DeciBio’s Q&A with Alice Zheng, investor at RH Capital, a fund investing in early-stage high-impact companies that are driving innovation, access, and equity across women’s health.

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To get started, I’d love to hear a bit about your background and how your journey led you to RH Capital, your mission and interest in women’s health.  

My journey in women's health spans various roles. I started with global public health, where I worked in East Africa and Asia on maternal health conditions. I went to medical school and almost became an OB-GYN, but ended up going to business school because I was really fascinated with the intersection of business, public health, and medicine. At McKinsey I focused on healthcare, particularly women's health. However, I found that the center of gravity in women's health wasn't with big corporations. They're an important part of the ecosystem, but the real excitement for me was around innovation, with a growing number of startups and  VC funds focused on women’s health. 

I transitioned to RH Capital, an early-stage women's health VC fund focused exclusively on female-specific conditions, everything from menstruation to menopause. We invest with an impact first lens, where we think about companies’ potential to transform outcomes, improve accessibility, offer affordable care, or reduce systemic inequities in the health system. A small silver lining in Roe v. Wade being overturned was a call to action. We had a number of prospective LPs who realized the time is now to double down and invest in women’s health. I am proud that we’ve built the largest dedicated portfolio in women’s health, with 21 investments so far.

The last hat I’ve worn is as a patient. I recently recorded a podcast about my personal experiences, which have only added to my passion for women's health and made me more empathetic toward the patient experience. It gives me more resolve to improve outcomes for women. There's an incredible amount of unmet need.

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We’ve heard that female-founded companies tend to receive less funding. One study showed not only that female-founded companies receive less funding, but that it potentially decreases their success raising future funding to have investors that are female-only. On the flip side of things, data supports the fact that female-founded companies are quite successful. What's your perspective on what drives this, especially as a female investor pursuing this space specifically?

Healthcare startups typically have about 20% female leadership, but in women's health, this figure jumps to 60-70% or higher. PitchBook’s female founders dashboard shows less than 2% of VC funding goes towards companies founded exclusively by women and less than 20% if you include companies founded by men and women. However, in my corner of the venture world, it’s different. The companies we're screening have lots of women as founders and leaders and my colleagues and our co-investors are overwhelmingly female. 

One interesting wrinkle I've heard from some female founders is that sometimes they have a harder time raising from women than men. If you're the one female partner at a firm with all men, you might feel that you have a higher bar to uphold. Your reputation as an investor is scrutinized from every angle, so you may be scared to invest in companies that are more controversial or come with more risk. 

Hopefully, as we normalize female success by bringing in more female investors and seeing successful women-led companies, this bias will go away. And you're right, there is data showing female-led companies often do better. Some of it could be because women who end up getting funding are the superstars since it’s so hard to get funding in the first place. The other piece could be the research on women and decision-making. Women in leadership roles tend to think holistically about all stakeholders and make decisions in a way that can be more beneficial.

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That makes sense. One thing I think about a lot is how to bring attention to the women’s health space. How do you think the community should go about showing the importance of women’s health issues? How do we get men to understand enough to care and invest?  

Several factors come into play here. Firstly, there's the issue of bias, as some men may not initially prioritize women's health issues. Additionally, it's crucial to assess the seriousness of investors in the devices or diagnostics segments. If non-expert VCs fund women's health startups without proper due diligence, it can undermine confidence from follow-on investors. The goal is to have dedicated and credible investors in women's health, irrespective of gender, to overcome skepticism. The evaluation of women's health companies should match the rigor applied to other fields like oncology or cardiology. Beyond the altruistic reasons, the business case needs to resonate universally, involving investors from diverse backgrounds.

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Are there any challenges you’ve faced in your role or anything that has surprised you about being an investor in this space or in general?

I didn't start my career in investment banking or private equity, but there's always something new to learn in investing, from the mechanics of term sheets to the broader negotiation mindset. Drawing on my background as a physician and patient, I have a unique perspective on how healthcare operates from both sides. This lens allows me to critically assess whether an investment will truly work and make a meaningful impact. From my public health experience, I know to think about outcomes and broader impact beyond financial considerations. My consulting experience provided me with expected but also surprising tangible skills, which I've further detailed in a blog.

In this field, both qualitative and quantitative analyses are crucial. While those new to venture might view their role as primarily making investments, there's more to it than meets the eye. Beyond assessing markets, team skills, and product-market fit, a significant aspect involves people and relationships. It's not just about what's on paper; understanding team dynamics, values, and interpersonal dynamics is equally vital. Despite thorough diligence and assessments, the success of deals often hinges on the intangible aspects of human interaction.

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It's inspiring to hear that you back the people in addition to just the numbers and the data. In that same vein, what's been an inspiring aspect of your experience as an investor? What has been motivational or exciting?

I love being at the forefront of innovation. We range from companies focused on how to best serve populations in need all the way to very futuristic science like creating IVF eggs from blood cells or a transformative new diagnostic for ovarian cancer. Being able to talk to new companies that range from the cutting edge of the scientific side to the delivery side of care is really exciting. There is so much variety on any given day.  

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That is super interesting. What do you think might be some long term impacts of the lack of investment in the women’s health space? 

Before I joined RH Capital, I was studying the women's health innovation space and the first time I did a scan in 2018 or 2019, there were about 200 companies I could identify. Now that's tripled or quadrupled. Some of that was riding the tailwinds of increased VC funding generally. But a lot was due to increased societal awareness and destigmatization. I do see positive trends here, but we still have a ways to go. There is a lot of seed funding and some Series A, but as companies grow, there aren't as many investors that are committed to women's health at that later stage. That’s what we need to see more of. If we don't invest in women’s health, we will continue to see the poor outcomes we have today. Large patient populations that represent a market opportunity will remain untreated. Women's health is also a gender equity issue; healthier women reduce health costs overall for society. Women are the primary caregivers for children and the elderly. There are so many ramifications. 

