Closing the female health gap

Female health has been ignored for years. Only 4% of all healthcare research and development and 1.4% of capital invested in healthcare is targeted specifically at women’s health issues, even though they contribute to $500bn in medical expenses per year. It can be explained by a historically low investor interest due to poor gender diversity and few exits, as well as a lack of female-focused medical research.

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The good news is that things are changing. To compensate for the research gap, most start-ups operating in this sector have taken a data-first approach, collecting user data to support leading university research in their specific fields. Looking at the investment side, the global FemTech market generated $820m in funding in 2019, which is estimated to increase to at least $3bn by the end of 2030. We’ve also seen positive exits recently, such as the UK biotech start-up, Kandy Therapeutics, focused on menopause, which was founded in 2017 and acquired in 2020 by Bayer for $425m. This particular acquisition demonstrated that even though 45% of the start-ups in this space to date have focused on reproductive health, the opportunity in female health is much wider than that. Indeed, most start-ups fit into two categories: stage-dependent (their core product addresses a specific pain point from a certain stage of a woman’s life such as pregnancy or menopause) or lifelong (their core product is relevant throughout the majority of a woman’s life such as sexual wellness or endometriosis). It’s worth noting that most startups today focus on sexual, OBGyn and brain areas of female health, however we can expect more to tackle areas like oncology, autoimmune and heart disease in the future (ie. women are twice more likely to get Alzheimer’s).

Why is this exciting? Female health has been left behind for so long that there are large gaps for improvements, leaving space for three different types of innovation to be simultaneously successful (examples below within fertility):

• category killers that are improving on existing solutions (Ava modernising ovulation monitoring for conception)
• category disruptors that are digitalising current solutions (Apricity offering better access to fertility clinics)
• and category creators that are moving female health into the future (Natural Cycles providing hormone-free contraception using the Oura ring)

Another, more obvious reason to be excited is the market size. With a market size estimated to reach $50bn by 2025 and the potential to reach half of the world’s population, FemTech is far from a niche sector. Although sub-areas of FemTech are big enough to build a large business (ie. endometriosis’ associated costs in the UK alone adds up to £6.2bn a year), quite a few founders share the vision of becoming the go-to generalised female health platform. This article explores how this long-term vision of supporting women from their first period to menopause could be realised.

The vision. FemTech start-ups are leapfrogging years of gradual improvement. From their inception, the founders have the ambition to harness the latest digital health trends. Those aiming to become the go-to female health platform are no different (see below).

From speaking to start-ups looking to become the go-to female health platform, it looks like version 1.0 can be characterised as:
1) accessible with content and experts
2) de-stigmatised with a community.
Over time, we can expect the platform to become increasingly:
3) connected with health monitoring through tracking devices.
The data collected will enable the most advanced characteristics:
4) personalised health with also the help of at-home medical tests
5) dynamic with health prevention or self-management.

Where to start. There are a few reasons why being accessible (content and experts) and de-stigmatised (community) are important to start with. A community not only provides some defensibility for investors looking to invest (when customer love and value is expressed through high organic growth, engagement and retention), it also drives stickiness by:
1) connecting people who face or have faced similar health challenges, particularly when those issues are rare within their personal network
2) enabling crowdsourcing to find the best remedies, both backed by science and home-made.

Access to good quality content and experts is a great way to attract this community and ultimately, it is the community itself that drives retention. This retention is absolutely key to collect the consistency and volume of longitudinal data needed to become a fully personalised and dynamic platform.

It is true that startups focusing on connected features such as tracking could potentially bypass the content, experts and community features altogether if users are already regularly coming back to the platform to input their data. However, across the female health space, the need for content, experts and community features goes beyond simply offering better access and de-stigmatisation as you can see below:

• Motherhood: active communities already exist on Facebook or Mumsnet but the information is generic and unreliable, and the community is often in the form of one to many interactions
• Menopause: even though it’s 2020, this is still a taboo topic, which is not even mentioned in school programs. With 38 possible different symptoms and 25 treatment options, it’s not surprising only 7% of women think symptoms are not a problem
• Endometriosis: similar to motherhood, endo communities already exist, and patients are used to journaling their symptoms. Although it affects 1/10 women, there is a lack of research and understanding of the disease. Nevertheless, a lot can already be done through information sharing and community building
• Sexual disfunction: Not only is the topic taboo, but access to experts and services is difficult and it’s unclear when it is needed (many issues can be resolved through correct information, suggestions and normalisation)

Over time, start-ups become more dynamic as they start proactively identifying potential problems and offering hyper-personalised solutions, enabling prevention and self-management. At that stage, we can expect these features to overtake the community as the main source of defensibility and retention. Indeed, the larger the volumes of consistent and proprietary patient data, the better the care provided will be. It goes without saying that startups will also build defensibility on top of that by developing a trustworthy brand.

The existing European players. As previously mentioned, the most advanced characteristics underpinning the go-to female health platform(s) will likely be personalised advice and dynamic care. This is why I’ve mapped out the existing players according to the extent to which they have started providing these two features.

