(Bloomberg) -- Fertility startup Kindbody is seeking to raise an additional $50 million to help the company weather larger-than-expected operating losses and a cash burn that it has described to investors as “material.”
The New York-based startup is looking to raise the funds by the end of the year, according to documents and people familiar with the plans who asked not to be identified because the information isn’t public. The company may be valued at $1.8 billion, the people said — the same valuation it got earlier this year in a fundraising round that founder Gina Bartasi told Axios would be its last.
The company also lowered its 2023 revenue forecast to $186 million from $240 million, they said.
“Kindbody consistently seeks new capital to advance our mission to increase access to convenient, affordable fertility and family building health care,” the company said in an emailed statement. A Kindbody spokesperson said that losses and revisions to the annual forecast were customary for growth-stage companies, and it would be “incorrect and incomplete” to say it lowered its forecast or saw larger-than-expected losses.
Kindbody, which offers in-vitro fertilization and other services such as egg freezing and storage across a network of brick-and-mortar clinics, has emerged as one of the fastest-growing fertility startups in the US. Since its founding in 2018, the venture-backed company has cultivated a modern and millennial-friendly aesthetic that has helped it attract more than $300 million in investments, including backing from celebrity investors like Gwyneth Paltrow, Chelsea Clinton and Gabrielle Union.
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The startup has cited a number of reasons for its revenue falling below forecasts: Fewer employees at Kindbody’s client companies have used its fertility benefits than expected, and Walmart Inc. — one of the company’s largest clients — was estimated to have a smaller fertility-eligible population than previously planned, the people said.
In March, Kindbody had projected it would be cash-flow positive and profitable on an earnings before interest, taxes, depreciation and amortization basis. Instead, it has continued to lose money and is now forecasting that it won’t turn a profit until mid-2024, the people with direct knowledge of Kindbody’s situation said.
The company has spent nearly $60 million in 2023 through September and was losing an average of roughly $7 million each month over the same period, according to the documents. Of the startup’s 33 clinics, six were profitable.
Kindbody’s spokesperson said it is “inaccurate and incomplete” to say the company had seen larger-than-expected losses, noting that losses were expected. Kindbody said that clinic openings require millions of dollars in upfront investments.
A Bloomberg investigation published Oct. 13 found understaffed clinics and inconsistent safety protocols contributed to errors — including mislabeled, lost or accidentally destroyed embryos — at Kindbody facilities, according to interviews with three dozen current and former employees and patients. The company at the time disputed the characterization that it was understaffed or struggled to staff clinics and labs, though it acknowledged the mislabeling of embryos at least in one case.
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Kindbody is also looking to replace several executives, the people said. It’s paying a search firm $750,000 to find a replacement for its chief executive officer, Annbeth Eschbach, though the timeline for any potential transition isn’t clear. The company hired a new chief scientific officer in October and its president, Gregory Poulos, stepped down in September. Kindbody is also planning to recruit new chief operating and people officers, they said.
“Annbeth and the Board have been working together to develop a succession plan which ensures that Kindbody remains responsive to its employees, patients, and all stakeholders,” the company said in a statement. “We look forward to celebrating Annbeth’s five-year anniversary in spring 2024.”
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