HealthIL Israeli Femtech Report
There have been countless articles about the burgeoning Femtech scene in Israel.
Numerous innovation hubs, corporate programs, and local events have emerged in recent years to capitalize on the buzz. But this also creates a lot of noise. And like everything in healthcare innovation, it is critical to embrace the complexity and the nuance of healthcare, and femtech specifically, in order to maximize the potential of what is coming out of Israel.
This post will highlight some of the key findings from the recent Israel Femtech Startup Review I wrote for HealthIL. The full report can be accessed here (link), but I wanted to share with you some key findings, to give insights for both founders and investors who are into the space.
TL;DR HIGHLIGHTS
The Israeli healthcare system has the potential to be an incredible ideation and pilot location for new solutions in femtech, and founders (and investors) can build on this infrastructure to build broader and more holistic solutions.
Uptick in activity over the last five years, but also some major gaps that need to be addressed.
Difference in the types of products/services being developed in Israel when compared to leading femtech startups from the US/EU
Funding is both extremely concentrated and extremely disparate, with no clear investing "champion" in the space and a glaring need for Pre-A capital.
Now let's dig in...
Defining the Space
The term "femtech" is thrown around frequently, but is commonly misunderstood. For our purposes I will refer to Rock Health's definition of "Women+":
Tech-drive products and services that encompass the full spectrum of health needs experienced by cisgender women, from mental health and wellness through traditional clinical/medical indications.
Therefore, we do not include therapeutics (drugs), nor aesthetics. Nor do we include startups that market to women but have no connection to health (like gaming, e-comm, or social marketing).
Startup Deep-Dive: Insights
The Israeli Femtech scene really started to pick up around 2011 - 2012. Since then there have been an average of 5 new Israeli startups in the space every year.
Looking back at all of the startups that have formed in the femtech space over the last two decades, almost 50% of all startups address the pregnancy/natal/fertility category.
Also, there has been a big shift into that category over recent years. Less than a quarter (23%) of new startups formed from 2011 – 2013 addressed this category, whereas over half of new startups formed in the last two years are in this category (53% in the years 2020 – 2022).
The reason for this is unique to Israel. Israel is one of the (very) few countries that fully reimburses for all types of ART (Assistive Reproductive Treatment) - including IVF.
Public funding for in vitro fertilization in Israel is the most generous in the world, and the technology is highly advanced. The public health system provides unlimited IVF treatments for any woman between 18 and 45 for her first or second child and funds fertility treatments using donated eggs through age 54.
The cultural norms of high birth rates, governmental subsidies, and the subsequent relevant data create incentives for founders to build solutions in the pregnancy / natal / fertility category.
In most cases, the femtech products and services being developed in Israel are a direct result of the healthcare infrastructure that exists in the country. So while there is a major emphasis on pregnancy / natal / fertility, there are also many aspects of women-specific care that are not currently being addressed. For example, behavioral and mental health, ongoing care for chronic diseases that are prevalent among women like breast/ovarian cancer, osteoarthritis and osteoporosis, or endometriosis.
There is also a noticeable difference in the type of products, specifically when compared to leading startups in the US like Carrot Fertility, Maven Clinic, Tia, or Ovia Health. These companies are more typically characterized by a holistic, platform-level approach; incorporating aspects pertaining to clinicians, provider networks, payors, or employer insurance.
There are also startups that focus on specific demographic groups, like Caraway which targets college-aged women, or Gennev which is focused on menopausal-aged women.
By comparison, Israeli startups tend to address more pointed challenges in women's care, building solutions that are narrower in scope, typically focused on a single clinical or medical situation, and not focused on a specific demographic or socio-economic cohort.
This does not mean that the Israeli startups are less relevant, but it is reflective of the underlying health-tech ecosystem in Israel, and the types of products and services that emerge from Israel.
Funding Deep-Dive: Insights
The funding side of the equation is also interesting... First, the lion's share of funding has tracked along with startup formation - which is logical. The 43% of startups in the pregnancy / natal / fertility category have garnered 55% of all disclosed funding since 2005. Two companies alone account for a third of all funding.
Of course, more successful startups will move up the chain and raise more dollars from later rounds.
But still there is notable skew:
The Health / Wellness / Lifestyle space - which includes behavioral and mental health - is notably low, and has garnered only 6% of dollars, even though over 20% of startups are in this category.
Below the surface there are also interesting things to note:
Over 70% of cash comes from non-Israeli investing entities
Early stage (Pre-A) activity has been noticeably scant over the last 3 years - over 65% of cash went to just two late stage companies since 2017.
Israeli investing entities with recognized or perceived health-tech expertise have been noticeably less active, across all stages. Only six investments from these players since 2017.
