Beyond VC: 6 Ways to Fund Your Healthcare Startup

When you hear “startup,” you probably think venture capital. But in women’s health, securing VC funding can be especially tough. Many investors prefer markets with well-established predicates of success, yet many women’s health innovators are trailblazers working with limited historical data.

That’s partly because science is still catching up. NIH didn’t recommend including women in scientific research until the late 1980s, and only in 1993 did U.S. law require women be included in clinical trials. The resulting decades-long data gap makes it harder for startups to show traction that VCs find attractive.

Furthermore, many investors undervalue the massive market opportunity in women’s health. It goes beyond fertility and includes the myriad of health challenges women disproportionately face across their lifespans.

“I spent a few years wasting my time trying to educate the VCs. They didn’t listen and didn’t invest,” said Sylvia Kang, Co-founder and CEO of Mira, a hormone testing platform for women. “I finally realized I was putting my focus in the wrong place,” she shared at the recent SiS Women’s Health Conference, held at Cure in New York.

What should founders do when traditional VC funding sources fall short? First and foremost: Don’t get discouraged.

“If you've decided to go after problems that VCs don't traditionally fund, and you're getting rejected, it's not you,” said Piraye Beim, PhD, Founder and CEO of Celmatix Therapeutics, which is creating “drugs of the future” to transform women’s health. Beim pitched to VC 650 times in 16 years, receiving $0 in investment. “Don’t let yourself buy into a narrative that you’re failing because VCs are turning you down,” she said.

Here are six alternative funding options for founders to consider.

Funding Opportunity 1: Academic Institutions, Accelerators and Foundations

Women’s health startups can access funding and support from non-venture sources including academic institutions, strategic accelerators, and philanthropic foundations. These organizations not only offer non-dilutive funding but also additional resources, mentorship, and access to their greater network of partners.

Academic institutions tend to fund faculty or student-led startups. Elena Rueda Carrasco, Co-founder and CEO of Dama Health, a patient-centered care platform for women to access personalized hormone therapies, secured non-dilutive funding from her alma mater, Imperial College London. She and her co-founders also raised capital through a strategic accelerator called Illumina, which also provided lab space, sequencing technology, reagents and other resources that allowed them to get to a point of conviction.

For more non-dilutive funding, founders should tap into foundations, many of which are now focused on women’s health. Foundations don’t have expectations for a five-year exit like VCs do, and their funding can create a halo that may attract future investors.

Foundations such as Pivotal Ventures, run by Melinda French Gates, as well as the Gates Foundation, the Robert Wood Johnson Foundation and the Helmsley Charitable Trust all invest in women’s health.

Funding Opportunity 2: Angel Investors

Angel investors use their own money to fund early-stage startups, usually in exchange for equity in the company, but the value they bring often goes beyond capital.

Angels are likely very invested in the mission of their startups. They believe in founders and are willing to make introductions, advocate, and open doors. That conviction can attract other investors. When seeking angel investors, look for those who focus on healthcare, women-led businesses, or social impact.

Funding Opportunity 3: Industry Partnerships

Big Pharma is finding it’s simply too expensive to build new innovations in-house, and they can’t innovate as quicky as they’d like. That’s why startups creating cutting-edge tools, using AI are increasingly becoming of interest to partner with, license, or acquire. Many pharmaceutical companies even have venture arms to identify early-stage companies for potential collaborations.

And these partnerships can be a win-win. In 2022, Cirqle Biomedical, which is developing a non-hormonal contraceptive using cervical mucus as a natural barrier, announced a strategic partnership with Organon.

“Organon’s mission is women’s health, so we felt our visions were aligned,” said Cirqle CEO Frederik Madsen. “Their competencies in manufacturing, clinical trials, commercialization, and sales mean that we can focus on what we're good at, which is the pre-clinical research.”

He also noted that partnerships like these can ease the pressure of constant fundraising. “When you’re working on a capital-intensive case like ours, a strategic partner helps you stay focused on the mission instead of having to go out and fundraise again.”

However, it’s important to proceed carefully. Madsen advises founders to ask key questions before committing to a partnership: Do they share your vision? How much time do you have to spend educating them? Will they improve your operational efficiency? And what additional resources can they bring to the table?

Funding Opportunity 4: Family Offices

When it comes to alternative funding, family offices, private firms that manage the wealth of ultra-high-net-worth individuals or families, can be lucrative sources for startups in women’s health.

“High-net worth individuals are impacted by health conditions just as much as anyone,” said Beim.

Look for mission capital that aligns with your company’s vision — just don’t expect to unlock that funding overnight. If you meet someone who runs a family fund at a dinner party, you’re probably not going to get a check the next day. Take the time to cultivate those relationships, and family offices can become an impactful part of your funding portfolio.

Another surprisingly underutilized funding resource, considering it’s the women’s healthcare space? Wealthy women.

“If the 100 richest women in the world donated just the passive income they generate on their birthdays to women’s health innovation, it would surpass the total annual biomedical research budget of the U.S. government in that space,” Beim noted.

Keep an eye on the recently reported “great wealth transfer,” much of which will go to women. It’s another area of potential startup funding that has been undervalued and largely untapped.

Funding Opportunity 5: The U.S. Government

Although the current administration has cut domestic programs including Health & Human Services by 23 percent, ARPA-H is still providing capital to power biomedical innovation. The agency takes a VC-style approach without the constraints of VCs, and the awards are significant.

Celmatix, for example, received a $3.5 million contract from ARPHA-H “with very little lift for us operationally,” noted Beim. “It involved a pitch — no 50-page grant application. It's been transformational.”

The Department of Defense is another avenue for government funding. Women are the fastest growing demographic within the warfighter community, and therefore, there is a growing awareness that promoting the health of female warfighters is a matter of national security.

While the current data is sparse, research shows that women in the military are at a much higher risk for occupational hazards such as burn pits, radiation exposure, chronic sleep deprivation, dietary changes, and chronic stress. In addition, women in the military have a three-times greater risk for infertility.

“We're not going to be able to maintain our defense needs without understanding that women are part of the equation,” said Beim.

The good news is the DOD has allocated half a billion dollars to studying women's health — a solid start, and an indication that entrepreneurs working in the space would be welcome to knock on their door.

No matter what patchwork quilt of investments you secure for your company, remember that despite the current hype, women's health is not a fleeting trend. It’s a long-term play. Make sure your funders are in it for the long game with you so you can stay focused on your mission.

“Build something great that customers will pay for, and then capital should chase you,” said Carrasco.

Funding Opportunity 6: Act Strategically

Be willing to broaden the definition of your company. In the beginning, Mira called itself a “digital health” company as opposed to a women’s health company. That distinction widened the net of potential investors and helped them raise initial startup funding.

Don’t be limited by geography. By launching during COVID, the Dama Health team worked remotely from day one, which meant tapped into networks, institutions, researchers, and investors all over the world.

“That kind of became our team culture,” said Carrasco.With U.S. funding currently being pulled back, having a geographically diverse funding pool puts your company in a stronger position to weather the fluctuating investment climates.

Stay lean and scrappy. Keep costs down by looking for team members in less expensive labor markets and using technology to improve operational efficiency. Periodically look at what changes you need to make to your capital work hardest for you.

“There's a beauty in trying to put all those puzzle pieces together — it’s another way of innovating,” Carrasco pointed out.