Why is it still so hard to succeed in women's health?

And a personal update

Hello, friends. News from me: 🥁 I’m joining Second Opinion as Managing Editor. I’ll still cover the fertility industry and repost related pieces here, but am broadening my writing focus to include the rest of women’s and reproductive health—and beyond. 🚀 Join the party and subscribe to keep up.

If you missed it, my first piece on Second Opinion is below, and goes into the reality of founding and funding women’s health startups. Caveat that I wish I didn’t even have to write this piece, but here we are, still in a world where women’s health is harder than it should be. Founders—hope you feel seen.

Thoughts, story ideas, or want to sponsor? Email me: leslie@secondopinion.media.

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Why is it still so hard to succeed in women’s health?

The five bosses to beat in women’s health

Women dominate healthcare. 80% of all healthcare workers are women. Women make 80% of all healthcare spending decisions. BCG projects backing female entrepreneurs would add $5 trillion to the global economy. So what's the problem?

After a decade-plus working with and investing in women’s health founders (and authoring two books on the topic), I’ve seen firsthand that despite huge market opportunities and acute need, building and funding companies in women’s health is still more challenging than it should be. 

Before diving into why, let’s acknowledge that masochistic tendencies are required when founding a healthcare company, regardless of the focus. It is a complex industry and requires more time, patience, and capital than other sectors. Hurdles include misaligned incentives, deeply entrenched incumbents, bureaucracy, technical inefficiency, and many other unsexy problems. A great product isn’t enough either; navigating and driving policy is necessary for healthcare businesses to succeed at scale. There are also justifiable questions about whether venture capital is the best investment format for healthcare businesses. Put together, founders and investors have a perfect storm of huge opportunities and huge challenges.

In particular, founders in women’s health must navigate the gauntlet above and others I’ll refer to as the five bosses to beat in women’s health. 

Boss 1: Less investment for women founders and investors

Capital starvation is a problem across all tech but is especially difficult for women’s health, where almost every company is founded and funded by women. The early-stage cap tables of women’s health companies are packed with female angels and VCs. Many sign on because they relate personally to the problem. Around 100 venture capital funds, which are (mostly) smaller and invest in the early stages, are women-led. Around 40% of angel investors are women, and a quarter of investment by this group goes into healthcare. By 2030, American women will control $30 trillion in financial assets, up from $11 trillion today. $700B would be unlocked globally if women were better served by financial institutions—more money for these fledgling companies. 

Raising money from institutional investors after seed gets more difficult. Just 2% of all VC investments go to companies founded solely by women. Like growth and private equity, only 15% of venture firms' institutional partners and managing directors are women. Female-backed female founders can struggle to raise additional funds from new investors, as a homogenous cap table can (incorrectly) signal that the investment was based on gender instead of merit. Female investors active in women’s health can also be pigeonholed if they write more than one check in the space. 

Women supporting women and investing in companies that serve women matters. And yes, we need far more women on cap tables, more women at funds at all phases, and more women on boards. We have the early stages covered, but it’s not enough: we need a few men on women's health companies' boards and cap tables if we want the space to thrive. And for that to happen, men must understand and be willing to talk about the problems. For those who are willing, an arbitrage opportunity awaits. 

Boss 2: The yuck factor

Any women’s health founder with VC funding has partner meeting war stories. I’ve heard reactions from male partners like, “Well, I don’t think my wife had incontinence after her pregnancy, but I’ll ask.” (news flash: nearly ALL women have some incontinence after pregnancy, and the global incontinence market is projected to be $36.6B by 2032). Or that hot flashes sound like a quality-of-life problem (tell that to the 75 million women who have or are currently navigating horrendous menopause symptoms). Other post-game reports included men who were unable to utter the word vagina aloud or left the room when anatomy and gynecological conditions pertinent to the business were discussed. To be fair, sperm elicits similar repulsion, which I believe is one reason male reproductive health has not met its potential. 

Due to a mix of factors—believing a symptom is normal, gaslighting, and shame related to normal bodily functions, to name a few—women aren’t always forthcoming, either. A recent survey from Maven, a company I have advised since its early days, revealed that 60% of millennials and 35% of Gen Xers have not discussed their menopause symptoms with a healthcare provider. Thanks to celebrities like Halle Berry, Gwenyth Paltrow, and Naomi Watts, as well as the fast and furious funding into Midi Health, menopause is having a moment. But there is still a lot of work to do to normalize women’s bodies. We need less shame around our innate biology, to teach kids about their bodies from an early age, and must ensure that these problems are researched, understood, and treated. 

Boss 3: the TAM problem

“The total available market (TAM) isn’t big enough” is a frequent gripe I hear about women’s health. To some degree, the haters are right. VCs do not entice LPs with the promise of modest returns, and the power law of venture capital dictates that a small number of investments drive the majority of returns. For that to happen, a startup’s TAM has to be in the billions. Using narrowly focused fertility startups as an example, with around 400,000 IVF cycles per year, charging a clinic $20 per cycle isn’t a business with a billion-dollar TAM. For it to work for venture, these businesses must have the potential to grow horizontally into other areas.

Luckily, there are many multi-billion-dollar problems to solve. Conservatively, 1 in 5 American women has either endometriosis or PCOS during their reproductive years, a combined over 10 million women that are currently left to suffer. Both are causes of infertility and are challenging to diagnose and treat. By 2050 around 5M women in the US will have vaginal prolapse, a condition that often starts after pregnancy and often requires surgery. But just 1000 urogynecologists serve the 15% of women who need surgery to fix it. In these cases, better diagnostics, education, and preventive care—which startups are perfectly positioned to build—would go a long way.  