Crowdfunding is a frequent fundraising option for the startups and is more integral to femtech than to other areas of health-tech
Over 70 distinct investing entities (not including angels or crowdfunding) have disclosed activity in femtech since 2005 - but none of them have made more than one investment
Half of all startups are still "Unfunded" and living on fumes (or a rich uncle).
To me, this indicates that there are no clear investing “champions” who offer consistent capital support for the femtech space in Israel, and that founders must rely on a hodgepodge international angels and crowdfunding sources.
The high concentration of funding seems to be increasing in recent years, driven by foreign investors, and increasingly more skewed toward the later stages.
This could stem from a number of possible reasons, like:
1. Unproven Market
It could be that Israeli investors believe the femtech sector is still too nascent, even by health-tech standards, and accepted pathways to positive financial returns have not yet been solidified. This seems plausible, and explains the lack of support for early-stage unproven solutions, but there are more and more examples of companies who have succeeded in creating revenue and profit in the space.
2. Investor Bias
Yes, this is still a factor that needs to be addressed.
3. Lack of Healthcare Expertise
This is a touchy one, but it is a factor that is frequently cited by the countless founders that I speak to. From their perspective, Israeli investors will tend to avoid femtech, particularly in the early stages, because they may not understand the nuances of the space, or may not have the network to support their portfolio companies.
We are sure there are more reasons as well.
Maximizing the Potential of the Israeli Health System
The Israeli health-tech ecosystem offers numerous opportunities for femtech, which is driven by five factors:
Critical density of technical talent
Increasing accessibility to potentially relevant healthcare data
More unified care continuum across community, in-patient, and out-patient settings
Access to health-care organization for alpha/beta testing of products
Wide demographic base
These factors create a fertile infrastructure for new solutions to address the multiple needs and challenges, and creates numerous opportunities for founders (and investors) to explore:
Broader offering in Pregnancy / Fertility / Natal
The unique dataset in Israel in this area can support broader product offerings, more in line with leading platform-level startups in the US or Europe. This would mean looking beyond point solutions in IVF or fertility tracking to build more robust offerings.
Care Continuum Solutions
The Israeli healthcare system benefits from interconnectedness between various care settings; in-patient, outpatient, community, and ancillary care. In addition, many healthcare organizations in Israel have specific services for women, like the Women’s ER departments at many hospitals. This infrastructure can create a unique opportunity for Israeli femtech startups to address care continuum challenges for women as they move between care settings.
Health Equity
The Israeli healthcare system is known for inclusiveness, where each citizen largely receives the same access to care. In addition, the demographic characteristics of Israel are varied, with a population that is dispersed across many ethnicities and backgrounds. The data from a wide demographic pool can create opportunities for startups who are interested in addressing the many challenges at the intersection of femtech and health equity.
Opportunities with Incumbents
Israeli founders in general possess a high degree of technical ability. In addition, the Israeli healthcare system is an excellent alpha/beta site for initial clinical validation. At the same time, Israeli femtech startups generally build products and solutions to address more pointed issues in femtech. This creates an opportunity for Israeli femtech startups to work in conjunction with leading femtech startups and incumbents in the US/EU to collaborate. Israeli startups can offer their technological expertise and the clinical validation from Israeli healthcare systems, while leading incumbents can offer proven access to international healthcare systems and established business models.
Summary
There is a lot of potential for the Israeli femtech space to expand and grow and drive innovation, and there has been significant activity in the Israeli femtech sector over the last five years.
But with all the activity, there are also gaps that need to be addressed.
There are commercialization opportunities beyond narrow point solutions, and the Israeli healthcare infrastructure can serve as an excellent testing ground for broader products and services. There are also opportunities with incumbents and that can be explored.
Investors can maximize opportunities in femtech by helping portfolio companies understand emerging business models outside of Israel and adapting these business models to the type of products being built in Israel.
In short, there is significant potential for future innovation in femtech coming out of Israel, but there are noticeable areas for improvement if the potential is to be realized.
Notes:
“Diagnostic (non Onco)” refers to diagnostics tools/services/products that do not pertain to any form of cancer
“Pelvic Health” refers to startups where the product addresses the broader pelvic region, including the pelvic floor and incontinence.
“Oncology” refers to startups that specifically address cancer – either diagnostic or treatment.
“Pregnancy / Fertility / Natal” refers to startups that address any aspect relating to childbirth, including assistive reproductive treatment (ART), pregnancy/fertility, and childbirth.
“Health / Wellness / Lifestyle” is a general category for all other startups that do not fall under the previous four categories, including mental and behavioral health.