is pre-revenue, the current valuation is quite high. This high valuation could result in investors getting limited returns in a liquidation event, as future funding rounds could dilute current investors’ shares. The at-home lab test market is also quite competitive, and even more players are expected to enter the market. Moreover, TRAQ might experience harder market acceptance and slower market adoption because the lack of regulation could make consumers more wary about at-home lab tests.

Even though there are uncertainties, TRAQ’s at-home lab test device has huge potential. First of all, its ability to show results in just 30 seconds is a sustainable advantage, as most players can only show results in a couple of days. Not only that, the features that are currently under development could also be winning differentiation factors. These features include actionable advice and the ability to connect with medical professionals. If everything goes as planned, it will not take long for the product to reach the market, as TRAQ intends to begin limited production in the second quarter of 2022. Currently, the company shows amazing early signs of traction from testing with Olympic and university athletes. TRAQ has an impressive team with experts in this particular field. Furthermore, TRAQ has a significant obtainable market size, and the at-home lab test market is growing at a rapid pace. 

TRAQ produces a portable device called Stone, and it’s designed to measure one’s fitness and health in real time. The device uses disposable test cartridges to collect saliva samples and show results in 30 seconds. TRAQ has an impressive team with a nice mix of skills. The company has a significant market size, and the at-home lab test market is growing rapidly. The company has successfully shown great early signs of traction. It is testing its product with the US cycling team, US Olympics and Paralympics, NCAA Division I, and sponsored triathletes. The product itself has a sustainable differentiation factor in its speed of showing results. Moreover, there are multiple features currently under development that could boost the company to dominate the market. 

Nevertheless, TRAQ poses a significant investment risk. The company is still pre-revenue, as it has not started production yet. The efficacy and quality of the product is unknown, and hence, it is not possible to anticipate how much demand there will be for the product. It might also take a long time until the product is fully developed with the features necessary to win the market. Given this early stage and uncertainty, the current valuation is quite high. The market is also competitive, and more players are expected to enter. Additionally, the company might experience harder market acceptance and slower market adoption because there is skepticism around at-home lab tests. Therefore, TRAQ is rated a Neutral Deal at this time.

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Analysis written by Inez Sanjaya, December 13, 2021.