Harnessing The Power of Profit: The Business Case for Women’s Health Startups with Erin Lambroza
about the episode
In this episode, Sharon is joined by Erin Lambroza, Vice President of L Catterton, a consumer-focused private equity firm. Erin and Sharon discuss what makes a women's health company fundable and how to navigate the challenges in this space. Erin brings her extensive experience in early-stage investments with a focus on health and wellness to provide invaluable advice for founders and investors alike.
Erin emphasizes that the success of a women’s health startup relies on the same factors as any other sector: a growing market, scalable growth, and demonstrated product-market fit. She highlights the importance of understanding unit economics, ensuring that the business model is sustainable and profitable, especially after the first year in the market. The conversation also touches on the historical challenges in women’s health, such as underinvestment and the lack of viable exit paths, which make fundraising particularly difficult. Erin notes that overcoming these obstacles requires innovation at the research level to build a foundation for profitable businesses.
The episode delves into the historical context of women's health, revealing that women were excluded from clinical trials until 1993, resulting in a significant lack of comprehensive data and chronic underrepresentation in healthcare research. Erin also discusses the origins of the word "hysteria" and its longstanding impact on the perception of women's health issues. This historical lens underscores the need for deliberate and targeted innovation in areas such as autoimmune diseases, Alzheimer's, and cardiovascular disease, which disproportionately affect women.
Erin offers practical advice for founders, emphasizing the importance of surrounding oneself with the right people who genuinely support the mission, being receptive to investor feedback while synthesizing advice from multiple sources, and seeking strategic, active capital rather than passive investment. Her insights provide a roadmap for founders looking to make a meaningful impact in women’s health.
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“We need to build the foundation of information and innovation to create profitable businesses in women’s health. It’s not just about having a great mission; it’s about having a viable business case.”
About Erin Lambroza
Erin Lambroza is a Vice President at L Catterton focused on the Growth fund. Erin holds Director roles on the boards of Alice Mushrooms—a functional health supplement business pairing chocolate with the power of adaptogens from legal mushrooms; an unannounced beauty and wellness platform providing solutions to women who are navigating menopause; and Yummers, a pet food company founded by “Queer Eye” stars Jonathan Van Ness and Antoni Porowski alongside the former CMO of Petco. Prior to joining L Catterton, Erin spent nearly 4 years at Blackstone. Most recently, she was a Senior Associate at Blackstone Growth ("BXG") where she was responsible for driving thematic sourcing efforts, executing on investments and managing portfolio work across the Consumer sector.
Episode Outline
(01:56) What Makes a Women's Health Business Fundable?
(04:49) The Audacity of Profit
(08:53) Beyond Bikini Medicine: Addressing Innovation in Women’s Health
(12:06) You Are Not Alone: Common Challenges All Startup Founders Face
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Sharon Kedar 00:02
Behind every pioneering idea, method and device is a fellow human or humans, a trailblazer who is daring enough to ask the questions that push the boundaries and make the impossible possible. I'm Sharon Kedar, co-founder of Northpond Ventures, a multi-billion dollar science-driven venture capital firm, and the host of, "Innovate and Elevate." In each episode, we'll have candid, in-depth conversations with top doctors, scientists and innovators about leading-edge discoveries, and how they impact our lives. Season one focuses on women's health with the aim of helping women lead our healthiest lives. You'll hear from leading experts such as Dr. Kathryn Rexrode, Division Chief Women's Health at Harvard's Brigham Hospital. It's time for all of us to innovate and elevate.
Sharon Kedar 00:52
Erin Lambroza is a Vice President at L Catterton, the world’s leading consumer-focused private equity investment firm, where she focuses on identifying, evaluating and executing early-stage investments, with a heightened emphasis on health and wellness. Erin holds Director roles on the boards of Alice Mushrooms—a functional health supplement business pairing chocolate with the power of adaptogens from legal mushrooms; an unannounced beauty and wellness platform providing solutions to women who are navigating menopause; and Yummers, a pet food company founded by “Queer Eye” stars Jonathan Van Ness and Antoni Porowski alongside the former CMO of Petco. Prior to L Catterton, Erin was a Senior Associate at Blackstone
Growth. Erin, welcome to the podcast.
