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Latent demand for fertility tech identified by market study

Global investment in fertility tech startups tops $2.2bn over five-year period, with significant growth opportunities going forward due to combination of technological innovation and latent demand for fertility treatments

Fertility technology startups have seen a significant increase in global investment over the past five years, a trend which is expected to continue in the coming weeks as latent demand for their services is unlocked, according to a market analysis of global venture capital (VC) investment.

Conducted by London-based VC firm Octopus Ventures and data analysis company PitchBook, the market analysis from early July reveals billions have been invested in four healthcare technology (healthtech) sub-sectors since 2014 – $2.2bn in fertility tech startups; $4.4bn in cannabis tech companies; $4.5bn in telemedicine firms; and $7bn in developing medical records systems.

The study also looked at the overall deal count in the four sub-sectors, finding that each has had an almost continuous rise in the total number of deals being made every year, with exceptions for telemedicine in 2017 and 2019, as well as medical records systems in 2019, when the total number of deals decreased slightly.

Compared with the three other sub-sectors, which have seen significant but inconsistent spikes in investment over the past five years, the growth of investment into fertility-related technology startups has been much steadier.

These startups encompass a wide array of approaches to fertility tech, ranging from science-based research and development firms working on machine learning for embryo selection or artificial wombs for premature babies, for example, to consumer-facing firms working on mobile tracking or diagnostic apps.

According to Kamran Adle, an early-stage investor in the Future of Health team at Octopus Ventures, a high number of deals in sectors with still relatively small investment activity means companies are being invested in at the earlier stages, which is “typically a leading indicator of greater investment down the line”.

Deal count

The fertility technology sub-sector’s total deal count, for example, jumped from 47 in 2014 to 97 in 2019, with the latest data showing a jump in average funding rounds from $4.1m to $7.73m in the same period.

“Fertility treatments are genuinely life-changing for many people, but there has been a lack of innovation in this area for a number of decades, which is reflected in the relative underinvestment compared with other sectors and indicative of the early stage science involved,” he said.

“As a result, innovation has lagged behind other areas of healthcare, with options for those looking to conceive remaining expensive. The focus has generally been on IVF [In vitro fertilisation] that places women at the centre of the process, with ‘men in white coats’ the accepted interface for lengthy and sometimes distressingly ineffective experiences the norm.

“Significant scientific and technological advances mean this is now starting to change, and there are some talented entrepreneurs building very exciting startups in the space. We believe many of them have the potential to radically disrupt the industry and backing from VCs will be crucial to driving this change.”

The market analysis identified significant latent demand for fertility treatment innovations, pointing to rising infertility rates among both men and women over the last 60 years, especially in industrialised countries, and the fact that one in seven UK couples report difficulties conceiving.

“The trend is clear to see. As fertility rates continue to decline, demand for fertility treatments will continue to rise, but not everyone who wants treatment can access it,” said Adle. “That’s where we see the big opportunity in the coming years, with new technologies and services enabling new treatments that are cheaper and more scalable. Ultimately, this presents a huge opportunity to transform patient outcomes and should make having a baby much more accessible to all.”

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In order to unlock this latent demand, Adle said companies should put trust at the forefront of their product development.

“When you're operating in an area or a topic that is, as we call it, fundamentally taboo, you're basically asking your users to give a bit of a leap of faith, so you’ve got to meet them halfway as a company,” he said.

“Developing a product or service that is able to gain their trust, and relate to them in what is otherwise a very sensitive subject, is absolutely key.”

One way startups can do this, he said, was to partner with employers to include the fertility treatments as benefits in employee healthcare packages, which will help disseminate the solutions throughout the workforce.

Speaking on the impact of Covid-19, Adle said that while the need to alleviate burdens on the health service has always been there, “Covid has helped to further underline and accelerate part of that transition”.

“Maybe not to the same extent that we’re seeing the adoption of telemedicine, but broadly speaking digital health services have been a huge beneficiary of Covid for both user engagement and also for the professionals – such as doctors and clinicians – acceptance of using these types of tools in their workflows, [which] historically has been a pretty big bottleneck,” he said.

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