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Vicky Protano, corporate partner at Mills & Reeve, argues that although femtech deals are on the rise, more work needs to be done to create a sector shift.
Headline figures only ever tell part of the story, and that’s certainly the case when it comes to investment in femtech.
Recent research that we conducted has revealed that investment in the UK femtech sector has increased substantially over the past decade, with deal activity rising by more than 194%.
Not only has volume increased – from 18 to 53 deals – so too has value. Total funding has grown sharply, rising from £9.4 million in 2015 to more than £100 million 10 years later. The average deal size has also gone up, more than doubling since 2015 from £527,000 to £1.9 million.
Companies such as SheMed, Gaia, Emm and Hertility have all completed sizeable funding rounds in the last 12 months, with the majority of investors being UK-based.
While the wider women’s health market has also hit a funding milestone, with investment reaching a record $1.55 billion (£1.1 billion) last year, according to the 1st Global Women’s Health Investment Report, the standout figures need to be treated with a word of caution.
Yes, we are on an upward trajectory, and this positive trend demonstrates growing investor confidence and increasing institutional interest in the sector. However, when it comes to UK femtech, these figures are still relatively low compared to other segments of the health and care market. As such, more work needs to be done to create the right funding environment that is balanced and evenly spread across the UK.
Currently, the majority of deals have been conducted in London, with the capital strengthening its position as the main hub for femtech startups in the UK. Elsewhere, other regional clusters have been slow to emerge, with areas such as the North East, North West and Yorkshire & the Humber significantly underrepresented in the national figures.
So what do the figures really say about the investment landscape in femtech?
Behind the numbers
A decade after the term ‘femtech’ was first coined by Ida Tin, co-founder and chief executive of Clue – one of the first period-tracking apps for women – the market has clearly grown in maturity; however, a large proportion of deals are still seed investments. The early-stage nature of the sector creates an understandable funding ceiling when it comes to investment values, with companies traditionally relying on angel investors and angel networks to help scale and grow.
While dynamics are shifting, with more venture capital and PE investors appearing in funding rounds, the market continues to face significant funding barriers, which are hindering strategic ambitions.
A key challenge faced by female founders, in particular, is that their businesses are often driven by purpose, emerging from lived experience rather than commercial ambition. In fact, research shows that the most damaging thing a female founder can do in funding pitches or company publicity is to suggest they champion their product’s cause. It’s hardly surprising that innovators led by all-male teams are four times more likely to receive funding than those that have a female leader.
Investors clearly remain sceptical, with the sector in need of more strategic exits and improved early-stage conversion to achieve a more mature, equitable landscape beyond the headline figures.
There’s also a wider societal issue that is holding back the femtech market. For decades, women’s health has been under-funded, under-researched and misunderstood, creating an undeniable gender health gap.
Businesses focused on women’s health may be at the cutting edge of healthcare innovation, transforming women’s health and wellness, but while barriers such as a lack of funding, gender bias, and societal disparities still exist, those businesses will struggle to close that funding gap.
Where do the opportunities lie?
There’s no doubt the investor landscape is evolving. The data around the femtech sector is valuable and growing. It demonstrates progress is being made from an investment point of view, creating a better environment where digital innovation can thrive, with a renewed focus on prevention through market-leading consumer-driven products.
The UK has a real opportunity to transform women’s healthcare into a model of fairness, accessibility and excellence, and femtech businesses have a crucial part to play in achieving this transformation. But there is clearly room for improvement.
Encouraging more women-led funds, as well as increasing representation of female investors who prioritise women’s health, are essential steps to ensuring that femtech receives the funding it deserves. Expanding dedicated funds which prioritise founders addressing female health issues will also help to promote investment in women’s health. These approaches not only advance the cause but also mainstream it within the investment landscape.
What’s more, we need to better educate. VC infrastructure in the UK lacks a deep understanding of women’s health solutions. The sector needs greater support to take something that is unfamiliar and translate it – not just from a healthcare perspective, but from an investment perspective as well.
The good news is the landscape is beginning to shift in a more positive direction, with several initiatives in place that are designed to address the funding gap to drive greater innovation and economic growth, particularly for female founders.
With government-backed initiatives, such as Investing in Women Code, the investment community is making a concerted effort to break down barriers that prevent female entrepreneurs from accessing capital.
The seeds have been sown, and the growth of femtech deal activity over the past ten years demonstrates a desire and ambition to build on that momentum.