Erin Lambroza 01:46
Thank you for having me. Super excited to be here.
Sharon Kedar 01:52
So for those viewers and listeners that haven't gotten to know Erin, I met her at the second inaugural New York Stock Exchange Women's Health Summit a couple months ago and I feel like you had a lot of brilliance that you shared with me sitting next to me after that, that I thought viewers and listeners would want to hear. Would love to talk about building for success in new company creation in women's health. And I guess to start, from the investor lens, from the place where you sit, it would be great if you could just share what you think the opportunity today is for investing in women's health and really what makes a women's health business fundable?
Erin Lambroza 02:36
If you've heard investors answer this question before about what makes a business fundable, I'm going to sound a bit like a broken record. But I think what makes a women's health business fundable is, at the end of the day, the same thing that makes any other business fundable: a large and growing market with room for continuous, go-forward innovation; a track record of solid and scalable growth; demonstrated product-market fit; and what I mean by that is proven traction, which often ties into the revenue piece with customers and end consumers—because it's important to remember those can be different depending on what kind of business we're talking about, right? We, you know, I think for a business to be fundable, it has to have unit economics that work. I talk about this all the time. From the get-go, we need to really be able to see is the product or service that you're selling, providing, is it scalable? And is it scalable because the cost base for the outset is not larger, right, than the revenue you'll bring in?.
Erin Lambroza 03:33
Obviously, that, in your very early days, is not always something you can do, but usually, I would say by the end of year one when we're looking at businesses that have been in market for a year, we want to see economics that, sure, have room for improvement, but really, really work. You're making money basically on every incremental sale. And I think one of the biggest pieces that's interesting to talk about, particularly the women's health lens, is a viable exit path. There is a dearth of exits right now in the women's health category, and that's hurting everyone's ability to fundraise, whether you're a founder of a women's health company, whether you're a founder of a women's health focused fund. It's really hard because investors and LPs don't know how they're going to ultimately make a return on their investments in women's health at the moment because they don't have any data points for businesses that have exited. I think a key criteria, frankly, for what makes a woman's health business fundable are all the things I mentioned, but also from my perspective demonstrating that you as a founder or a management team have a reasonable vision for how your business can sell, who it can sell to and why it will sell eventually.
Sharon Kedar 04:45
I think what you just said is so smart and I don't understand why there's a gap, but what you said is that what makes a women's health business fundable is what makes any business fundable. It has to hit the same bar. Why aren't we starting with profit?
Erin Lambroza 05:02
I think this gets to a broader question, which is around the state of women's health and what we understand about it more broadly. So I think where we are in the life cycle of women's health innovation, we're so early. And what that means is that there's a very limited amount of innovation and information for companies to go build off of. And with the rise of, you know, venture capital dollars, it feels as though not just in women's health, but across the board in a lot of different categories, healthcare more broadly, you know, you name it, people tend to, maybe not today, but in the the last 15 years relative to the time period before that, it's been easier to raise venture money than ever before and so people have leaned on the concept of raising venture money to go solve, build companies that solve problems. I don't think that works yet entirely. I don't want to say it doesn't work at all, but I don't think it works entirely yet in women's health because there are a lot of things that need to be solved at the research level, at the academia level realistically through things like grant funding and research funding and non-dilutive funding, more broadly, I think in order to create businesses that can be profitable, we need to build the foundation of information that they can build off of.
Sharon Kedar 06:15
I see a lot of stuff that, you know, it's like, "Well, this is such a great mission. Let's do it." But it's like, where is the business case? So I'm just curious if you have any perspectives on that?