Two women’s health companies that answer the TAM skepticism are working in similar spaces: Pomelo and Maven. a16z-funded Pomelo analyzes health record data to identify and mitigate risks during pregnancy and now provides virtual and IRL care between appointments via their recent acquisition of Doula Network. Maven is dominating the benefits space and was last valued at $1.7B, chipping away at their publicly traded incumbent competitor, Progyny. Just last month, Progyny’s share price crashed 20% after Amazon terminated its contract and awarded it to Maven. I suspect this is just the beginning of employers choosing outcomes-based benefits providers versus fee-for-service.

Boss 4: abysmal reimbursement rates

Policy is the least sexy aspect of starting a company, but low reimbursement rates are another reason women’s health businesses are tough to fund. Even if a business has a product people love, like beautifully designed brick-and-mortar clinics, it’s hard to make the economics work when a provider only receives $120 for a 45-minute long well-woman visit. There is not much (or any) room for a decent margin, and low-margin businesses are not a good fit for VC.  

Poor reimbursement rates make it challenging to build in-person care at scale. For example, when a hospital system’s obstetrics department loses money on childbirth, it can make up shortfalls from NICU admissions. That isn’t an option for startup birth centers that operate independently. Medicaid now reimburses doulas, but there aren’t enough to go around, and they make more money going cash-pay. In-demand doulas are better compensated for childbirth than the ob-gyns. Poor reimbursement rates, along with burnout, difficult working conditions, and complexity related to reproductive rights, are driving ob-gyns to leave the specialty in droves. Startups must understand these policy issues and better lobby for change within the system.

Midi Health, like Maven, has raised money because telehealth is a good solution for menopause care. Appointments are generally conversational and more focused on managing symptoms than testing. ACOG doesn’t have a menopause sub-specialty, and the one offered by the Menopause Society is cash pay, so only around 2000 providers are credentialed. Virtual care is convenient and allows the few menopause specialists to see more patients. Primary care will likely be the specialty that fills the IRL needs, but more training (and more providers) are still required. 

Boss 5: VC’s macro existential crisis 

This last boss beats everyone in tech but has especially outsized impacts on women’s health. After the ZIRPy heyday of the pandemic, 2024 is the worst year for VC fundraising since 2015. Funds are returning money to LPs because post-2021 valuations are too bananas, and M&A is at a standstill (thanks, FTC). LPs aren’t getting their money out of funds, so there is less capital for new and existing funds. Funds are struggling to close, have less to deploy, and lower management fees; investors are dropping like flies. 

Existing capital is going to large, established funds like General Catalyst (GC) and a16z. Combined, those two funds sucked up 44% of VC fundraising in the first half of 2024. These funds are looking for one thing: monster returns within the standard 10-year fund lifespan so they can go out and do it all again. Given that, AI companies are an easier sell than the complexity of healthcare.

GC used some of its reported $6B war chest to acquire Summa Health, a non-profit hospital system, as part of an initiative dubiously named HATCO (Health Assurance Transformation Corporation—seriously, enough with the acronyms). With the ex-CEO of Intermountain Health at the helm, maybe that much money and experience is our best shot at reinventing our broken system. Then again, money can’t buy product/market fit. 

Vice clauses are another problem for growth-stage women’s health companies. Though they’re not usually part of an LP agreement for seed-stage funds, religious institutions, teachers unions, university endowments, corporate pension funds, and sovereign wealth funds can limit where their money can be invested. How one defines vice ranges and depends on the LP, but it has included cannabis, porn (see: OnlyFans), and, yes, women’s sexual wellness. With one in place, partners who want to get into some areas of women’s health cannot.

At the risk of undermining everything in this piece, I often question whether venture capital is the right type of funding for healthcare. The time horizons for returns don’t match the ponderous pace of healthcare’s sales cycles. Growth hacking is hard without becoming a pill mill (see: Cerebral). Services and brick-and-mortar businesses are hard to scale and do not warrant software-style valuations. Startups are now seeing this reality reflected on term sheets. The space needs a more patient capital alternative to VC and PE.

What happens next

I remain optimistic about the future of women’s health. For one, after decades of exclusion, the federal government is doubling down on funding women’s health research. Jill Biden announced a $500M commitment via the Pentagon and Department of Defense. The other Biden proposed a $12B fund for the same purpose through the NIH. Private funders are committed too, with Melinda Gates pledging $250M to improve women’s mental and physical health through Pivotal Philanthropies. However, it isn’t easy for for-profit companies to access this non-dilutive, dare I say, more free-wheeling capital. And it will take a lot of money to beat the incumbents. I expect roll-ups and consolidation across women’s health going into 2025, as many compelling point solutions should exist but just can’t survive on their own.

The US pays more for healthcare than other wealthy countries and has worse outcomes even as insurers' market caps (and CEO compensation) balloon. Without the passion and persistence of startup founders, I don’t believe we will see any meaningful disruption because the existing system isn’t incentivized to do anything but continue to print money.

The sleeping giant that is women’s health is finally awake. Women’s health founders are the most passionate and driven people I’ve worked with during my many years in digital health. I love waking up doing good and doing well. So whether you’re here for arbitrage or want to be part of the movement, you’re welcome if you’re ready to fund it.

If you have thoughts about this piece, email me at leslie@secondopinion.media. If you can’t tell, even though I said the quiet part out loud, I love working in women’s health and believe in its potential. But I’m also ready for the narrative to change. For that to happen, we must acknowledge and work together to solve these problems.