Courtesy of Carrot
Tammy Sun
- Venture funding has been pouring into fertility treatment startups in the last 18 months, but a significant portion has gone to male-led or male-targeted startups.
- Two of the highest valued startups in the space, Ro and Hims, are starting to chase the larger market opportunity in women's health, after exclusively offering men's health products at first.
- While the spotlight has been on female entrepreneurs and investors in the space, multiple female founders told Business Insider that fertility treatment has been difficult to sell male investors on.
- Several female founders said the discrepancies in funding, while on par with venture capital funding as a whole, serves as a stark reminder that there is still a long way to go to get to funding parity even in a women-centric industry like fertility.
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Fertility is booming, and investors aren't leaving any man behind.
Fertility startups have raked in an estimated $321 million in venture funding in 2019, as estimated by venture capital firm NEA. Still, the two most valuable fertility startups - Ro (valued at $500 million) and Hims ($1.1 billion) - target men, while the third-most valuable, fertility benefits provider Progyny, clocks in at a $123 million valuation.
This checks out with the broader trends in the venture capital industry: In 2018, it was reported, women-led startups only accounted for 2.2% of total VC dollars invested. However, the irony of male-focused companies outraising their female-focused counterparts in the fertility industry, of all markets, has not gone unnoticed.
"Even in femtech, guys are raising more money than women," NEA partner Vanessa Larco told Business Insider.
The totals changed just this week, too, when Dadi, a startup that offers sperm freezing to men, announced $5 million in new funding, adding on to the $2 million seed round it first announced in January.
By Larco's estimation, the fertility market overall is poised to explode: In her view, fertility is one of the few women's health issues that is felt by both parties in a heterosexual relationship, and the strict guidelines for diagnosing and getting insurance coverage for infertility leave the space wide open for innovation.
Still, many of the startups in the space are still very much in their early stages, Larco says, and it's no coincidence that Ro and Hims are the two largest fertility startups that have progressed past the seed stage.
"If you think about the investing population, it's mostly men," NEA partner Vanessa Larco told Business Insider. "Investors invest in things they can relate to and [fertility] is more relatable to them for a majority of investors."
Even then, though, some of the male-focused startups are starting to chase a larger opportunity: Ro launched Rory, its service for menopause, weeks after securing $85 million in Series B funding in March. Hims launched Hers, a line of birth control pills customers can order on the internet, in January, shortly before raising $100 million.
On the flip side, founders say that being focused on women's health can confound male investors, who don't grasp the issue as intuitively. Some fertility startups and founders tell us that they feel that pitching women-focused fertility solutions to male investors can make it that much harder to raise a round.
"In our initial fundraise, we met with a lot of investors that would say, 'Let me go home and ask my wife or partner or whatever and see what they think," Modern Fertility cofounder and CEO Afton Vechery said. "You're pitching more male investors than female investors just because that's venture capital, but that's changing now."
Modern Fertility, for its part, is one of the faster-growing women's fertility startups, most recently announcing $11 million in funding in June that valued the female-led startup at $60 million, according to Pitchbook data. The company provides at-home fertility testing.
High risks, higher rewards
By Larco's assessment, the fertility market in the United States is relatively small, but you wouldn't have guessed it based on interest from some of Silicon Valley's biggest venture firms. In her research on the industry, Larco found that about 200,000 couples seek fertility treatment annually in the United States.
"There is not as much supply as there is demand for a lot of reasons, but that means you can command expensive price tags for treatments," Larco said. "If you want to invest in high-margin industries, this is it. We know there are tailwinds."
But according to some founders, the higher margins still haven't been enough to win over wary investors. Fertility startups for financing, hardware, and mobile apps have struggled to win over male venture investors, several founders told Business Insider. Many said that they had better luck when pitching female investors, but still struggled against perceptions that theirs was a niche product without a viable market.
"In 2016 I received largely questions about market size and the scalability of our solution," Future Family founder and CEO Claire Tomkins told Business Insider. "There's no doubt that female investors were on the forefront. Those that bought in early had the product intuition. It's an advantage of firms having women in prominent roles because the female investors got this trend much sooner." Future Family, a financing startup to help patients pay for fertility treatment, was most recently valued at $36 million, according to Pitchbook data.
Access and affordability came up often with potential investors, several founders said. Many insurance carriers define infertility very narrowly, which excludes same-sex couples and unmarried heterosexual couples. Unless an investor had an infertility experience of their own, or knew someone personally who had, fertility solutions and care were a tough sell.
Women's health or human health?
Part of that change is who is investing. George Arison, founder and co-CEO of car selling startup Shift, personally invested in Carrot Fertility, an employer-based fertility benefits provider valued at $38.5 million, after attempting to navigate the world of IVF and surrogacy options. In September, he and his husband will have two children born via two separate surrogates.
"Our first investors were gay men, women, and people with adoption experience," Carrot cofounder and CEO Tammy Sun told Business Insider. "But our stance was always we are not building a female health company, we are building a human health company."
By tying her startup to the world of health tech, Sun says that she's managed to avoid the more limiting label of "women's health tech," which has been especially useful as a female founder pitching mostly male investors. But her experience with early backers was not unusual, and having a diverse source of funding has helped Carrot Fertility get ahead of some of its notable competitors.
"In startup-land, when one or two companies start in one space, many more follow," Arison told Business Insider. "A lot of entrepreneurs are thinking about the company they want to do and will see other companies and go from there. It's just how the Valley works and that's the reality of it."
For all the goodwill and dollars flowing into fertility startups, several founders said the contrast serves as a stark reminder that there is still a long way to go to get to funding parity both at the investor and founder levels.
"It's better than we were three years ago, but there's a lot more work to be done," Sun said.
