Fertility is booming, and investors aren’t leaving any man behind.
Fertility startups have raked in $321 million in venture funding in 2019, as estimated by the venture-capital firm New Enterprise Associates. Still, the two most valuable fertility startups — Ro, valued at $500 million, and Hims, at $1.1 billion — target men, while the third-most-valuable, the fertility-benefits provider Progyny, clocks in at a $123 million valuation.
This checks out with the broader trends in the venture-capital industry. In 2018, Fortune reported, women-led startups accounted for only 2.2% of total VC dollars invested.
However, the irony of men-focused companies outraising their women-focused counterparts in the fertility industry, of all markets, has not gone unnoticed.
“Even in femtech, guys are raising more money than women,” Vanessa Larco, an NEA partner, told Business Insider.
The totals changed just this week too, when Dadi, a startup that offers sperm freezing, announced $5 million in new funding, adding on to the $2 million seed round it first announced in January.
By Larco’s estimation, the fertility market overall is poised to explode. In her view, fertility is one of the few women’s health issues felt by both parties in a heterosexual relationship, and the strict guidelines for diagnosing and getting insurance coverage for infertility leave the space wide open for innovation.
Still, many of the startups in the space are very much in their early stages, Larco said, and it’s no coincidence that Ro and Hims are the two largest fertility startups that have progressed past the seed stage.
“If you think about the investing population, it’s mostly men,” Larco told Business Insider. “Investors invest in things they can relate to, and [fertility] is more relatable to them for a majority of investors.”
But even then, some of the men-focused startups are starting to chase a larger opportunity. Ro launched Rory, its service for people in menopause, weeks after securing $85 million in Series B funding in March. Hims launched Hers, a line of birth-control pills people can order on the internet, in January, shortly before raising $100 million.
On the flip side, founders say that a focus on women’s health can confound male investors, who don’t grasp the issue as intuitively. Some fertility startups and founders told us that they felt that pitching women-focused fertility solutions to male investors could make it that much harder to raise a round.
“In our initial fundraise, we met with a lot of investors that would say let me go home and ask my wife or partner or whatever and see what they think,” said Afton Vechery, the cofounder and CEO of Modern Fertility. “You’re pitching more male investors than female investors just because that’s venture capital, but that’s changing now.”
Modern Fertility, which provides at-home fertility testing, is one of the faster-growing fertility startups, most recently announcing $15 million in funding in June that valued the women-led startup at $60 million, according to PitchBook data.
High risks, higher rewards
By Larco’s assessment, the fertility market in the United States is relatively small, but you wouldn’t have guessed it based on interest from some of Silicon Valley’s biggest venture firms.
In her research on the industry, Larco found that annually about 200,000 couples seek fertility treatment in the United States.
“There is not as much supply as there is demand for a lot of reasons, but that means you can command expensive price tags for treatments,” Larco said. “If you want to invest in high-margin industries, this is it. We know there are tailwinds.”
But according to some founders, the higher margins still haven’t been enough to win over wary investors. Fertility startups for financing, hardware, and mobile apps have struggled to win over male venture investors, several founders told Business Insider. Many said they had better luck when pitching female investors but still struggled against perceptions that theirs was a niche product without a viable market.
“In 2016, I received largely questions about market size and the scalability of our solution,” Claire Tomkins, the founder and CEO of Future Family, told Business Insider. “There’s no doubt that female investors were on the forefront. Those that bought in early had the product intuition. It’s an advantage of firms having women in prominent roles because the female investors got this trend much sooner.”
Future Family, a financing startup to help patients pay for fertility treatment, was most recently valued at $36 million, according to PitchBook data.
Access and affordability came up often with prospective investors, several founders said. Many insurance carriers define infertility very narrowly, excluding same-sex couples and unmarried heterosexual couples. Unless an investor had an infertility experience of their own or knew someone who had, fertility solutions and care were a tough sell.
Women’s health, or human health?
Part of that change is who is investing.
George Arison, the founder and co-CEO of the car-selling startup Shift, invested in Carrot Fertility, an employer-based fertility-benefits provider valued at $38.5 million, after attempting to navigate the world of IVF and surrogacy options. In September, he and his husband will have two children born via two separate surrogates.
“Our first investors were gay men, women, and people with adoption experience,” Carrot cofounder and CEO Tammy Sun told Business Insider. “But our stance was always we are not building a female health company, we are building a human health company.”
By tying her startup to the world of health tech, Sun said, she’s managed to avoid the more limiting label of “women’s health tech,” which has been especially useful as a female founder pitching mostly male investors. But her experience with early backers was not unusual, and having a diverse source of funding has helped Carrot Fertility get ahead of some of its notable competitors.
“In startupland, when one or two companies start in one space, many more follow,” Arison told Business Insider. “A lot of entrepreneurs are thinking about the company they want to do and will see other companies and go from there. It’s just how the Valley works, and that’s the reality of it.”
For all the goodwill and dollars flowing into fertility startups, several founders said the contrast serves as a stark reminder that there is still a long way to go to get to funding parity at both the investor and the founder levels.
“It’s better than we were three years ago,” Sun said, “but there’s a lot more work to be done.”