Why Venture Capital Investors Are Focused on Femtech

Andrew Harper in San Francisco and Francesca Blythe in London look at some of the drivers that are fueling interest in digital health products aimed at women.

The term ‘Femtech’ was coined by the founder of a fertility app company in response to her experience that male investors often struggle with the specifics of discussing products focused on women’s reproductive health. However, Femtech covers a wider range of products than the purely fertility-focused, including all health software and tech-enabled products that cater to female biological needs and to the wider wellness market for all those who identify as women.

The advent of the term is a signal of the tide turning in a sector where many companies have historically struggled to secure financing, and investors have not been fully aware of the growth potential.

In Silicon Valley, the growth of VC investment in the fields of women’s digital health during the last two years has been marked, with the West Coast tech world recently witnessing its first unicorn minted. The growth of Femtech in the United States has been fueled by two main factors. The first is a general perception that the VC industry needs to move away from being male-dominated. In the United States there has been a rise in VC funds dedicated solely to investing in female founders and in products that address women’s needs.

The second is the realization that Femtech has massive growth potential as a market. A report this year by non-profit FemTech Focus estimated the size of the market as US$1 trillion, based on the facts that the world’s 3.8 billion women have a collective spending power of US$20 trillion per annum, control 85% of day-to-day household spending, and make over 80% of healthcare decisions. The report stressed that exits by female-founded companies increased by 16% year over year during 2019-2020 while male-founded exits declined by 2%.

The Femtech market is also expected to grow significantly in value over the next five years in Europe, where it is being driven by changing regulations to address women’s basic health requirements. The recent removal of a tampon tax in the UK and the free female sanitary products initiative in Ireland are examples of this. Also, in Europe and elsewhere, the pandemic has resulted in underdeveloped areas of healthcare from fertility to mental health garnering increased attention, and this has led to a focus on more personalized health solutions.

Another factor accelerating the growth of Femtech has been the increasing use of digital health tools. These suit Femtech’s focus on one-to-one personalized care rather than the one-size-fits-all approach previously applied to women’s health. Working age women are 75% more likely to use digital healthcare tools than men, including the consumer health and wellness apps that have for some years now been a top five investment area in digital health. And health issues like fertility and menopause are particularly well-suited to management via apps.

Historically, women’s health issues have been marginalized, with conditions such as endometriosis suffering from a lack of recognition. Today, an estimated US$500 billion is spent on women’s medical expenses. However the FemTech Focus report also found that only 4% of pharma R&D budget is currently earmarked for women’s health. This suggests that R&D in women’s health has the scope to increase exponentially, and that VC investment in the sector will reflect a growing recognition of this opportunity.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.