Catching the herd of FemTech unicorns

August 2024 | SPOTLIGHT | SECTOR ANALYSIS

Financier Worldwide Magazine

August 2024 Issue

Despite its exponential growth over the past few years, ‘FemTech’ is a relatively novel segment in the health technology market. In essence, it is innovation at the intersection of life sciences and technology to address health issues that solely or disproportionately affect women and address general health conditions that affect women differently to men, such as cardiovascular or oncological conditions.

On 11 June 2024, global accelerator FemTech Lab hosted its second women’s health tech conference – ‘Decoding the Future of Women’. This was held during London Tech Week and attendees included investors, corporate innovators and cutting-edge start-ups in the women’s health space. What follows are some of the key takeaways from the panel discussion on key investment trends and unicorns in the space, in addition to giving an overview of the FemTech sector more broadly.

FemTech explored

Modern medicine was developed based on a foundation of male subjects. Medical research has historically favoured male interests, leading to persistent gender disparities in diagnostics, treatment and care. Clinical studies have long been conducted exclusively with male participants, leading to women receiving incorrect prescriptions or dosages. To highlight the disparity, it was not until 1993 that the National Institutes of Health mandated that clinical research studies receiving federal funding must include women and minorities.

The term FemTech now receives mixed responses in the industry. The aim is to live in a world where there is no need to refer to it at all, because those innovations are simply captured within the general health tech umbrella once this gender disparity falls away. At present, society is still quite far away from achieving that goal, so bringing attention to this sector is important in order to sustain its development and growth.

There is much in the way of untapped potential here. The sector serves to provide countless opportunities for investors in life sciences and technology looking to diversify their portfolios. The list of areas covered by FemTech is non-exhaustive, but includes fertility solutions, menstrual healthcare, reproductive and maternal healthcare, cancer screenings and treatments, women’s sexual wellness, menopause and hormonal disorders. The historical lack of funding in the space has meant lack of growth, but the tide is turning, and government bodies globally are now backing the space.

Investment strategies

Innovation in the FemTech space often starts with a personal journey (overcoming adversity in the women’s health space, for example), but the idea and motivation to build something is just the start. It is essential to have a clear business model to be able to take these innovations to market.

For FemTech start-ups looking to secure investment and scale up, there are key steps which must be made. First, have a clear go-to-market strategy. This includes marketing and sales plans, identifying distribution channels and outlining a roadmap to include achievable future milestones.

Second, provide detailed financial forecasts and break-even analysis. Specifying funding needs and intended use of funds, in addition to showing when the company expects to become profitable, can provide a level of clarity to investors and when they should expect to see returns.

Third, highlight the team’s expertise and advisory board. It is important to achieve the right balance between industry experts and business advisers. Additionally, having both men and women represent the company will allow for a broader outreach when pitching to potential investors. This is particularly important in the case of FemTech companies, given boards of venture capital and other investment firms are predominantly made up of men. Having a female-only team when seeking investment provides challenges so encouraging men to be ‘on board’ from the outset is helpful.

Finally, identify an exit strategy. Investors are deploying capital to make money. They will be interested in the sectors they are investing in, but ultimately a return on investment in the form of an exit is the optimum result. Being able to demonstrate potential exit strategies for investors, for example by way of identifying companies that might be interested in acquiring the target, will likely go a long way toward attracting a sizeable investment.

By incorporating the above elements and building a comprehensive and attractive business model, FemTech companies can create an impact while demonstrating potential for financial return.

Innovation and inspiration

What is unique about the FemTech space compared with other subsectors of life sciences and technology is the strong community that exists. Priya Oberoi, founding general partner at Goddess Gaia Ventures, explained that “community is the superpower of women’s health”. For too long, women’s voices have not been heard and as a result women’s health issues have been neglected, the consequences of which have had tragic results. The FemTech community has begun to shine a spotlight on these issues and together work to find a way to address them. The ‘Decoding the Future of Women’ conference provided an excellent forum to do just that.

Ida Tin, co-founder and chief executive of women’s menstruation-tracking app Clue, gave an insightful speech about her journey. She shared her thoughts on the FemTech space and how it has grown: “So much of what is intensely intimate and impacts our lives daily happens in what I think of as the big shadow area of culture. What is so fascinating about technology is that innovation tends to come in where something has just become visible in our mainstream culture, at the very edge of this shadow area. What we have just barely made room for in our culture is where new needs become visible. We start being able to articulate our experiences and then we want to have our needs met.”

Expansion and unicorns

At present there are only seven FemTech unicorns – privately owned start-up companies that have achieved a valuation of $1bn or more – in existence, and unsurprisingly they are based in North America and Europe. But there is a growing pipeline of potential global unicorns and increasing support from governments worldwide to help fund the space.

In the UK, Innovate UK provides government funding to businesses and research organisations across the UK, predominantly in the life sciences and technology sectors. An increasing number of FemTech companies in the UK are emerging and seeking support from Innovate UK to build and grow.

In the US, greater strides have been made just recently. On 13 November 2023, the White House announced the launch of its first-ever initiative focused on women’s health research, to be led by Jill Biden. On 21 February 2024, President Biden announced the first major deliverable: $100m in federal funding to be used to invest early in “life-changing” work being done by women’s health researchers and start-up companies that cannot obtain private support. “To achieve scientific breakthroughs and strengthen our ability to prevent, detect and treat diseases, we have to be bold,” said Mr Biden. He added that the initiative will “drive innovation in women’s health and close research gaps”.

The ‘Decoding the Future of Women’ panel shared thoughts and insights into the areas within FemTech that are most likely to produce the next unicorns based on current trends. These included affordable assisted reproductive technologies, including those tackling male reproductive health issues, products for early diagnosis and treatment of cancers, and innovations related to menopause.

It is an exciting time to watch this growth sector, with many more unicorns on the horizon.

Which one will be the next?

Sage Revell is a partner at Brown Rudnick LLP. She can be contacted on +44 (0)20 7851 6175 or by email: srevell@brownrudnick.com.

Sage Revell

Brown Rudnick LLP