Therapy is a growing market.
At least that was the trend following the outbreak of the COVID-19 pandemic. Total annual spending on mental health in the U.S., estimated about $280 billion in 2020, increased dramatically in subsequent years in all age groups, which was partly on account of the development of telehealth platforms.
According to recent data from the federal government, greater than one-fifth of American adults now receive mental health treatment in a given yr estimate. Much of this is done in the type of individual therapy.
Founders and investors in the space have taken notice. Funding for mental health startups has skyrocketed since 2020, with large rounds going to firms developing telehealth offerings, AI-enabled platforms, and services aimed at specific groups like teens or older adults.
Yes, investment in mental health startups has slowed since its peak in 2021. However, we proceed to see a steady flow of deals and large rounds, as seen in the chart below:
Startups are focusing on insurance-covered care
The common denominator of the biggest investments this yr is an emphasis on providing insurance-covered mental health care.
This was the essential topic of conversation for New Yorkers. Talkiatrymental health care startup that in mid-June picked up The largest mental health funding of the yr at $130 million. The round was a combination of Series C equity funding led by Andreessen Horowitz and debt financing Bank of California.
In its funding announcement, Talkiatry noted that it has partnered with providers across its network to expand coverage to most Americans with private insurance. The startup, as its name suggests, also focuses on connecting patients with psychiatrists who can each provide therapy and prescribe medication when needed.
Based in New York Growth Therapywhich earned $88 million Sequoia Capital-raised in a Series C this spring, also bills itself as a provider of covered mental health care. The startup offers an online platform to attach people with therapists who work with their insurance policy.
Meanwhile, Bright Side Health, which accomplished a $33 million Series C sale in March, touts its mental health offerings as “affordable help with or without insurance.” The San Francisco-based company provides online therapy for anxiety and depression, works with most major insurers, and also offers fixed monthly pricing for those that self-pay.
The right match
Investors are also backing large rounds for startups improving screening tools and targeted services to match people with therapists best suited to their needs.
Among them is a company based in San Francisco Two chairswhich offers a platform powered by its proprietary algorithm to assist match the right therapist to the patient. The company closed a $72 million C round in the spring, which was a mixture of debt and equity.
Based in Boston InStride Healthwhich secured $30 million in Series B funding in March, is more narrowly focused. The 3-year-old company offers outpatient care for childhood anxiety, considered the most typical mental health disorder in children and adolescents.
Backpack Healthcare closed a $14 million Series A in May and is also focused on pediatric mental health. The startup is specifically focused on expanding mental health care to children and families covered by Medicaid who previously had limited options.
What to not do
While recently funded startups hope to set an example of the right approach to mental health care, they’ll look to their predecessors to learn methods to do it improper.
For this purpose, they’ll contact Donea telemedicine start-up whose CEO and clinical president was arrested last month for alleged Adderall fraud.
Founded in 2019, Done describes itself as an online platform specializing in psychiatric care for attention deficit hyperactivity disorder (ADHD). According to US Department of Justicethe company “exploited the Covid-19 pandemic to engineer and execute a $100 million scheme to defraud taxpayers and provide easy access to Adderall and other stimulants without legitimate medical purposes.” (Done said do not agree with allegations.)
A few years ago, one other startup that received funding, Cerebral, was placed under investigation amid allegations that he prescribed Adderall and Ritalin for ADHD without properly screening patients. The company was also there recently fined $7 million over your privacy practices. Cerebral raised over $460 million in 2020 and 2021 from SoftBank and others, but has not secured latest financing since then.
Demand for therapy continues to drive deals
Even with a mixed track record of investing in mental health, enterprise funders proceed to see opportunity in this space because the demand for therapy and treatment remains high and the level of unmet need remains high.
For now, the focus areas of the recently funded startups, which include expanding insurance-covered care and targeting underserved populations, appear to be sound approaches. We’ll be watching to see how well they proceed to scale.