Few people understand the fertility business like David Sable. The former reproductive endocrinologist changed hats in 2005 to run a healthcare investment fund. A few years later he restudied in vitro fertilisation (IVF) from an investor perspective. “I found a tremendous number of inefficiencies, combined with some major changes that were gradually transforming it from a dull, staid, low-growth industry to one that was getting ready to scale,” says Mr Sable, who is raising his third fund dedicated to IVF advancements. 

Since 2015, a growing number of venture capitalists have joined Mr Sable in targeting a burgeoning group of start-ups innovating tech-driven solutions that improve success rates and broaden access to assisted reproduction. Pitchbook data shows that in 2021, venture capital (VC) investment in the fertility sector hit $857m — more than double any other year on record. 

Ripe for disruption

Despite its futuristic premise, IVF has not significantly changed since the first ‘test tube baby’ was born in 1978. Embryologists select embryos and manage the overall process without the assistance of technologies transforming other industries.

Using human-centred practices, some believe success rates have peaked. “Current approaches in fertility treatments at so many levels have reached their performance wall. “There must be something else that brings hope to patients,” says Yael Gold-Zamir, founder of Israeli start-up Embryonics. Her team of computer scientists and doctors is using geometric deep learning to build a suite of artificial intelligence solutions that, studies suggest, improve an IVF cycle’s success rate by 25–50%. Its first product is an embryo selection tool now being sold in Europe and Asia.  

Another start-up disrupting the sector is US-based TMRW, which recently opened an office in the UK. In 2021, it launched the world’s first automated platform to identify, store, track and monitor frozen eggs and embryos using radio frequency identification. This is a marked improvement on today’s haphazard approach of storing specimens in thermos-like containers called dewars. “To the extent we can automate manual steps, remove risks associated with human error, and allow doctors to spend their time on high-value tasks in the lab, that will create huge value for [fertility] clinics,” says Tara Comonte, CEO of TMRW. 

Beyond the lab 

Investors are not limiting themselves to IVF, but are also backing a new breed of fintechs that support the trend of companies subsidising employees’ fertility services as part of benefit packages, a trend started by Facebook and Apple. A 2020 survey by Mercer found that 40% of US firms with more than 20,000 employees covered IVF treatment and 19% covered egg freezing.  

Will Gibbs, head of the health team at Octopus Ventures, which has made six fertility investments, says “bringing the employer in is potentially the largest single change that could happen” in the market. He believes that increasing payers’ budgets will support innovation by tech disruptors. It will also broaden access to successful IVF treatment which, according to educational site FertilityIQ, costs an average $50,000 in the US.  

VC is particularly excited about employer benefits because it is financially sustainable. “When you talk about consumer spend, there is a limit to the market’s size,” says Alice Zheng, principal at Rhia Ventures which backs reproductive health start-ups. “But as more employers think about employee retention and fertility benefits, that pie just keeps growing.”  

Taboo no more 

Another factor piquing investor interest is the sheer volume of latent demand. “I think we need a worldwide IVF infrastructure at least 10 times the size of the one we have now,” says Mr Sable.

A simple calculation supports his thesis. With around 130 million babies born globally each year and 15% of couples struggling with conception, there is an annual shortfall of 19 million babies. FertilityIQ studies suggest a successful pregnancy requires on average 2.5 IVF cycles. That is 47.5 million cycles per year compared to the three million happening today. 

Not taking these areas of taboo health seriously means missing out on large financial opportunities

Will Gibbs

But heterosexual couples struggling to conceive is now just one customer base. Younger women proactively freezing their eggs, improved LGBT+ rights and greater acceptance of non-nuclear families, is expanding the market’s potential and strengthening the investment case for innovation. “The inflection point that we are at really demands technology,” says Ms Comonte. “The industry can’t scale without it.” 

A simpler reason for the investment uptick is that infertility — like other historically taboo sectors such as mental and sexual health — are now more widely spoken about. “These are areas most investors couldn’t talk about without blushing. That’s really only started to change in the last two or three years,” says Mr Gibbs. The number of fertility start-ups reaching unicorn status, such as US benefits provider Progyny and virtual reproductive clinic Maven, helps overcome any embarrassment. “Not taking these areas of taboo health seriously means missing out on large financial opportunities,” says Mr Gibbs. 

Innate needs 

Allied Market Research forecasts the global fertility market’s compound annual growth rate to hit 15.9% by 2027, but this will still be a sliver of the healthcare sector, and some investors query the limits of standalone fertility solutions. “For any tool you have to consider how much you can sell it for, to whom, and how many per year. People aren’t having a baby a year,” says BlackBird Ventures’ partner Samantha Wong. BlackBird’s decision to invest in Australian start-up Harrison.AI was driven by the latter’s plans to apply algorithms built for its flagship embryo selection tool to other healthcare products.  

But other investors are convinced by the prospect of a truly global market, arguing that the inherent human desire to procreate transcends regulatory and cultural barriers. Mr Gibbs says: “If you are looking to build a global business from day-one, fertility is a prime area to look at.” Mr Sable agrees there will be “an awful lot of transnational spread” of effective technologies through business and scientific channels. China’s efforts to recover from its one-child policy, Japan’s ageing population, Israel’s free fertility treatments, and high IVF rates in Spain and Denmark make them markets to watch.

But Mr Sable believes it will be a truly global effort. “My prediction is that this is the next great area within healthcare,” he says. 

This article first appeared in the February/March 2022 print edition of fDi Intelligence.