I don't have direct experience with products in this space but I've done extensive contract work for companies in the sleep apnea wearable space, so here are some insights:
i) Strategy wise, for a small startup, it is always better to place yourself in the 'wellness' product space.
For a startup business selling directly to costumers it is _always_ better to frame your product as wellness/lifestyle or 'life-improvement' wearable.
As soon as you make any claims of clinical benefit it becomes classed as a Medical Device, at which point you have to go through the very long and expensive process of getting it approved for each major market (FDA, CE, etc.).
You should only aim for a 'medical device' if:
1) You're able to secure VC level funding to carry you through expensive clinical trials and more expensive hiring with medical staff that can sell your product and convince other doctors and key opinion leaders.
2) You are able to build enough patents around the product that give it uniqueness as a competitor in this space. Realistically the only exit strategy in the medical device industry is to get acquired by a major Medical Device company. The key thing for these companies is usually competitive advantage through IP more so than talent acquisition or acqui-hire.
ii) When selling directly to costumers anything that can happen will happen.
Having a product that works as intended is great but it is simply not enough once you release it out in the open for a wide enough cohort. People will find every possible way of misusing/abusing your product or misinterpreting instructions etc. There are a multitude of failure modes that will occur in the 'real-world' that you likely didn't plan for.
iii) (Related to the previous point) User 'compliance' exponentially drops as soon as they have to physically 'wear' something in their sleep.
Looking at the competitors you mentioned, they are trying to get some form of EEG info, at which point they _need_ a headband with electrodes to be worn.
Immediately things start going south, people in warmer climates will probably report that it makes them sweat, users with hard pillows will refer discomfort if the headbands wedge on there skull, some users will report that they repeatedly remove the headband in their sleep and can't get a full night of data, some users will not tighten the band enough resulting in poor electrode contact, resulting in bad data, etc, etc.
All of these will likely cause users to stop wearing your device after a few trials and likely reviewing it poorly both online and as word-of-mouth.
So your ideal product would be:
-Something that address a user problem without making a 'medical claim'
-Something that requires minimal user setup and user input
-Ideally a wearable that is not worn (very zen), a 'wearable' that is on your mattress, or inside a pillow case or near the bed but not directly worn by the user during their sleep
Edit:formatting