While health care innovation has been slow and steady, there continues to be a gap in the market for women’s health. As a Vice-President (VP) in RBCx’s Life Sciences practice, Parneet Dehl advocates for cultivating the growth of the Canadian femtech market.
Since the pandemic, health care technology—or healthtech—has evolved into a market ripe for innovation. Healthtech companies saw a spike in their growth to address immediate needs, ranging from telemedicine to measuring health metrics. However, there has been unmet demand within the healthtech market that has largely stemmed from a lack of inclusivity in health care, tech, and venture capital (VC).
Within the sphere of health care innovation is femtech, a growing category catering to critical segments of the population. Femtech is a technology sector focused on improving health care for women, girls, non-binary folks, trans people, and those assigned female at birth, through digitally-enabled tools, therapeutics, medical devices, wearables, and other consumables. It encompasses areas of health that exclusively affect women and more general health care conditions that disproportionately impact women, such as autoimmune disorders.
Much like other healthtech companies, the Canadian femtech market is faced with a lack of funding as they move from research and development (R&D) to commercialization. Today, a significant portion of Canadian innovators flock to the U.S. due to higher VC funding and access to femtech-focused investors. There is an opportunity to scale Canada’s femtech ecosystem and foster a space for women founders to thrive.
Parneet Dehl, VP, Life Sciences, is committed to paving the way for the femtech sector to fuel the growth of the economy by connecting companies with critical resources on Canadian soil. From her experience working with femtech clients, she breaks down the market opportunity for femtech, why education is needed, and how femtech founders can navigate the current funding landscape.
In your opinion, why is there a need for a femtech market?
The rise of any market starts with the need to address a broad range of issues for a specific segment. With femtech, it was aimed at solving women’s issues that haven’t received the right level of attention. More broadly, the femtech market highlights the inclusivity gap in the tech sector.
From sexual to reproductive health and everything in between, the femtech sector has reinforced that women’s health care is underserved. Often, many issues impacting women are deemed as normal due to a lack of research and understanding. Companies in these sectors, such as Hyivy, are bringing many of these issues to light and finding genuine solutions that work. Even within the femtech market, there are companies that focus on issues disproportionately affecting niche segments. That illustrates the opportunity to serve unmet needs, which adds to the market potential.
What is the critical challenge for femtech founders?
The plight of femtech founders further underscores the need for the expansion of this market—they wear multiple hats across education, advocacy, lobbying, and even grant writing in addition to entrepreneurship. The combination of health care and women’s issues necessitates a deeper level of understanding from investors and government funding programs to obtain the capital they need and deserve. There’s also the lack of women’s representation in the VC space, with only 19.4 per cent of partners at Canadian VC firms being women. This is an important factor in why femtech services and products aren’t prioritized.
Despite founders seeking funding from specialized U.S. investors, Canadian support also exists in the form of government support programs, grants and general tech funds that invest in the sector, as well as BDC (Thrive Venture Fund for Women), and family offices. As portfolios and VC investors become more diversified, it can create a foundation for the market to evolve and deliver their much-needed innovation to women, trans women, and gender-variant folks in Canada.
In general, femtech founders are underfunded. Why is this the case?
If we take a step back and look at the sector broadly, it’s truly an education problem. Women’s health often gets lumped into the category of “lifestyle diseases” and ends up underfunded and under-researched. As one founder pointed out, women were only allowed to be a part of scientific research studies in the late 80s and early 90s. In fact, it wasn’t until 1997 that women were required to be part of clinical trials in Canada.
In working with several femtech companies, our team at RBCx has noted a few trends in our discussions with founders. As one founder stated, “What gets measured gets managed.” For VCs and institutions, there are currently no measurement frameworks or metrics around the types of deals they fund. This is augmented by the lack of knowledge and understanding within the VC space about the femtech market. Since the field is relatively new, investors don’t have appropriate benchmarks to evaluate the companies against. Most femtech companies operate in the medical devices, consumables or wearables sectors, and they’re evaluated against the trajectory of other products in these sectors, without taking into account the specific issue in women’s health being addressed due to lack of research and other external factors.
