Good evening Upscalers’ followers.
First, let met tell you that I’m really sorry the newsletter didn’t get through last week.
Anyway, it’s now time to bring you the 16th edition of our weekly journal. This week, we’ll talk about Femtech 👩
As always, I’ll also give you some news about what happened in the European Tech ecosystem this week.
Feel free to like, comment, react and respond. Thanks for reading!
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👩 Femtech 101
Let’s try to give you a brief overview of what Femtech is here.
Here we go ⬇️
1. Understanding Femtech
Femtech can be understood as all software, products and services that use technology as a way to support Women’s health and wellbeing, by addressing conditions that solely, disproportionately, or differently affect them.
Putting Femtech as a subset of health technology makes perfect sense, given that its reason for being is the historical and systemic exclusion of women’s health from healthcare research, development and funding (see below).
The term “Femtech” was first coined by Ida Tin, founder of a mobile fertility tracking app called Clue, back in 2016. At the time, Ida Tin used the term to (1) bring more attention to an industry that lacked funding opportunities, and (2) create space for investors to discuss female-focused products. The birth of Femtech as a investment vertical is a direct consequence of the VC gender gap — most of world’s investors being men, struggling to understand women’s health needs and issues.
As such, Femtech covers four subsegments:
General health and wellness 💓 — nutrition, fitness, sexual wellness, mental health…
Healthcare and diagnostics 👩⚕️— menstruation, tests, disease management…
Reproductive health 👶 — menstruation tracking, fertility and birth control…
Pregnancy and family care 🤰— breastfeeding, nursing tools…
Products in the Femtech space typically fall into one of these categories: medical device, healthcare software, therapeutic drug, consumer product, consumer service or consumer apps.
Defining Femtech is quite elusive though.
Some include skincare and beauty products in its scope. I believe that it doesn’t align well with the historical roots of Femtech. Plus, skincare and beauty products increasingly target mixed audiences.
Others say the term by itself encourages the Pink Tax phenomenon: which is often attributed as a form of gender-based price discrimination (the name stemming from the observation that most affected products were pink). However, the aim of Femtech is quite the opposite. It is not about rebranding or repositioning existing products to target women, but to create brand new innovative solutions that are designed to meet women’s health and wellbeing challenges.
3. Femtech market potential
Beyond controversies, the market potential for Femtech companies is huge. Let’s drop some figures here:
There are over 380M women in Europe, 3.9B in the World.
In 2020, women controlled around $20T in annual consumer spending. This figure is expected to increase by up to 40% by 2025.
Women control most of households spending worldwide: 70 to 80% of women are responsible for all consumer purchases accounting for themselves, their partners, their children, and other miscellaneous household needs.
Back in 2018, it was estimated that $500B per year were spent by women on medical expenses. Working-age women spend on average 29% more on healthcare than men each year.
There is a also high prevalence of chronic diseases among women. Up to 45% of women suffer from specific chronic conditions (e.g., endometriosis, autoimmune diseases, hormonal disorders), and every year they spend $1,000-$3,000 per capita to address the symptoms.
Despite the gender gap in healthcare spending, it is estimated that only 4% of all healthcare research and development is targeted specifically at women’s issues.
Globally, the women’s health market size is estimated to be $1.186T. This is not the actual Femtech market size, since this does not distinguish the share of the market that is used specifically for tech-enabled products and services. The Femtech market is narrower.
As there is still no standard definition of Femtech, there is no standard way to subcategorize the industry. As an example, Femtech is still not considered a market segment per se by Dealroom… Some reports have valued Femtech at $60B, while others have shown that the menopause market alone (which is a segment of the Femtech market) could top $600B (Crunchbase).
➡️ My guess is that it is massively undervalued, but truth is difficult to tell here.
Despite having some undeniable potential, the FemTech space remains massively underfunded. Using data at our disposal, FemTech would have accounted for only 2.4% of all healthcare funding in 2019 (Source: Dealroom).
But Femtech is growing at a great pace. Despite suffering a huge blow in 2020 due to Covid, 2021 was a record year for Femtech funding accross the globe, with around $2.7B invested (x2 since 2019, x7.5 since 2015).