Erin Lambroza 06:27
No, and I think it answers, it starts to answer a question that we've talked about which is just why are we broadly so underinvested in women's health whether it's from the venture side or just the broader side of things? I think it runs really deep unfortunately. So I'm going to repeat a fact that I hope everyone has now heard once, if not multiple times. But if not, you know, you heard it here first. Women did not have to be included in clinical trial research until June 1993. That is barely over 30 years ago, so what that literally means is until about 30 years ago every single study, right, that underpinned the evolution of the healthcare system as we know it, that underpinned the tenets that dictate modern medicine, those studies did not have to include women. So we are just fundamentally, chronically underrepresented in healthcare. I learned a new fact the other day.
Erin Lambroza 07:19
I'm reading Dr. Mary Claire Haver's new book called, “The New Menopause,” but in one of the first chapters she tells readers that the word hysteria was coined by Hippocrates, the father of medicine, to describe specifically what he believed was a disease that originates from the uterus. So he believed that this disease called hysteria maneuvered its way through a woman's body and caused symptoms like tremors and anxiety. And so, flip forward to today: the word hysteria, and by very close association, obviously, hysterical, is literally defined as an exaggerated or uncontrollable emotion or excitement. Or I saw another definition where it was called ungovernable excess. And the word hysteria was used for the disease because the Greek word for uterus is, and I'm probably going to mispronounce this, hystera. So the word hysterical, the word hysteria comes from the word uterus, which is, to me, mind-blowing. And just like really goes to show you how deeply rooted in culture this concept of marginalizing women's health issues and attributing them all to emotional problems and it being in your head, that just runs so deep. And you can't fix something like that unless you really are deliberate in trying to make change. And we just as a society have not been deliberate in that.
Sharon Kedar 08:47
I'm covered in chills hearing you talk. It's what you said about the word hysteria which is completely unacceptable. And then it's things like what Dr. Kathy Rexrode, the Head of Women's Health at Harvard, was saying when she was here at Northpond about, I didn't even know this, but 80% of autoimmune disease being in women and that we don't understand why. I mean, Northpond has a bunch of autoimmune companies like Scipher for rheumatoid arthritis and Kyverna went public doing cell therapy for autoimmune. But just the fact that we don't know why, it's like where's the sense of urgency and when are we going to know why? Are there specific disease categories in women's health that you think need innovation?
Erin Lambroza 09:35
All of them. Is that an answer that works? Something that was talked about a lot specifically at the New York Stock Exchange Summit, and that I've seen and read a lot about since is this concept of women's health not just being female-body-parts-specific. If you're looking at the women's health landscape funded by venture capital specifically, somewhere between 35% and 40% of dollars went towards fertility pregnancy and reproductive health between 2019 and 2022. And so that excludes even things, by the way, that are still specific to women's bodies like endometriosis, PCOS, pelvic floor disorder, menopause, etc.
Erin Lambroza 10:13
So I think as a starting point, there needs to be more innovation in categories that don't just rely on how we, like the first line of defense for making babies. But then beyond that, you know, we've talked a lot at the New York Stock Exchange about how there are non-bikini-region-specific diseases that affect both men and women, but happen to disproportionately and/or differently affect women than men. And I think a lot more innovation needs to happen in understanding what those diseases are, why they affect women differently, specifically talking about to your point earlier, things like autoimmune disease, things like Alzheimer's. I think the number is around 75% of Alzheimer's patients are women rather than men. Things like cardiovascular disease. Women are multiple times more likely to die from cardiovascular disease than men, not just because they may be more predispositioned to it, which they may or may not be, I think that is potentially a question that folks are still sorting out,
Erin Lambroza 11:09
But also because the symptoms present differently. So a woman comes into an ER with symptoms of something, it's not pain in her left arm, it's not pain in her chest, it's something else that a doctor doesn't know is actually still indicative of a heart attack. So I think that's where the innovation really needs to happen.
Sharon Kedar 11:26
You're making me just realize how important these kinds of conversations are and for those who are seeking to make a difference in women's health to really make sure to think about the end game at the beginning because I think that's a lot of what trips people up it's like, "Well, that's a great idea." And, you know, you've raised X million dollars but that's going to take you to what milestone, and then where do you go? So how do you truly make something fundable and investible? What are some of the common challenges you see founders facing within women's health? And are they unique to women's health or are they just simply like issues founders face?
