FemTech and SexTech: Undressed and Explained (Part 1)

HCIT, digital health, fintech, robotics, life sciences — these are all widely discussed areas of interest among the VC and startup communities. It would be easy for others to understand an interest in those spaces. However, when I comment that my area of interest is sexual wellness and female health, the first questions that I often get asked are “So you mean like vibrators?” or “So that has something to do with sex and vaginas?” While both are technically true, the area that I’m focused on is much broader.

Consider this view: the world runs on money and sex. If you think about it, we all talk about who has it and who doesn’t.

Yet, both subjects are largely not discussed in high schools. It’s true that it’s probably an easier pitch to get high schools to teach students about 401ks and budgeting their savings than explain where the clitoris is and how to communicate with a sexual partner, but both are likely more important in the long run than learning that the mitochondria is the powerhouse of the cell. Recently, consumer financial planning apps have burgeoned, bringing consumer education about money to the forefront. So why shouldn’t we similarly invest in the other space that makes the world go round?

Accordingly, I think it’s time to “undress” the market and explain why I think that it’s a compelling space. I’m interested in the broad landscape of what could be called “FemTech” and “SexTech”. These are relatively nascent spaces in terms of funding — although not in terms of innovation and startups — so it is understandable that many in the investment community are not intimately familiar. In addition, a large portion of the investment community is male and older, and I suspect that these areas are often at best a mystery, if not “taboo,” for many older male investors. Part of what I’m hoping to achieve through my writing is to dispel the mystery and enable all portions of the investor community to embrace the investment opportunity.

But what do these terms really mean? What do they encompass? I would argue they fall under a larger umbrella term that I like to call “Intimate Health.”

I would informally define Intimate Health as any health-related topic that “most people don’t want to talk about but care deeply about.”

More formally, Intimate Health comprises several categories:

  • Female health (FemTech, coined by Ida Tin, CEO of Clue)
  • Sexual wellness, health, and pleasure (SexTech, coined by Cindy Gallop, Founder and CEO of IfWeRanTheWorld and Founder of MakeLoveNotPorn)
  • Family planning/parenting (“FamTech”, if we’re continuing the trend)
  • Relationship health and happiness (shall we try for “RelationshipTech”?)
  • Mental health

Most of the startups of interest have some technology angle, whether connected devices, AI features, online education, eCommerce, or telehealth. I acknowledge that there are many fantastic healthcare companies that do not have a core technology angle (although likely fewer and fewer as time goes on), but these are less of a focus for my research and writing. In addition, mental health has also been well covered by a variety of thought leaders, so for now, I will focus here on the first four categories.

While my analysis is not a comprehensive assessment of the relevant markets, I track 600+ startups globally in the space, so it is my belief that it is meaningful and directionally correct. Of the companies tracked, 78% are FemTech (exclusively female health and wellness), 13% are SexTech (including male sexual wellness and health), 5% are FamTech, and 3% are RelationshipTech.

Data as of 11/30/20

There are significant market tailwinds, detailed below, which I hope will enable investors to take a leadership role in penetrating (pun intended) this nascent, yet critical, market.

Customer and Sector Tailwinds:

Significant and Increasing Female Purchasing Power:

According to a variety of studies, women drive 90% of household healthcare-purchasing decisions, and spend more money on healthcare, particularly drugs, medical services, and personal products, than men; for example, in wellness-oriented products, women spend an average of $714/year on self-care while men spend closer to $297. But there is also a customer pain point: ~66% of women reported feeling misunderstood by the healthcare market.

In addition, women are increasingly staying in the workforce longer, delaying marriage and childbearing to their 30s and 40s when they have a significant amount of discretionary income to spend on starting a family, including on the sometimes stressful issues of fertility, pregnancy, and breastfeeding. I posit that the traditional focus of health and wellness marketing is not maximizing the potential of this large and increasingly wealthy segment of the population, and that health and wellness companies that recognize and address this could stand to reap significant market share.

