Femtech has faced an uphill battle ever since women began using diaphragms for contraception in the 1800s. Age-old taboos around women’s health means the sector has suffered from years of under-investment and a lack of research from the science and medical community. But there are signs this is changing, with the sector drawing more interest from investors.
In July, Flo Health became Europe’s first femtech unicorn. The period and pregnancy tracking app raised $200m from growth investor General Atlantic, becoming one of the handful of femtech companies to be valued at more than $1bn.
Founded in 2015, Flo’s platform allows users to track their ovulation cycle and monitor symptoms, and offers relevant educational insights. Apps like Flo have changed how women engage with their health and have made life easier for them in many ways, from family planning to detecting early signs of health problems. The platform’s 70 million monthly user base speaks to the demand.
Tamara Orlova is Flo’s chief financial officer. Since joining five years ago, she’s focused on cutting losses and helping bring the company from a startup to a rapidly growing scaleup. And it seems to be working. Flo’s revenue in 2023 was $112m (£86m) – up from $35m (£27m) in 2022, according to the latest annual accounts.
Like many femtech startups, however, Flo has had to overcome “multiple obstacles” that make accessing capital that much harder, Orlova says.
Historically overlooked and underfunded
There is growing demand for female health solutions. The femtech market is currently valued at $28bn (£22.3bn) and estimated to reach $60bn by 2027. Nevertheless, businesses in the market continue to come up against deep-rooted prejudice. Although women make up more than half of the population, products and services focused on their health have long been viewed by investors as a niche market. Part of the problem, Orlova says, is a male-dominated investment community that “often fails to grasp the value proposition” for women’s health products.
She recalls walking into pitch meetings and having to explain to a room full of men the intricacies of the female fertility experience. Convincing them of the demand for a product like Flo took time: “Like most niche markets without a track record of investment, investors struggle to validate the business model and scalability. You really have to invest time in educating investors.”
Start communicating with your investors as early as possible
There was considerable pressure on Orlova, as Flo’s CFO, to map out and communicate a clear equity story that investors would buy into. “It’s easier the more milestones you hit and the more funding rounds you go through,” she says.
Still, “it’s a long process and it can be hard to stay enthusiastic when you are repeating the same story,” the CFO admits. “It’s important that you are passionate about the product. I had gone through an IVF journey shortly before joining Flo so the company’s mission has always felt very personal to me. I think that helped.”
Opening up further conversations between companies and investors is crucial to expanding a market that is vital for women’s health worldwide, Orlova stresses. Despite recent recognition of this problem, she says it’s still challenging and recommends any business in a similar position focuses on finding people and networks who want to support them and their work.
Improving investor relations
For Flo, securing game-changing investment was about building and managing their relationships with investors. And this began long before they went to market.
There are no shortcuts, says Orlova: “A lot of it came down to research and preparation. We identified investors that we knew could help with our specific challenge and made sure we knew exactly what their profile was. Be aware that not every investor is going to have the same questions or way of thinking so come prepared – I’ve found that the more information you are able to give them up front, the more comfortable they are to move faster.”
She continues: “As well as having the right metrics in place, we spent considerable time crafting the story of the company. Be warned – this takes time so don’t wait until your runway is too low (that is, how many months your business can keep operating before it’s out of money) because you’ll be in a harder position to get the best deal. Start communicating with your investors as early as possible. We were in discussions with General Atlantic for years prior to their investment.”
In recent months, investor expectations on CFOs have grown significantly. A recent study by finance management platform OneStream found that investors would increase their funding by 2.6% in organisations where the CFO is seen to be the main strategic growth driver.
“There is a growing recognition of the importance of the role,” Orlova observes. “It is probably the one function in the company that is actively involved throughout the entire investment process. And the fact that investors have become more data-driven means they are looking more closely at us to provide those crucial pieces of information.”
Addressing challenges in the fertility sector
Unfortunately, women’s health is still a contentious topic in some parts of the world. Orlova says there are additional complications that come from operating in the female fertility market that Flo has had to navigate as a result, including reproductive laws and data privacy concerns.
In 2022, the US Supreme Court overturned women’s constitutional right to abortion, triggering fears among users of menstrual tracking apps that their data could be used against them in states where abortion has become illegal. Due to rising concerns over political policies, more women have deleted their period tracker app. Global usage decreased 7% in 2023, according to app intelligence firm Sensor Tower.
In response, Flo has established a free ‘anonymous mode’ that allows people to use the app without linking any personal data to their name. It has since open-sourced the technology behind this anonymous feature with the rest of the femtech sector.
Like most niche markets without a track record of investment, investors struggle to validate the business model and scalability
Concerns about data privacy were not unfounded. Prior to this update, Flo’s average daily users had been on the decline for several months following its 2021 settlement with the US Federal Trade Commission over allegations it had shared data on users’ menstrual cycles and pregnancies with third-party companies, including Google and Facebook.
A recent poll of women using fertility apps by the Information Commissioner’s Office found that transparency over how their data was used and how secure it was were bigger concerns than cost and ease of use when it came to choosing an app.
“Protecting our users’ data has become a huge focus for the business as a result,” says Orlova. “It is really important that we have a very direct line of communication with our users and are continually striving to improve the experience we are offering.”
Is it a man’s world, even in a woman’s world?
It may come as a shock to discover that Flo’s founders are two male brothers, Dmitry and Yuri Gurski. The fact that a male-funded firm has become Europe’s first femtech to achieve unicorn status has not gone unnoticed.
It sparked online backlash earlier this year. “A company founded by men, led by men and funded by men became the first women’s health app to achieve unicorn status. If this doesn’t show you everything that’s wrong with the ecosystem, I don’t know what will,” wrote Anna-Sophie Hartvigsen, co-founder of investment learning app Female Invest, in a LinkedIn post that went viral. “It doesn’t matter when this company was founded. What matters is that no other company in the industry, founded by women, have been able to scale equivalently because they can’t raise money,” she added.
Another wrote in the comments: “As a female founder, I am genuinely scared of fundraising because of this.“
It’s a well-known fact that women face a tougher time raising money than men. Female-founded startups accounted for just 2% or less of VC investment in 2023, according to data by investment insights platform PitchBook. That this funding gap can exist even in female-dominated sectors like femtech, where 70% of companies have at least one female founder, is perhaps more shocking. Yet on average, a female-led femtech startup raises $4.6m (£3.9m), whereas those with all-male teams raise $9.2m (£7.4m), according to data published in the European Femtech Report 2023-2024.
Such findings have raised concerns that female founders may feel pressure to add a male to their executive team to improve their chances of funding.
Orlova acknowledges these challenges. But she is of the opinion that a successful femtech business, regardless of who is at the helm, is a win for the entire sector. “It made me more curious than anything,“ she admits, upon first learning that Flo’s founders were male. “But Flo’s product roadmap is built for, and influenced by, the women that use the app. There are so many people involved, like myself, who help shape the business and are the ones going out to ask for money.“
Now, with its newfound unicorn status, Orlova says she hopes Flo will “open the door” for new femtech business and drive further innovation in the space. The startup already has plans to expand into new areas in women’s health, including perimenopause and menopause. Whether or not Flo’s own success is a reflection of things to come for the rest of the femtech sector remains to be seen.