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That makes a lot of sense. What do you think about the hypothesis that innovation is currently moderated by a lack of basic biological understanding of women's health?

We do partly lack scientific innovation in women's health due to a limited understanding of the underlying biology required for developing new targets and therapies. Unlike oncology, where scientific discoveries happen all the time, women's health faces challenges in both upstream funding and research, as well as downstream payer appetite. Payers are accustomed to low-cost generics for certain conditions, making it challenging to introduce new, expensive, branded products in women's health.

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How do you think that challenges with investment could be better resolved in the future?

There's a noticeable increase in public discourse around women's health, with women’s health increasingly on the agenda at mainstream events. Increased awareness not only helps destigmatize the field but also captures the attention of potential investors. Generalist funds with significant capital are increasingly drawn to the sector downstream, but some are better suited for later-stage pipelines with larger check sizes. Some private equity funds may have specific criteria not currently met by women's health companies. However, I do think it's really promising to build on those interests in the downstream pipeline.

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That's interesting. From biotech and pharma perspectives, we hear how the overall market, especially oncology, is becoming saturated. One of the areas with room to grow is women's health. It feels like people still don't know enough about women’s health, but it's a space people are starting to think about. 

Right, and as I mentioned, more of the conversation revolves around the business case. It's not just that investing in women’s health is the right thing to do, but it's attractive from a business standpoint. I also separate the business case from the economic impact. There are some really great reports out there on the economic impact of different women's health conditions, such as menopause. But we need a strong business case that you can make money in women’s health and there is opportunity for financial return. That is critical, and what is going to make women’s health more mainstream is presenting it as the next big thing and the right thing.

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If you were giving advice to a company on making a business case, what would be some of the key pillars? Is it showing you've got a good addressable population and a path to reimbursement? What are the factors you look at to identify if a business case is strong?

It means different things to different groups. Startups should demonstrate a sizable market, but in a contracting economy, the challenge lies in out-of-pocket or direct-to-consumer products. The crucial questions revolve around payer support, cost savings, and the value proposition for those investing. Investors seek a viable return or potential exits through IPOs or acquisitions. Having data on women's health exits strengthens the business case.  

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You made a point earlier that women's health today is not as much in large corporations, but rather in newer, smaller, often more innovative companies. I'm curious how you think the space will play out. Do you think we'll see more activity from larger, more established diagnostic players, or will it remain within more of the startups?

There are different dynamics at play here. In the past 5-10 years, there has been a broad trend around external innovation. Big pharma companies may not develop drugs internally. Instead, they acquire assets or license them. This is a general trend that is amplified in women's health. This is not a bad thing for investors. It's more important to know they are still interested in the space in general. 

Three or five years ago, there were big question marks surrounding women's health. Several pharma companies were trying to shed their women's health divisions. However, with the emergence of Organon, I have seen a shift in tone. Organon was a divestiture, but they came out of the gate with a lot of capital from other lines of business. They had a big appetite and acquired a lot of companies. I think that has reinvigorated the women’s health space; investors see potential exits for the companies they want to invest in. It's also been a wake up call to other pharma companies, and we’ve now seen some of them start projects in women's health, participate in conferences, even sponsor or host their own. For example, Roche started the X Project. It's pretty exciting that different companies are investing in women’s health, maybe not in drug discovery and development, but engaging in other ways that signal interest.

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What do you think of the branding of this space as Femtech? It may seem like words are just words, but words also have so much meaning, and a lot can be interpreted from good phrasing. When people ask us for the size of the Femtech market, it can be hard to even define Femtech.

I have a love-hate relationship with the word. It’s done wonders for the space since it emerged; it helped enthusiasts find each other. Femtech referred to consumer tech in the beginning, such as menstrual tracking, but it's grown to include other types of consumer oriented products. What I don’t love about the term is its inconsistency; it's sometimes used to represent only consumer tech, while other times it's used to encompass the entirety of women's health. This can be confusing, and sometimes makes it sound like a fad. It feels like if you add the word “tech” to something, then it becomes a little bit of a hype. Hypes cool down, and I’d rather focus on the underlying fundamentals and importance of women's health. I wrote a couple of articles at McKinsey, one of them on Femtech. As you mentioned, the other question is market size. People always ask me this, and I just don't think there's a good answer. Market size is often measured by existing revenues for mature industries - in this case, revenues often aren’t reported publicly and they are small as with early-stage companies, but the opportunity is vast. 

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The consumer health side is important in helping access and there’s a lot of activity, but are there any companies or products on this consumer facing side who are best positioned to transition to the clinical realm?

This is an interesting debate. Companies can start on one side of the spectrum and pivot to the other. It does take a bit of rebranding, and has really different implications for your funding needs, especially if you're planning to do a clinical trial, as well as your regulatory strategy. It's not easy to pivot, but there are examples; if you’re a digital health company, you can refine your algorithm and establish the rigor and evidence generation that will enable you to get reimbursement. Pivoting can be a lot harder for products. If you're offering a product as a supplement, it's really hard to change the direction once you've started down that path. 

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Lastly, do you have any advice for women with goals of becoming an investor or entrepreneur?

Leverage your networks to find investors, brainstorm ideas for your company and hiring. A lot of venture and entrepreneurship are about relationships. As an investor, I’ve found my network to be very useful so far; sometimes people you may not see squarely fitting into the space you're interested in will know someone who has something to offer or have insight that is actually quite relevant. People might start out in one role and move to a different role in your space, so that network can be really, really powerful. Always use that to your advantage.

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Thank you for a great conversation. I look forward to staying in touch.

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