VCs See Opportunity in Growing Fertility Market

VCs See Opportunity in Growing Fertility Market

Wall Street Journal
By Cat Zakrzewski

After two unsuccessful in vitro fertility treatments, Christine Turner didn’t know where to turn.

Ms. Turner wanted a new doctor to help her get pregnant, but finding recommendations proved difficult. Other friends who had struggled with their infertility rarely talked about their experiences.

“You’re kind of in the dark,” she said.

But soon she was connected with FertilityIQ, an online database started by a San Francisco couple that provides in-depth reviews of doctors and treatments. The service is so comprehensive that Ms. Turner said she was able to drill down and search to learn what had worked for other women who were the same age, race and lived in the same city as her.

FertilityIQ is one of several tech-enabled services for the booming fertility market. As more young adults delay parenthood and the number of same-sex couples starting families climbs, demand for such services has perhaps never been higher. According to market research firm Technavio’s 2016 report, the global fertility services market is expected to exceed $21 billion by 2020.

Venture capitalists have been investing heavily in fertility technology in recent years, with funding slipping slightly in 2016 as it did across the startups in general, according to data tracker PitchBook Data Inc. In 2016, venture capitalists poured $101.71 million into fertility companies, down from the $118 million they invested in 2015. However 14 fertility deals were completed in 2016, up from the 13 closed in 2015.

Large venture-backed companies addressing fertility include Natera, Femasys, OvaScience and Progyny. Kleiner Perkins Caufield and Byers has made five fertility investments, according to PitchBook.

Beth Seidenberg, a general partner at Kleiner, led the firm’s Series B round last year in Progyny, one of the largest venture-backed fertility startups. The company recently brought on David Schlanger, the former chief executive of WebMD, to lead its business that helps employers cover fertility services.

Ms. Seidenberg said that once she began looking into fertility about eight years ago, she realized how many people were affected by infertility and the myriad ways technology could alleviate their problems. She said that since her firm’s backing of Progyny, she is seeing increased deal flow, from hardware that tracks kicks during pregnancy to apps that track women’s cycles.

“Millennials live with technology in their day-to-day lives,” Ms. Seidenberg said. “That’s what’s driving it.”

To be sure, services offered by fertility startups remain costly. Moreover, many people don’t have insurance to cover such treatments through their employers’ health plans.

Ms. Seidenberg said Progyny is helping more people have fertility treatments covered by their employers. She said partners at her firm were moved to back entrepreneurs in the category; several of them said their wives had fertility treatments.

For some startups, however, venture capital’s high-growth model isn’t a good match for entrepreneurs who are on a mission to help people solve infertility.

Started by a former Sequoia Capital partner and a former startup product manager, FertilityIQ has the pedigree to raise venture financing. But co-founders Jake Anderson and Deborah Anderson-Bialis said they have passed on venture financing in favor of raising a $1 million seed round from individuals. They say they don’t want to be pressured to grow at all costs in an industry where they’re helping patients navigate a “life or death” situation.

“The less money we raise, the less pressure there is to do anything beyond our sole objective: to get crucial data to hopeful families before they run out of money or hope,” Mr. Anderson said.

As venture investors continue to funnel capital into fertility companies, private equity is also making a mark. Serial entrepreneur Martin Varsavsky raised $200 million from investors including Lee Equity Partners for his startup Prelude Fertility Inc. His previous company, FON Technology SL, counted Sequoia Capital and Index Ventures among investors.

Ms. Seidenberg of Kleiner Perkins contends that for many tech companies working in fertility, venture capital can play a meaningful role. She said she wants to continue to invest in businesses where “people are truly focused on the human part of it.”

PHOTO: MICHELE BECKWITH for the WSJ