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'Femtech' may have its moment as investors target specialized digital health

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'Femtech' may have its moment as investors target specialized digital health

The pandemic-fueled popularity of online tools for primary and chronic care have emboldened investors to seek more specialized opportunities in digital health. Women's health may be their next target.

With patients pushed online by COVID-19, companies like Teladoc Health Inc. whose share price more than doubled in 2020 — got a warm reception on Wall Street. That led to greater interest in digital tools aimed at treating a chronic care population with conditions like diabetes and heart disease.

The enthusiasm has not quite caught up with digital women's health, often dubbed femtech. The field includes companies focused on maternal care, fertility and gynecologic care and is expanding into areas such as menopausal care and female reproductive cancers.

Digital health venture fund Rock Health told S&P Global Market Intelligence via email that an analysis of its 2020 data showed that female-focused digital health companies raised $418 million across 22 deals, which represented only 3% of overall digital health funding last year. In the first quarter of 2021, which at $6.7 billion was the largest quarter for digital health funding ever, only four U.S.-based femtech deals exceeded $2 million, raising about $58 million total, according to Rock Health.

That may change, as investors are realizing that more specialized focus areas are "deep markets" to invest in and that women's health fits that bill, Rock Health CEO Bill Evans said in an interview. The femtech market is expected to grow to $522 million by the end of 2021 from $487 million in 2020, consulting firm Frost & Sullivan found in a March report.

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7wire Ventures partner Alyssa Jaffee is among investors who believe that femtech investment is poised for growth. One reason for that is the huge opportunity to lower the cost of healthcare for women. The U.S. Department of Labor found that in 2015, women between ages 19 and 44 had healthcare expenses that were 80% higher than those for men of the same age group due in large part to the need for reproductive services. Another study published in 2015 found that untreated menopause symptoms cost U.S. employers $770 per patient per year.

"If you look at the spend, it is unbelievable how much is actually spent on women's health, and that has to be curbed in a smart and thoughtful way," Jaffee said in an interview. "The whole mantra of digital health is we improve outcomes and we reduce costs, and [femtech] is a market that's absolutely primed and ripe for doing so."

The COVID-19 pandemic has only exacerbated some of these costs. One in four women had trouble paying medical bills over the previous 12 months, and more than half of them attributed it to the pandemic's impact on their lives, according to a survey conducted by the Kaiser Family Foundation between Nov. 19 and Dec. 17, 2020.

"The COVID-19 pandemic has exposed the challenges women face, and many new products and technologies have grown out of this pandemic," Reenita Das, partner and global client leader for healthcare and life sciences at Frost & Sullivan, wrote in the firm's March report.

Companies say they are giving women what they are demanding. For example, NURX Inc., a telehealth platform that also provides female healthcare products such as birth control pills, added acne treatments to its platform after noticing many patients were requesting contraceptives as a means to control breakouts, Jennifer Peña, the company's chief medical officer, said in a previous interview.

"That all came as a response to what our folks were saying," Peña said of Nurx customers, adding that there is a possibility that Nurx could expand further into other areas of the "female healthcare journey" to reach women across different age brackets.

Many of the top-funded companies are focused on reducing costs for expensive services like childbirth and fertility treatments.

New York-based Maven Clinic Co., which raised $45 million in a series C round in February 2020, offers a digital care clinic that guides women and families through conception, pregnancy and post-partum care. KBI Services Inc., known as Kindbody, operates fertility clinics and includes fertility assessment and egg-freezing among other services. The company raised $32 million in series B funding in July 2020.

Fragmented industry

Women's health is traditionally very fragmented, according to Sonya Borrero, director of the Center for Women's Health Research and Innovation at the University of Pittsburgh. The center hosts a FemTech Collaborative through which researchers have developed digital tools that target women's health concerns. Borrero said the center's research found that women often were not having certain conversations with their doctors that were important to them about reproductive decisions.

"As we continue to super-duper specialize, we get very good at one particular focused area, and there is a lack of holistic care and so...people fall through the cracks," Borrero said in an interview.

Digital tools can help facilitate these conversations between women and their doctors, Borrero said.

While it can be difficult for a start-up to prove its offering decreases costs, it is much easier to show that it increases accessibility, Jaffee said.

"The thesis becomes if I can engage the historically unengaged population, if I can give them access to the resources to the [obstetricians, the nurse practitioners], the doula, the lactation consultants, [and] to nutrition and mental health, and I can drive utilization of the services, that becomes a more informed consumer," Jaffee said. "That informed consumer better understands their healthcare journey and ultimately has better outcomes, while still reducing costs."

A major appeal of digital tools for women's health is that they can be used to reach underserved populations as well. Companies like Wildflower Health, Inc. work with women and health plans, including Medicaid, to facilitate care.

Other companies like Health In Her HUE LLC seek to mitigate the maternal mortality crisis in the U.S., especially among Black women, by providing easier access to healthcare providers who are more attuned to their needs. According to data from the National Center for Health Statistics and the U.S. Centers for Disease Control and Prevention, pregnancy-related deaths increased from 7.2 deaths per 100,000 live births in 1987 to 17.4 deaths per 100,000 live births in 2018. Black women had the highest death rate per 100,000 live births at 37.3 while white women had a rate of 14.9.

The stepchild for digital health

Opportunities exist for femtech to expand into other areas like mental health, endometriosis or menopausal care, according to Frost & Sullivan. But femtech is a relatively new and poorly understood term, with some investors seeing it as limited to reproductive health, the firm noted in its report.

"Femtech still continues to be the stepchild for digital health, as there are very few femtech products catering to tracking and monitoring these diseases," Frost & Sullivan's Das said.

SNL Image7wireVentures partner Alyssa Jaffee

Source: 7wireVentures

Jaffee identified two reasons why femtech tools may be experiencing a smaller number of investments compared to their digital health peers: a lack of data and a lack of empathy.

Data around the effectiveness of many digital health tools is sometimes difficult to find, leading to confusion for patients, investors and regulators. Jaffee said women's digital health tools have not typically included longitudinal data — or data that is periodically collected from the same person over a period of time opting instead for point solutions that only address immediate needs.

Femtech founders, historically, have also had difficulty connecting with some investors who were not in a population that experiences the same conditions as many women, Jaffee said. Less than 10% of 4,475 startup founders who received venture capital investment from 2013 to 2017 were women, according to research by RateMyInvestor.

"There is so much capital...that the investors that treat women that way, that don't want to get on board, I don't think that they're here for the long run. I just think that's how you get squeezed out is because you don't have empathy and thoughtfulness for markets that are markets you don't understand," Jaffee said.

Ultimately, Jaffee remains bullish about the sector.

"I am eagerly awaiting the right company, and I think that it's those that really are not point solutions, that think about longitudinal data, and that are thoughtful about how they're not only capturing a consumer but engaging and empowering," Jaffee said.