Erin Lambroza 12:12
It's a great question. So I think one, the first thing I'd say is just assuming that venture capital is the right source of funding for the vision that they're setting out to build and scale. So I would say the first mistake is really not considering the incentives that you want your funders to have and understand how they do or don't align with what you are trying to build, and what your incentives are. But yeah, I think broadly speaking, you know, many of the issues that founders in this space face are endemic, to your point, any other founder trying to start a healthcare business in the venture ecosystem. So I think the takeaway there is really just really understand the unit economics of what you're trying to build and whether or not you can sustain growth without having to throw money at the business. And then I think other times for female health companies specifically, I think that some founders try to go via venture capital after relatively niche markets.
Erin Lambroza 13:13
So women's health, to be clear, not a niche market in no way shape or form. But I think there are some founders that tend to go after hyper-specific conditions that affect women, which is super important, but I don't think we're ready, frankly, in women's health to tackle those issues through the startup venture landscape.
Sharon Kedar 13:30
If you had three pieces of advice to give to founders on company creation, what would they be?
Erin Lambroza 13:36
I think they would be have the right people on board. So whether it's members of your team or a suite of strategic advisers or just like really beloved mentors, people in general who are more than just helpful, right, they more than just can introduce you to one person, but they genuinely care about what you're doing and genuinely want to be there to support you through thick and thin because you're advancing something that they stand for, that they care about. So I think really having people on board that have skin in the game, whether actually or emotionally, that's really important. If you're raising money, listen to investors. Solicit, accept, be receptive of their feedback, but also take what they say with a grain of salt. And if you are going to take an investor's word as gospel, make sure that you've talked to a lot of them and that you really step back to synthesize all the advice you've gotten and pull out major consistencies, or themes, but do not over-index on what, you know, one or two investors told do because most investors are not founders and they're not necessarily right.
Erin Lambroza 14:39
And so I've seen situations where founders have been given advice, have changed something that they were doing based on the feedback of an investor and then the investor kind of changed their mind a couple months later on what, you know, they really thought was right. Not all advice is coming to you as a founder from an investor after like tons of deliberate thought, right? It's kind of no sweat off their backs to tell you to do one thing. So I would say, obviously, be receptive of feedback, but collect a lot of it and sort of synthesize key pieces and themes from it versus listening to one major piece of feedback. And then if you are raising money, find investors who can bring real value to the table. So try to seek strategic, active capital, not just passive capital. I think that's super important. You get to craft your cap table and you want to craft it with people who can be really helpful. If you’re going to give away any part of your business, you want to give it to people who deserve it.
Sharon Kedar 15:28
I'm just so grateful to you, Erin, for being there and for everything that you're doing. I think that your advice today on the podcast is beneficial to all founders and just really appreciate your time today. Thank you for being on the podcast.
Erin Lambroza 15:45
Of course. Thank you for having me.
Sharon Kedar 15:50
Thank you for tuning in. Please connect with me, Sharon Kedar on LinkedIn for additional innovative content. If you enjoyed this episode, please take a moment to like it and don't forget to subscribe to the channel by clicking the button below this video. The views and opinions of the hosts and podcast guests are their own professional opinions and may not represent the views of Northpond Ventures.
Additional Resources
About Your Host
Sharon Kedar, CFA, is Co-Founder of Northpond Ventures. Northpond is a multi-billion-dollar science-driven venture capital firm with a portfolio of 60+ companies, along with key academic partnerships at Harvard’s Wyss Institute, MIT’s School of Engineering, and Stanford School of Medicine. Prior to Northpond, Sharon spent 15 years at Sands Capital, where she became their first Chief Financial Officer. Assets under management grew from $1.5 billion to $50 billion over her tenure, achieving more than 30x growth. Sharon is the co-author of two personal finance books for women. Sharon has an MBA from Harvard Business School, a B.A. in Economics from Rice University, and is a CFA charterholder. She lives in the Washington, DC area with her husband, Greg, and their three kids.
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