Aging Female Population Entering Menopause:

An aging female population is searching for menopause-related products and services, and, due to the trend of females staying in the workforce longer (mentioned above), they have significant purchasing power to allocate to products related to their health and wellness. The Census Bureau expects that by 2030 the number of women of menopause age in the US will reach 93m (52% of the female population), a very large TAM and a sizable jump from the 81m in 2016 (49% of the female population). Globally, it is estimated that 1.1b women will be postmenopausal by 2025.

Ability to Capture Female Purchasing Power Through Different Life Stages:

Consumer-oriented menstruation startups have raised the most VC money historically (~$490m), and certainly target a critical phase in a woman’s life. But what if a company didn’t just target one life stage, and instead acquired a young female customer around age 13 (when many adolescents start getting smartphones), when she begins asking real questions about her body? For many parents, a female this young may not be of “traditional age” for a gynecologist visit. But these females have a legitimate need for answers about their own bodies.

After bringing the adolescent female onto the platform for this purpose, imagine if an app followed her and provided her with goods, services, and advice through puberty, menstruation, birth control, sexual health, sexual pleasure, financial planning for a family, fertility planning, pregnancy, labor, post-partum, breastfeeding, and all the way through menopause. Talk about CLTV and customer loyalty.

Rise in Preventive Medicine:

The healthcare industry has historically been focused on treatment, not prevention, but the focus has shifted in recent years, and female health should benefit from this shift. Investors have allocated capital to a panoply of urgent-care and primary-care companies (e.g. Carbon Health, Doctor on Demand, Oak Street, OneMedical etc.), but PCPs rarely cover a critical, underserved area of the market: female health and sexual health preventative care.

To cover the full spectrum of preventative care, and increase patient awareness of access, those areas must be properly, and separately, funded. Fertility, menopause, reproductive health, and sexual health (both male and female) are all areas where preventive education and care is on the rise. There are a number of companies making significant inroads in the space (e.g. Tia, general female and sexual-health teleconsultation app, and The Cusp, a healthcare app that connects menopausal women with experts), but the space is nascent, with room for many additional players.

Large Portion of Women with Pelvic Disorders:

Roughly one in three women will experience a pelvic-floor disorder in her lifetime. These disorders can affect women of all ages; for example, vaginal births double the rate of pelvic-floor disorders, while older women are more at risk for disorders. Based on incidence reports by age, almost 30m women suffered from these disorders in 2016, with 36m expected to in 2030 (to put this TAM into context, 22m people are enrolled in Medicare Advantage plans, and MA is an area of focus for some healthcare insurance startups/healthcare investors).

With a significant number of women suffering (many in silence as there can be harmful stigma surrounding a variety pelvic disorders, for example, adult urinary incontinence), and surgery considered a last-resort, startups are working to develop innovative services and products, from both a preventative and treatment perspective, and have the potential to improve the quality of life for many patients.

Continued Innovation Regarding Breast Cancer:

Breast cancer is the #1 cancer affecting women globally, but can be treated more effectively if properly diagnosed early. There are a number of startups working to develop consumer-oriented products and medical devices for early self-detection of breast cancer, thereby placing less emphasis on the annual gynecological exam. For example, companies such as EVA (wearable device with sensors to detect early indications of cancer) play on the trend of the consumerization of healthcare, allowing women to track their breast health at home. I have no doubt that we will see continued innovation in the space, both through consumer-oriented and life-sciences lenses.

Increased Comfort with and Interest in Sex Toys:

The stigma attached to exploring sexual activity and experimenting has decreased substantially in the last decade. There is not only growing acceptance around sex toys, but more importantly, growing awareness of their availability and utility. Historically, men have been the primary customers for sex toys, but this trend is seeing a shift as women continue to feel more sexually empowered. Combine that with increasing female purchasing power, and boom, you have a large market of sexually free women (and men) who are looking to explore new ideas. The COVID-19 pandemic, in particular, has accelerated the purchase and usage of sex toys for partnerless pleasure (driven both by those who are single, and those who have remained in quarantine separated from their partners).

