In the healthcare sector, many companies are struggling to grow due to the market downturn. However, fertility startups are thriving in a $54 billion market. The demand for services such as in vitro fertilization, surrogacy, and egg freezing has been steadily increasing over the past few years, as more people choose to have children later in life and as infertility rates rise. Despite the uncertain economy, people tend to prioritize fertility care over other forms of healthcare.
Fertility startups, in particular, are benefiting from these social factors and projected to continue to grow for many years. Investors are betting big on their outlook, and fertility tech startups raised $854.5 million last year, according to PitchBook, even as healthcare funding decreased. The fertility industry includes clinics to provide egg freezing and IVF as well as labs and tests, and companies that help people pay for procedures.
While fertility care can be expensive, with a single IVF cycle costing over $15,000, many patients pay out-of-pocket as health insurance doesn’t cover the breadth of fertility services. As a result, fertility businesses that operate clinics can reap hefty profits, yielding robust returns for investors. Startups such as Progyny, which focus on helping companies offer fertility benefits, can be attractive for investors because of the lower risk involved: startups get paid via contracts with employers and don’t pay for emergency healthcare costs.
Fertility clinics are owned by private equity firms, with about 15% of fertility clinics being private-equity affiliated in 2018, per a Centers for Disease Control and Prevention report. Experts predict that the fertility industry will see more consolidation soon, including clinic acquisitions by private equity firms and fertility startups. Kindbody, for instance, provides both fertility insurance and clinics and is actively looking to buy more fertility practices.