We can expect more progress towards the top right corner over time, especially on the proactivity front. At the bottom, I’ve also included some existing businesses who could be potential players here. For instance, those with already strong communities to leverage like Facebook or Mumsnet, or those who have already been collecting proprietary datasets like Clue.

Challenge 1: Monetisation. It’s important for start-ups in this space to monetise the community from the beginning as it’s what early stage investors are on the lookout for. This can be done by iteratively testing the relevant below revenue streams to find which one responds best:

• B2C. Standard subscriptions are usually between £6–10 a month, a freemium model is often used. Platforms that have scientific backing are generally able to charge users a higher fee.
• B2B2C. Corporate benefit offerings usually charge more per individual per month than B2C subscriptions. It aligns interests between employee — employer — start-up.
• Marketplace. The marketplace can offer tele-health through online consultations with experts/doctor/nurse. It can also offer health and wellness products, over-the-counter or prescribed.
• Insurance & government

There are challenges and merits to each of these revenue streams. B2C is tough in Europe as many patients are not used to paying for healthcare out of their own pockets. However, the rise of subscription products and the wellness sector have demonstrated that users might be more willing to pay if product-market fit is strong enough. With B2B, although sales cycles are long, user adoption is partly outsourced to the employers and so is lower on a per-user basis. Some startups even combine usage and fixed pricing to incentivise employers to push adoption. We’ve seen the B2B channel work not only in the mental health space with Calm or Headspace but also within FemTech with Carrot in the US who have raised £28m to date.

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In terms of tele-health marketplaces, a good example in Europe is Babylon, who despite quite a few challenges, is valued at over $2B and collected over £5m revenue in 2018 with a 6% EBITDA margin. In terms of health and wellness products, one of the most successful companies is in the US: Hims & Hers is expected to reach a $1.6B valuation, has a gross margin above 70% and has seen more than 100% compounded annual revenue growth over the last two years. Interesting to note here however that they have opted for a subscription model whereby patients automatically pay and receive the product every month.

In terms of reimbursements from private or public healthcare, it is rarer in Europe than in the US. In order to secure partnerships, the product needs to be backed by research and well-integrated with the existing healthcare system. Although rare, partial coverage is possible in two cases. First case is when the start-up is targeting a health issue that is costly to the insurer or healthcare system. Second case is when the start-ups are willing to share proprietary patient data. This however raises the question of data collection and protection.

Challenge 2: Data collection and protection. First, start-ups require a strong data collection process to reach the consistency and volume needed to offer both personalised and dynamic features. From the least useful to most, these processes are:

• User input: it’s an easy and cheap way to start, but it does not fulfil the long term needs in terms of volume (if you ask users for too much, they will lose interest and won’t fill in the data), quality (no control over what is inputted) and consistency (people often forget to input)
• Testing kit: although people are increasingly familiar with this methodology and it can achieve an acceptable volume, quality and consistency of data, unit economics as well as logistics can be challenging
• Tracking device: this option is fully automated, so the ease of use is best in class for user experience as well as for volume, quality and consistency of data collected.

For tracking devices, there is a question around whether wearables such as Fitbit or the Apple Watch that have introduced increasing features for female health are doing enough. As they grow to cover more female health data points and learn to overcome basic stigmas, we can expect partnerships to develop and possibly open APIs for the benefit of not only health start-ups but also governments and insurance providers. However, there is still an opportunity to collect women’s health data points in areas where more advanced medical expertise is required. This is where category creators such as Coroflo or Elvie for breastfeeding and Juno Bio for the vaginal microbiome come into play.

Once the data is collected, there is an additional complexity involved to protect it. In terms of how the data is being used, start-ups should ideally be held to similar standards to doctors, have privacy by design built in and aim to measure / collect only what matters. Although the US has lower data standards than Europe, it hasn’t stopped European FemTech start-ups, such as Clue, successfully collecting patient data. In terms of cyber attacks, it’s worth noting that data-driven health start-ups are at a high risk of being attacked as healthcare data is valued at $250 per record on the black market, 50 times more valuable than payment card details. In this context, it is crucial to have a strong data protection team and best-practise processes in place.

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Ending thoughts. Tech is enabling the rise of female health. It has not only allowed entrepreneurs to improve the lives of patient groups underserved for years, but also enabled the collection of missing data needed to advance research in female health.

As discussed, I believe there is an opportunity to build a generalist female health platform that supports women throughout their lives. The platform would allow women to get access to personalised and reliable recommendations, connect with others with similar health conditions and become more proactive in managing their health. Starting with content, community and access to experts, the platform could then evolve to offer more personalised and dynamic care, based on the longitudinal data collected through connected wearables, app input or patient testing. Of course, this won’t be without its challenges. Similar to Clue and Natural Cycles who have faced criticism, we can expect more push back as FemTech start-ups fight against their own built-in stigmas and learn how to best protect patient data.

At Balderton, we’ve been following the FemTech space to see how we can get involved to support entrepreneurs who, like us, want to close the ‘female health gap’. If it sounds like you, give us a shout!