Need for Accurate and Easily Accessible Sex Education Information and Tools:

In the US, we primarily rely on high-school health instructors to teach sex education. However, only 30 states (+ DC) require sex education be taught in school, and only 11 require it to be medically accurate, leading to a severe dearth of accurate and accessible sex-education information. Studies show that 86% of parents feel it is “very important” to provide children with sex education, but only 43% of parents say they feel comfortable talking to their children about sex.

In addition, 73% of adolescents (aged 13–17) own a smartphone, and there is a widespread belief that adolescents turn to the internet with their pressing sexual-health and sex-education questions. Given the disjoint between positive parental attitudes towards sex education and the discomfort they face when teaching their children about sex, the current state of our primary source of sex education (the public sector), and the fact that many adolescents (and adults) continue to go online to search for sexual-health answers, there is a clear need for sex education to be accessible through a different and more effective medium than the traditional school system.

It is my belief that existing sex education needs to be augmented by an online offering, and that the right apps could provide approachable, inclusive, and accurate platforms for all ages to access sexual-health topics, whether for parents to educate children or to allow adolescents and adults to seek out answers on their own.

Increasing Need for STD Prevention:

In the US, according to the CDC, the incidence of STDs such as chlamydia and gonorrhea has been steadily rising since 2010, suggesting a continued need for safe-sex products and education (likely aimed at the group that needs it most: 15–30 year olds). The growing awareness and increasing incidence rates have led governments and educational institutions to work to educate their constituents on safer sex (free condoms everywhere!).

But there’s more to STD prevention than free condoms — there is a need for innovation in terms of at-home testing, education, treatment, female condoms, and, yes, even the decades-old Trojan condom (new shapes, sizes, thicknesses, flavors, structures, materials, etc. to increase the range of pleasure, making condom use more appealing). Companies that have been at the forefront of innovation include Hanx (vegan condoms), iPlaySafe (at-home specimen collection to be sent to STD labs), and Wisp (telehealth designed to diagnose and treat cold sores, herpes, UTIs, etc.).

Changing Family Composition:

Family units are changing, with many families no longer being run simply by one cis-male and one cis-female. Some studies show that 1 in 5 Americans (35% of Gen Z, 25% of Millennials) know someone who goes by a gender-neutral pronoun and a Pew study found that 32% of Americans showed willingness to engage in polyamorous relationships or consensual non-monogamy. Another study showed that more than half of Millennials and Gen Zers do not identify as strictly heterosexual (likely referring to the Kinsey Scale or similar assessment tools). As gender fluidity, sexual orientation, polyamory, and ideology around marriage and childrearing evolve, there is a growing need for family/parenting products and services aimed at a wider range of family units.

Whitespace for Improving Relationships:

While the focus for many is on self-care/mental health, there is a significant portion of the human experience where happiness is drawn from maintaining healthy relationships with others. For example, a Harvard study conducted over 75 years showed that the biggest predictor of one’s happiness and fulfillment in life is love, and that there are two foundational elements to this — one is finding love, and the other is finding a way to cope with the pressures of life without pushing love away (that is, making the love work).

Divorce rates are high (almost 50% of US marriages are expected to end in divorce or separation), and Millennials and Gen Zers, who grew up in the age of technology and “instant gratification,” are more likely to respond to the slightest hint of relationship trouble by quickly moving onto the “next partner” given the seemingly instantaneous and limitless options that dating apps provide.

Presumably people want to be in happy relationships (whatever form that may take), and sometimes that requires outside tools (e.g. couples therapy, time-management/shared-calendar apps, apps focused on long-distance relationships, etc.). Since tech has proven its ability to offer more convenient or superior options in other spaces, it is only logical to expect that tech could have a materially positive impact in this sphere as well.

For those who are keen to improve existing relationships but who see traditional couples’ therapy as outdated or time-consuming, rate their relationship as “not serious enough to warrant official therapy,” or are seeking additional and innovative tools, there is a clear whitespace for interpersonal apps to help maintain and improve existing relationships.

In my next installment, I’ll tackle a few more tailwinds (regulatory and channel), look at headwinds, and provide some FAQs.

This article is part of a series of posts, found here.

Passionate about everything that improves the human experience. Personality traits include oversharing and sarcasm.