UK gut health startup Zoe has raised $15m from US-based VC Coefficient Capital as it looks to crack the US market with its microbiome testing and diet advice app. The Series B extension takes the startup’s total funding to $118m.
The news comes as a number of European startups vie to crack the direct-to-consumer (D2C) diagnostics market at a time when the post-Covid digital health bubble has looked close to bursting.
Zoe has faced its own set of challenges over the past few months. In April, cofounder and CEO Jonathan Wolf announced that the company was making layoffs as it looked to cut costs.
But now Zoe’s got its sights set on US expansion, it’s looking to tap into its “biggest opportunity” — according to Wolf.
“Successfully penetrating the US is famously one of the hardest things for a tech company from outside of the country to do,” he tells Sifted. But the reward if Zoe gets it right could be huge, he adds. “That’s partly because the market is so large, but also because the health crisis is so bad.”
US expansion
Wolf says Zoe will use the fresh funding to develop its product, build out a team in the US and, crucially for a D2C startup, invest in marketing and getting Zoe visible to consumers.
But there’s not going to be a “massive splurge”, he tells Sifted. “$15m is not really a big marketing push. It allows us to start to build the business, prove that it’s relevant, that it delivers results.”
While Zoe is the clear frontrunner in the consumer gut microbiome testing field in Europe, it’ll face competition in the US from companies like Viome — which has raised $186m since launching in 2016. Other startups include Seed Health and Flore, which sell supplements for the gut microbiome, and have raised $40m and $11.7m, respectively.
The US is often considered a key market for European healthtechs looking to scale, but it hasn’t always been a happy hunting ground for them. A number of healthtech founders told Sifted that higher salaries and marketing costs and the amount of homegrown competition all made the US a tricky place to set up shop.
But the potential upside is worth the challenge, Wolf says: “For health and nutrition, the US is by far the biggest market.”
Zoe’s goal is to expand globally and “improve the health of millions”, he adds — but to hit those kinds of customer numbers the startup “needs to succeed in the US”.
Wolf’s under no illusions about the cost of that ambition: “There’s a good chance that we will end up needing to raise more money.”
A household name
Zoe was spun out of King’s College London in 2017 from research carried out by now-famous diet influencer Tim Spector.
The startup became a household name during Covid, when it pivoted to allow members of the public to log Covid symptoms. It then launched gut microbiome testing and a diet and lifestyle app in April 2022 in the UK, and has since convinced the likes of Steven Bartlett’s Flight Fund, Balderton, Ahren and Daphni to stump up funds for the company.
Microbiome testing kits cost £299 and a monthly subscription to the app costs between £25 and £35 a month (depending on how long a user subscribes). For that, users get personalised scores on thousands of foods and access to recipes, diet and lifestyle advice. More than 100k people have paid for the service so far, says Wolf.
In the past year Zoe — which was the UK’s fastest growing healthtech by headcount in 2023 — has also launched a range of supplements.
Cutting costs
But customer churn has been high. In an interview with Sifted last October, Spector said that “half” of users only subscribe to Zoe for six to nine months before leaving — and the company was focusing on how to “keep people for years”.
While Wolf didn’t want to comment on those figures, he added that the majority of “new” members since that October interview have purchased annual membership.
But in April the company announced it would be making layoffs, as part of measures to cut costs by 20%.
“In 2023 revenue grew massively faster than we were expecting,” says Wolf. “We had long waiting lists — would-be members were complaining.” As a result, Zoe scaled to try and deal with the demand, he tells Sifted.
“We scaled for our forecast of what was going to happen this year,” Wolf says. While the company had a good January, he adds, “suddenly sales were not what we thought they were going to be”.
Read the orginal article: https://sifted.eu/articles/zoe-raise-15m-us-expansion-news/
