How NOT to Invest in Wearable Computing

Here at Tech Investing Daily, we’re constantly on the lookout for disruptive technology early in the commercialization cycle.

Our style of investing is more aggressive than most, but we hold firm in the belief that the additional risk of remaining future- rather than present-focused is often well worth the added reward.

Like so many other investors out there, we’re tirelessly in search of the next unicorn — tomorrow’s Google or Apple, still yet to be recognized by the general public.

Realistically, we believe this is the most surefire way for retail investors to truly multiply their wealth. Only by getting in early and taking on additional risk will you ever get the chance to bank meaningful multi-bagger returns.

Of course, it helps to keep in mind that not everything that glitters turns out to be gold. As important as it is to pin down companies with game-changing technologies up their sleeves, it’s just as essential to be able to spot a horse with a horn glued to his forehead.

For today’s piece, we’re going to share a few simple but essential questions investors need to ask themselves whenever they think they’ve found “the next big thing.”

We’re going to do this by using a real-world example of a company currently being touted as “the next big thing” — a small start-up firm and metaphorical horse in disguise known as LifeLogger Technologies Corp. (OTC: LOGG).

Now, in the paragraphs that follow, it may seem like we’re picking on LifeLogger — and we are — but it’s best to think of this as more of a general cautionary tale than a short thesis on one of the market’s single-worst investments.

Question #1: Does the company have a useful product?

This one seems obvious enough, but you wouldn’t believe how many public companies out there are surviving off of the idea of a product alone.

LifeLogger Technologies qualifies as one of these blood-sucking companies, currently living off little more than investor interest in the wearable computing market.

At first glance, LifeLogger seems pretty promising. The company describes itself as “an emerging innovative wearable video and software company that is developing the way people record, store and recall life’s unique memories through its true POV wearable video camera.”

The only problem, of course, is that after 18 months on the public market and several years in operation, LifeLogger’s POV camera still doesn’t even exist: it’s a prototype and nothing more. Not to mention, even the image of the prototype is computer generated (see right).

To make matters even worse, LifeLogger has no intellectual property whatsoever. That’s right, folks: zero patents. None. Zip. Nada.

The way I see it, if you’re going to gamble, at least gamble on something real. Buying a company with no product is like playing blackjack with no cards or craps without dice — you at least need something tangible before you have a chance at coming out on top.

The only exceptions to the “no product rule” are development-stage biotechs and junior miners. With the former, you at least have clinical trial data at your back. With the latter, you have regulatory resource estimates.

No product? No IP? Then don’t buy it.

Question #2: Does the company have a promising market?

Again, this one seems like a no-brainer, but companies that feed off hype can be highly skilled in the art of unfounded optimism.

Assuming LifeLogger can get past the prototype stage, the next question we need to answer is whether or not someone will actually buy the product.

Now, it may be true that the wearable device market is forecast to explode over the next several years, but that doesn’t guarantee LifeLogger a piece of the pie.

The simplest way to determine if a company has a market is not to look at overly broad industry forecasts but rather to ask yourself what the purpose of the product is and whether it a) does it better and/or b) does it at a lower cost than products that already exist.

In the case of LifeLogger, the answers to these questions are somewhat elusive, mostly because the company doesn’t have a product or price point yet. All we really know is that its wearable camera is head-mounted, shoots in 1080p, and has video stabilization, GPS, and Wi-Fi.

The reality, though, is that none of these features represents anything we haven’t already seen in other life-logging products such as GoPro’s Hero or newcomers iON’s and Narrative’s quarter-sized wearable clip-on cams.

Really, all you have to ask yourself is if you wanted to “life-log,” would you rather wear something like this:

Or something like this:

Now, I’ll be the first to admit that’s not exactly the fairest comparison, but the point is head-mounted wearables have proven over and over again to be fashion faux pas.

Despite the incessant push for this style of computing, the reality is that no one wants a computer permanently attached to their head. Bluetooth headsets are notoriously creepy. Putting a camera on it only makes matters worse.

I could be certainly wrong, but if Google couldn’t make it cool, LifeLogger won’t be able to, either.

This same line of thinking applies to any other company with a single product focus. If it doesn’t do something better or cheaper than the competition, you’re grasping at straws.

Question #3: Does the company have any money?

By now, you might be thinking I have an alter ego as Captain Obvious, but this wouldn’t need to be said if companies like LifeLogger didn’t have actual investors. I don’t know who these people are, but if you’re one of them, for the love of God, sell now. (Seriously.)

On Friday, May 15, LifeLogger filed its most recent quarterly 10-Q. The company generated zero revenue whatsoever and posted a $290,000 loss. That’s what you get without a product, I suppose.

Cash was down to $81,000 as of March 31, 2015, and the company raised an additional $200,000 earlier this month, so it has only a few months of breath left before even further dilution.

In fact, LifeLogger is so starved for cash that the company has been issuing stock as payment for services to vendors at a price of $0.20 a share.

Now, I wish this didn’t need to be said, but when a company is so broke that it’s literally selling itself away to maintain operations, you’d better believe it’s going to zero.

As much as I hate to be a buzzkill today, it’s occasionally worth the reminder that the stars won’t always align as you want them to.

Ultimately, investing is about what’s most likely to happen, not what you want to happen.

Always make sure to gather as much information as possible before buying, and be certain the answer to each of the three questions above is a clear and resounding “Yes.”

Until next time,

Jason Stutman

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