This CEO just raised $11.5 million to fix the broken field of fertility treatment by helping companies offer it as an employee benefit: 'A problem I couldn't let go of'
- Carrot, which helps companies offer their employees comprehensive fertility benefits, raised $11.5 million in Series A funding. CRV led the round, with participation from Sound Ventures, Y Combinator, and Uncork Capital.
- Tammy Sun founded Carrot in 2016 after experiencing what she describes as the expensive, confusing fertility treatment system. The company covers egg freezing, surrogacy, adoption, and other fertility treatments that are not typically covered by employer-offered insurance plans.
- According to Sun, fertility benefits will be the "fourth pillar" of coverage employers that will offer to employees in addition to medical, dental, and vision benefits.
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After sinking more than $35,000 into her own fertility treatment, Tammy Sun realized that the whole expensive, time-consuming, confusing process was out of reach for many.
"It became a problem I couldn't let go of," Sun tells Business Insider. "I wasn't sure what I was going to build. I wasn't sure I would even start a company, but I was obsessed with this problem. My friends, my sister, my family, I could see them in different permutations struggling with fertility in their own ways. That's how it all started."
By January 2016 she had left her job and started Carrot, a solution that helps companies offer their employees comprehensive fertility benefits.
On Wednesday Carrot announced it closed $11.5 million in Series A financing, bringing its total funding to $15 million since 2016. CRV led the round, and partner Reid Christianson has come on as Carrot's first board member.
"[Tammy] is incredibly passionate about [fertility benefits] based on her own experience going through and freezing her own eggs. She has both industry understanding and empathy coupled with her business acumen. She is signing up customer after customer so she's found product-market fit, but her vision and personal experience drew me in initially," said Christianson.
Carrot works directly with companies to offer employees fertility benefits as part of a larger benefits package. Sun sees Carrot as the "fourth pillar" of corporate benefits, adding to medical, dental, and vision. Companies work with Carrot to design a program that works best for their employees and outline a coverage amount. From there, employees have their pick of fertility services, including egg freezing, fertility testing, adoption, surrogacy, and sperm freezing.
"That financial coverage is available for a person who wants to freeze their eggs as equally as it is for a male employee with a male partner to get donor eggs and a surrogate. It's not restricted to women or the even more narrow view of legacy insurance of women diagnosed with infertility," said Sun.
A solution that hit close to home
When Sun decided to seek fertility treatment in 2015, she quickly realized the barriers to patients seeking the treatment she saw as a fundamental part of her healthcare. In addition to the prohibitive costs, she says the patient forms included legal language that had nothing to do with the procedure, and was ultimately denied insurance coverage because she did not meet the highly-specific requirements for an infertility diagnosis. Although Sun worked with the HR department of her then-employer, she knew time was of the essence and decided to pay out of pocket for the treatment.
"I literally Googled a fertility clinic in San Francisco and went to the first one that showed up," said Sun. "Ultimately it wasn't the right one for me and I went to a different clinic, but I felt the entire system was set up for a very narrow subset of people from the moment I walked in."
During her own fertility treatment, Sun said she didn't talk about it except with her close friends and family. Egg freezing was still experimental, she explained, and there was still a stigma on people seeking fertility treatments more broadly. Coupled with the exorbitant costs and lack of information, it was clear to her that these people needed a better option.
Sun considers herself lucky, even though she drained her savings account to pay for the $35,000 treatment. She explained that most insurance companies will only cover women in heterosexual relationships that have been trying to conceive for a predetermined amount of time, which leaves out a substantial percentage of people who want to conceive.
"There are lots of pain points. Access to education is a problem that I personally felt, access to support and care navigation that I personally felt. But the first and most important problem, the one that is transformational to fertility care overall, is the access problem related to affordability. Bottom line is that not enough people who seek fertility care cannot afford it financially," said Sun. "Now with Carrot, employers who previously could not have offered a benefit like this because there wasn't an off the shelf tech solution can, and employees benefit from that."
Expanding access for all
Stephanie Palmieri met Sun as the latter was just getting Carrot off the ground after completing a season in Y Combinator, the prominent Silicon Valley startup incubator. As a partner at Uncork Capital, Palmieri was scouting companies specializing in fertility technology for potential investment, and ultimately led Carrot's $3.6 million Seed round in 2017. Now, Palmieri praises Sun's commitment to solving this problem.
"While Carrot goes through employers, the end consumer is ultimately an individual," said Palmieri. "She has a great deal of respect for the problems those individuals face. She's wit smart, she knows the space, and she understands the concerns. She understands where the levers to drive the business are."
Available in 40 countries, Sun said U.S.-based multinational companies are the fastest-growing segment of Carrot customers. She says that as the tech giants have popularized the idea of fertility treatment as a benefit of employment, others have wanted to follow in their footsteps.
"Google and Facebook introduced this idea 5 years ago and sent a signal into the economy that [fertility benefits] were emerging [as a priority]. The science and technology on the science side has gotten so much better, so it's a combination of a lot of things hitting the mainstream at the same time really," said Sun. "It's progress. It's scientific and social progress."
An more modern benefit
With its influx of capital, Sun says Carrot is planning on expanding support to more companies and more countries as employees continue to demand coverage as part of their benefits packages.
"I think the underlying demographics of this type of business is that people who seek access to this type of care increasingly expect fertility benefits to be covered at work," said Sun. "More men and women are having children later, gay and lesbian couples and couples with seeking donor eggs and third party reproduction options like adoption are all part of the modern experience of fertility."
According to Christianson, part of the demographic shift is driven by consumer transparency around fertility and difficulties conceiving. As more people talk about it, he explains, the more normalized fertility benefits will become.
"Right now, employers are in a very interesting place," Christianson said. "They are faced with a lot of headwinds and competition when it comes to recruiting and retention, but there is a strong sense of urgency in caring for employees and promoting a diverse and inclusive environment."
"On one hand [Carrot] is a benefit, but on the other it is a stamp of approval for the company," Christianson continued.