On the topic of investment, the other issue is that companies in these sectors need ‘extra patient’ capital. It’s often difficult for investors to justify the long runway, especially if other products allow them to get returns to their limited partners (LPs) faster. This is where education around the sector helps, and government support can step in.
Most femtech companies also have founders and/or CEOs who are women. A 2022 study from McKinsey and Company found that 70 per cent of femtech companies are women-led. Research has shown that women-led companies receive disproportionately less dollars from investors—the average amount of financing provided for men-owned businesses is about 150 per cent higher in Canada. On the other side of the coin, there’s the lack of gender diversity among investors, which I previously mentioned. Again, this creates a situation where the founder must work that much harder for the investor to understand the relevance of femtech offerings.
Given that femtech plays in the life sciences and health care sector, what are some of the unique challenges they have?
At every stage of their journey, the biggest operating challenge is managing capital. Much like other life sciences and health care companies, its founders have to navigate lengthy research phases, clinical trials, and regulatory requirements to validate their innovation. The path to commercialization is longer, which can go against the “move fast, break things” ethos of the tech and innovation ecosystem. As discussed, femtech is already at a disadvantage given the lack of knowledge and support for this market, so these companies must compete with other life sciences and health care companies for capital. That being said, we’re starting to see incubators and accelerators working with femtech companies on how to represent and pitch femtech to investors by providing more information to appropriately benchmark during the due diligence process. I also think that we have strong fundamentals in Canada’s government programs.
Apart from capital, there’s also mentorship opportunities. With the lack of knowledge and support along with women being underrepresented in both tech and VC, finding mentors can be challenging for first-time femtech founders who are struggling to get their idea off the ground. That’s slowly starting to change as more individuals, founders and investors step in to support the community; RBCx’s client base includes femtech companies in Canada that we support in an advisory capacity.
Recently, Femtech Canada also launched a network to support innovation in women’s health in an effort to start addressing some of these unique challenges—networking, training, mentorship, and business advisory support for fundraising.
What has driven the success of femtech companies in Canada and globally?
The founders. In particular, the women founders.
Many of the ones we’ve spoken with have business backgrounds—we met one that was a serial entrepreneur. However, one common theme was that they started their companies because they were impacted by the problems they were looking to solve. There is a personal aspect for these founders that motivates them to drive their companies from ideation to commercialization. While they solicit expertise at the earlier stages, they can better tell the story behind the science.
From a health care perspective, femtech startups have also sought opportunities to partner with hospitals, health care companies, public health departments, and NGOs. This is the same approach done by many healthtech companies, which allows for expansion and added credibility for their product. The commercialization of these products and services for a growing user base can also shed more light on women’s health issues, and improve the variety of market offerings.
What should investors understand about the Canadian market opportunity for femtech?
First off, Canada needs to catch up with its U.S. counterparts on the funding side. There is plenty of innovation happening here, and we need more investors to set aside patient capital to fuel the growth of this sector.
The projected worth of the femtech market for 2025 is estimated to exceed $4.8 trillion. The market opportunity is clear, especially with women comprising 50 per cent of the population. But with any new innovation, there’s a perception of risk. Femtech needs to be treated in a similar way to environmental, social and governance (ESG) investing initiatives—VCs need to commit to extra due diligence on the nuances of bringing these products and services to market. Beyond that, it’s an opportunity to build and participate in an underserved area and send a strong signal to the market.
More importantly, femtech fills a gap in existing markets for issues that disproportionately impact women. For example, the market for products addressing diseases such as autoimmune disorders and Alzheimer’s will shrink if solutions aren’t inclusive towards women. Investing in and supporting the femtech sector fuels overall innovation and increases the size of the market. Essentially, it’s increasing the size of the pie.
This interview has been edited for length and clarity.
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