Reproductive health startups face double whammy of legal battles, skittish investors

When the Supreme Court upheld the Food and Drug Administration's approval of the abortion pill mifepristone in April, Cindy Adam "breathed a sigh of relief."

Adam is the co-founder and CEO of Choix, a healthcare startup that offers telemedicine abortion and other reproductive health services in six states. The startup, which had been in the middle of closing its seed extension round, paused fundraising to await the Supreme Court's decision.

The case is back to federal appeals court, and the question of whether Choix and others will be able to provide abortion care has been delayed.

But Choix and similar startups in the reproductive healthcare space face yet another battle: fundraising in 2023's tough dealmaking environment, just as the legal landscape for abortion care shifts under their feet.

"Investors see [reproductive healthtech] as having a heightened risk, despite the fact that they might be pro-choice themselves," Adam said. "Folks have been more hesitant to invest … but to us, the real risk is in not investing."  

Dealmaking for women's and reproductive healthtech companies has slowed, according to PitchBook data. Most of these femtech companies—a subcategory of healthtech catering to women's needs—don't directly provide abortion services themselves, but the data reflects that the dealmaking slowdown is hitting across the vertical.

Femtech startups, including those offering family planning services like abortion, contraception and fertility care, rode a wave of deals in 2021 and 2022. The Dobbs decision in June 2022, which overturned Roe v. Wade and triggered abortion bans in over a dozen states, also helped to drum up new energy in the vertical.

But nearly one year out from the landmark Supreme Court decision, that swell of excitement has waned, replaced by the aftershock of a banking crisis and shrinking capital, investors said.

Dr. Alice Zheng, principal at reproductive health-focused venture fund RH Capital, is advising her portfolio companies to budget between four and six months to close a funding round. At the height of 2021, rounds were closing in as little as four weeks.

Founders say they're faced with a familiar challenge: convincing VCs that they're worth backing.

"We've seen that in women's health in general there's a lot of talk [among VCs], but whether or not that translates into deal dollars is a different issue," said Dr. Tracy Dooley, partner at Avestria Ventures, a women's health and life sciences venture firm.

Dedicated women's health firms like Avestria are popular targets for seed and early-stage startups in the space, as they can offer subject matter expertise and tend to be less competitive—and have smaller minimum check sizes—than some generalist mega-funds.

But some of the very VC firms that are highly motivated to invest in the vertical are beset by their own fundraising challenges, especially those led by emerging managers. That only further limits startups' options.

The Dobbs decision sent a wave of LP dollars into reproductive healthcare VCs like RH Capital, which pushed out its Fund II final close by four months last year to capture the momentum.

"We raised almost a third of our capital in those four months," said Stasia Obremskey, managing director of RH Capital. But, Obremskey was quick to note: "We were lucky that we finished up fundraising before the market dried up in the fourth quarter."

Some deals are still happening. In Q1, Tia, a holistic preventative healthcare platform, raised an estimated $20 million from Pivotal Ventures and pregnancy care provider Oula raised a $19.1 million Series A led by 8VC.

Investors in the historically overlooked vertical say there are opportunities to deploy capital in women's health.

"It gives us the opportunity to really lead and to have a competitive edge," said Lindsey Taylor Wood, founder and general partner at women-focused VC firm The Helm. "Hopefully we can act as a lighthouse to others."

Featured image by Andrew Caballero-Reynolds/Getty Images

This article originally appeared on PitchBook News