4. Drivers of growth
A. VC-gender gap
These numbers are even more impressive knowing that over 80% of all Femtech startups have a female founder. If you’re a regular reader of this newsletter, you already know that a paltry proportion of VC funding goes to women-led startups. In Europe, in 2020, 90.8% of capital raised went to men-only teams... 7.5% to mixed teams, 1.7% to woman-only teams....
➡️ With (1) increasing representation of women in the venture-backed technology community and on the investors side, and (2) growing acceptance by men of women health issues, Femtech would grow at an even higher pace.
B. Niches outside reproductive health
Recent reports show that 51% of Femtech companies address menstruation, maternal health, fertility or sexual wellness. All these are important topics for sure. But it strikes me that only 1% of Femtech companies are addressing chronic conditions, knowing that 45% of women suffer chronic conditions over their lifetime. Similarly, only 5% of all Femtech startups address menopause, which is a natural (and largely misunderstood) phenomenon any women around 50 yo experiences.
➡️ There is a great opportunity here for startups to grow on niches outside reproductive health.
C. Consolidation and diversification
On top of that, most companies in the Femtech space are single-product companies. The latest report from Femtech Focus states that there will be an upcoming wave of consolidation within the industry through merger and acquisitions between startups.
➡️ There is plenty of room to diversify (by launching or acquiring new products).
Another aspect (which to be honest, I completely underestimated until now), is censorship. Advertisment for Femtech products on platforms such as social media, television or Google are blocked for being allegedly inappropriate. This does not only affect sexual wellness products but most of women’s health. The resulting consequence for Femtech startups is a higher Cost of Acquisition (CAC).
➡️ Growing acceptance of women's health issues would help Femtech startups to grow even faster
E. Regulatory environment
Finally, there is a more conducive regulatory environment (particularly in Europe as compared to the US), which should also drive growth in the Femtech space.
If you are interested in learning more about Femtech, I can only encourage you to read through these two reports:
➡️ Why FemTech is expected to break new grounds, by Pitchbook
➡️ FemTech landscape report by FemTech focus
🌍 All eyes on the EU... and elsewhere
Alright, now is the time to give you a quick overview of what happened in the European Tech ecosystem this week.
European funding in January 🇪🇺
Few crazy rounds 🤯
Each week is a new crazy funding week in Europe. The three biggest rounds this week come to us from the UK and France.
Cazoo 🇬🇧, the UK-based online car retailer announced a new influx of $630M. “In less than a year the company has seen a public listing via a SPAC merger, record Q2 numbers, and a seemingly unending round of acquisitions including SMH Fleet Solutions for £70 million and Swipcar for €30 million, and brumbrum for €80 million.”
GoCardless, the London-based fintech in direct bank payment solution announced it has raised $312M in a Series G round, which makes it the latest European and UK unicorn at a $2.1B valuation.
Alma, the buy-now-pay-later French startup announced a $130M Series C round, as well as an additional $109M in debt financing. While Klarna is reportedly preparing a new funding round (putting the valuation between $50B to $60B), will they be able to create a new BNPL giant in Europe?
European Tech Champions initiative 💶
Remember when I told you about the EU turning into an early stage investor? Well it seems that growth stage remains something of high interest…
Earlier this week, few members of the EU (including France, Germany, Italy, Spain and Greece) together with the European Investment Bank, announced a brand new initiative for financing growth funds accross Europe. Under the new initiative, the European Investment Fund will manage a €3.5B budget to fund VC funds with a focus on growth. The goal is to grow the number of European funds that have more than €1B to invest from 2 to 10 or even 20 in the coming years.
Zuckerberg going crazy with Europe 🤪
It’s been quite a while now since the war between the EU and Facebook (sorry “Meta”) over personal data started. The least we can say is that Zuck might not hold the EU in high regard…
On February 3rd, in a report to the SEC, Facebook (sorry “Meta”) announced that if a new transatlantic agreement to allow the transfer of users’ personal data from Europe to the United-States wasn’t signed, Meta would “likely be unable to offer a number of [their] most significant products and services, including Facebook and Instagram, in Europe”.
The war is on…
Anyway, it seems that Facebook’s (sorry “Meta’s”) near future doesn’t look so bright, don’t you think?
Thanks again for reading guys
See you next week 👋