Positive momentum in Femtech

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I’m seeking a lot of positive momentum in femtech, and the latest round of investment in Flo Health (and Pitchbook’s weekly newsletter) prompted me to pull my thoughts together. I’d love to share a bit about what has me energized.

Pitchbook is one of the news sources I follow in an effort to stay abreast of all the changes in healthtech. In their newsletter this week they shared some good news about ‘femtech’ – companies focused on product and services for women’s health. It’s an exciting time to witness the maturing of this space!

Deal growth is positive

In femtech and women’s health channels there has been a lot of chatter over the past few weeks, as Flo Health secured a $200M investment and achieved unicorn status. The term unicorn was coined by venture capitalist Aileen Lee, and it has come to mean a company valued at $1B or more while still being privately held, typically by VC or PE firms. This is part of a promising trend in investments and deal growth:

From a Pitchbook article entitled “Femtech startups appear on track for record VC funding“.

Given that it’s only August, there is a good chance this year will surpass the 2021 peak. There is still lots of room to improve; deal growth has increased but deal count has not, and annual totals are still down. But femtech investments (down 7.1%) appear to be doing better than healthtech (down 32.5%) overall (Hodgson).

Women have shared concerns

There are now four femtech unicorns – Maven, BillionToOne, Bellabeat, and Flo Health. Flo has been in the news recently, though many women have shared their disappointment that the company was founded and is run by men. In a post on LinkedIn Jessica Karr of Coyote Ventures wrote:

The most common criticism is that the company, despite its focus on women’s health, is not women-led. The co-founders are two brothers, which reflects continued concerns around male founders receiving the bulk of venture capital funding, even in women’s health. Male leadership dominates the company, with males in the roles of CEO, CTO, CPO, and President. It also brings into question the founding team’s motivations and their absence from the broader women’s health community.

Another serious concern is the sharing of Flo customers’ sensitive health data with marketing and analytics firms, which has resulted in several lawsuits in the US and Canada. In addition to cycle tracking, Flo is also conducting research studies with their 70M user base. The concern is that private information about topics like menstrual cycles – if not thoughtfully protected – could be accessed to monitor personal health decisions such as abortions.

In speaking with Michelle Agudelo (a menstrual health expert), Karr also shares how much more could be done to support women through personalized education. As an anthropologist and UX practitioner, I thought it particularly intriguing to consider why women are tracking – what are they hoping to learn? Or do? Or avoid? It’s not just tracking for the sake of tracking. Without really understanding why, we’re only scratching the surface of what a solution like this could really do for women. The concern is whether a company led by (and almost exclusively invested in by men) is interested in and up for the task.

On LinkedIn, Christine Olivas shared her feedback on a recent promotional campaign by Flo that focuses on how a woman tracking her cycle can help her male partner. There is a screenshot here, and others in her post. She argues that the focus on him is “antithetical to a women’s health platform, which is supposed to be to empower HER”, and that “this is exactly what happens when those who don’t directly experience a particular phenomenon are given millions of dollars to build tech around it.” Obviously the focus on what’s in it for him is problematic, and doesn’t move us towards better supporting menstruating women.

Furthermore, argues Cindy Gallop:

female-lens sexual health and wellness ventures are banned from advertising, while male-lens sexual health and wellness ventures … are welcomed to advertise as blatantly as they like.
Cindy Gallop, LinkedIn post

She shared a specific example from her own business:

Gallop goes on to explain that this bias enables male-founded businesses to expand into women’s health, while preventing femtech businesses from advertising, therefore limiting their ability to scale.

Still, the future of femtech looks bright

In spite of these concerns, I still believe the future is bright for investments in women’s health and femtech specifically.

Late last year the White House announced an Initiative on Women’s Health Research, which includes a $100M investment in an ARPA-H program on Women’s Health. For those of you not familiar with ARPA-H, it is a government agency like NIH, funding moonshots in healthcare. I find it particularly exciting because programs require academic / industry collaboration and a commitment to delivering commercial outcomes. There is some amazing talent coalescing around these federal programs.

Recent news continues to highlight the disparity in funding for all-female founding teams, which receive only 2.3% of VC funds; a distribution of $3.2B for all-female teams compared to $114B for all-male teams. However, women founders secured 22.8% of funding in 2023, up from 18.7% in 2022, so I hope that’s a signal that things are becoming more equitable bit by bit (CFO.com).

There are some notable differences between Private Equity and Venture Capital firms. PE firms typically invest in more mature businesses; they have achieved gender parity at the entry level as of 2022, though smaller companies tend to have better diversity than the larger ones (McKinsey p 11). VC firms tend to invest earlier, but only 10-15% of senior roles are held by women. There tend to be more women in non-investing roles, but research has shown that firms with more female investing partners tend to make more successful investments, as shown in this McKinsey report:

And isn’t it also fascinating that firms with partners that have daughters employed more women managers, ultimately making the firm itself more successful (The Economist)?

Both PE and VC firms have a long way to go in achieving meaningful racial representation, with 79% white PE professionals and 86% at the managing director level. This is why the Fearless Fund ruling was such a disappointment, and a setback for diversity & inclusion in U.S. venture capital. If you’re not familiar with the situation, you can read my brief post here.

One of the things I found most exciting in the Pitchbook articles is that VCs are looking for more female founders, which are likely to be found in femtech. The past few years have show record levels of VC deals and value to female founded and co-founded companies:

From Pitchbook’s article UX VC female founders dashboard.

The Pitchbook data is interactive and worth exploring further. I’m particularly excited by the investments in software (below), as I’d love to make my way into this space at some point:

From Pitchbook’s US VC female founders dashboard.

I hope you found this summary of value. In spite of the challenges, I am optimistic that growing momentum, the success achieved when women are included in decision-making, and better gender parity in the distribution of funds will continue. And hopefully that means looking well beyond reproductive health to the many health concerns that disproportionately affect women.

I know there is still a LOT of work to do, and perhaps I’m naively optimistic. But as a graduate of a women’s college, I have seen what happens when women lift other women up. I think there is a whole lot of potential in this space, and it energizes me for the future!

I look forward to sharing more as I continue to explore and learn about this exciting and emerging space.