Investors Love Breast Pumps

Male lactation is actually a thing (a shorter piece on Wikipedia) — Image source: YouTube Video by Naya Health

Last month a story came out on Bloomberg about a startup, Naya Health, who was struggling to raise funding due to the “male-dominated venture capital industry”.

Upon reading the piece, I realized that they had raised US$6.5 million (Crunchbase says US$4.6 million, but it’s still millions). This didn’t add up.

The title of the piece also mentioned that breast-feeding mothers were a “blind spot” for investors. It seemed to make sense… until it didn’t.

I’ll explain why.

VCs Don’t Know Your Industry, You Do

Let’s start with the second one: mothers are a blind spot for investors. Here is what I can tell: VCs enter new industries all the time, and often learn from scratch.

At HAX we invested in sleep tech, depression treatments, retail tech, mining tech, and yes, even a breast pumping bra and a milk-testing device (in fact, we helped the latter as an initial market). Of course after 200 investments we are familiar with a number of industries, but we are always curious to learn what gigantic opportunity founders have uncovered. If it were obvious, it would already be done.

Hence, assuming the “breast pumping industry” should be familiar from start is misguided, as it does not really matter. And investors always ask around for feedback. No human being has experience working in every industry. The default attitude is thus… research. Starting with people you know.

Finally, assuming a female investor who never used breast pumps would know all about them is just as misguided (though they might have learned more via friends). And knowing about a product is not the same as knowing about an industry anyway.

But Wait, Customers Loved It! That Should Be Enough.

It’s not so easy.

In another piece of news on CNBC, the founder of Naya Health says they sold over 1,000 devices, for over US$1 million.

After over 80 successful Kickstarters and analyzing many other campaigns and startups, one thing we learned is that many products can find 1,000 customers, but finding 10,000 customers or 100,000 customers is another story.

The company already spent US$4–6 million to generate only about US$1 million in sales. The last round was about 1.5 years ago, which might mean that cash it tight.

While any startup shipping a product successfully has already done more than 99% of others, it is not enough for investors: once your product is on market, it’s not a promise any more — you have real numbers. And the most important is growth.

If it had enough growth and margins — we’re talking (Growth+ Margin) > 40% (or better, 80%) — it wouldn’t have any problem raising funding.

Still, They Got Great Traction With No Marketing

It IS impressive. Still, they DID put some effort in marketing, at least in producing this video which got over 300,000 views. The problem is that such video is a one-time thing. After that you often need marketing (or other viral videos).

The question is rather if there is enough of a market for a fairly expensive breast pump, however great (I hope no-one argues that, like Juicero, “you can squeeze by hand” — as the whole purpose is to avoid that). The fact that they’re now launching a new product (a smart baby bottle) might suggest that they see more potential with it (and it’s much cheaper).

It’s Not About The Males Or The Sales

Eventually, the story is missing critical information to conclude on bias. Investors are fairly cold-blooded animals and any business that has fast growth, good margins and a large addressable market is of high interest.

Beyond the potential limited demand for the first (expensive) product of Naya Health, there is the question of competition: how much technology is there. Is it something a factory in Shenzhen could reverse-engineer in a couple of months? Is there more to it?

The only exceptions might be morally objectionable products (if only due to legal risk, and liability toward their LPs) — and even then your mileage varies. Breast pumps certainly don’t fall into this category. In fact, a smart breast pump won a prize at CES this year and there was an entire area dedicated to “mother & baby tech”.

Moving On

The first product of a startup is often what helps learn what to do next, where all the hard-earned lessons are applied. Naya Health is now crowdfunding its new product, a connected baby bottle that can analyze milk components.

Milk science in a bottle

The campaign currently stands at about half of its US$100,000 goal. Let’s wish them the best for the final stretch of the campaign, and the next steps with the business.

Partner @ SOSV — $700m VC fund for Deep Tech (biology, robotics, etc.) | Digital Naturalist | Keynote Speaker | Angel Investor

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