Road to Next
Femtech: Resilient and poised to grow
With billions in market potential, it’s hard to ignore the promise of female technology (femtech). Investor participation points to growth—though it may be slow given the current market environment. So, why isn’t femtech’s long-term potential turning more heads? <br><br>The first Road to Next report of FY24 uncovers timely trends and insights for the underserved expansion-stage femtech segment, as well as its significant market potential.<br><br>Three things to know now:
Q1 2024
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Dealmaking in female technology (femtech) is holding up fairly well, yet still undersized compared to other segments and its potential market size, particularly at the expansion stage. Competition from broader healthcare players and incumbents is a factor, but overall speaks to the femtech segment not getting the attention it deserves.
There are optimistic signs of resilient investor participation, along with a few scaling femtech companies, while broader female-founder funding appears robust even in a market downturn. However, market conditions are putting some pressure on femtech founders.
Benefiting from longer-term drivers and pockets of resilience in institutional investor interest, femtech will likely continue to grow. However, growth will be slow due to the current market environment despite improving awareness, foundational research, and technical advances.
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View full report Subscribe nowHeather Gates, Audit & Assurance Private Growth leader
There has been a growing realization that femtech can be a lucrative market with significant underserved segments. The rate of investment in femtech relative to others is still quite small, so there is also the potential for significant gains.
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Femtech numbers add up to growth
The femtech sector is poised for future growth as it adapts to market shifts. Progress depends on advancing technical capabilities through robust research in women’s healthcare. Look out for developments in expanded telehealth counseling, personalized treatments for puberty and menopause, enhanced fertility tracking, and accessible evidence-based women's medical advice. While capital and market conditions are up and down, the active participation of corporations in femtech, with 2023 financings reaching $380.4 million, signal a brighter path ahead. The sector's resilience and corporate involvement hint at an optimistic future, potentially propelling overall exit rates for mature ventures.
Too soon to spot trend in smaller markets
Considering the varying investment sizes in femtech, we find it useful to not only analyze 2023 financing in major cities but also to look at a broader trend over the last three years. The main hubs for VC investment in femtech in the US—Bay Area and New York City—dominate deal value and counts, with the Bay Area leading in deals. While there were occasional deals in lesser-known startup scenes like Salt Lake City, Fort Lauderdale, or Atlanta, the funding is primarily focused on the early stages of venture, given the overall deal value.
Are female founders weighed down by current market conditions?
Audit & Assurance Private Growth Leader, Heather Gates, notes a disparity between the rise in female investing partners and the limited increase in funding for women-founded companies, particularly in femtech. PitchBook data reveals gains in femtech but not as expected. Despite a drastic decline in first-time financing and broader market uncertainties, nontraditional investors showed interest, participating in 14 deals totaling $472.4 million in 2023. This suggests that, while market uncertainties affected new femtech founders, expansion-stage companies attracted capital. If the 2024 investment market improves, femtech businesses may see increased financing, but restoring the first-time financing pipeline is crucial for sustained growth.
2023 at a glance
<strong>The forces that led us here</strong><br><br>As we dive into the first quarter of 2024, let’s rewind and review the most important market trends and events affecting private financial markets and the VC ecosystem last year.
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