As Americans’ mental health buckles under the stress of a year filled with collective trauma, startups and their investors are cashing in on what’s becoming known as the “mental health boom.”
In the first nine months of the year, mental health startups were already shattering previous funding records both in total amounts and number of deals. Mental health startups raised nearly $1.5 billion in 173 funding deals through September, according to a CB Insights report released November 2.
It’s a sign that investors are paying attention to a growing mental health crisis in America that has only become exacerbated by the coronavirus pandemic.
That pace is only predicted to increase going into 2021, several investors told Business Insider, as the nation comes to terms with what has largely remained an unseen crisis. As recently as 2019, VC investments in other parts of healthcare far outpaced those specifically in mental or behavioral health.
2020 signaled a sea change for the mental health industry in Silicon Valley. Some firms, like notable healthcare VC firm Oak HC/FT, made their first mental health investment this year. Others, like Greylock and Venrock, have been backing mental health startups for years.
“The mental health industry, as a whole, has exploded,” Accel partner Amit Kumar told Business Insider. “It’s one of the hottest sectors of investment right now. Strangely, no one would’ve guessed that a few years ago.”
Already, 2021 is shaping up to be the year of mental health, just as 2017 was the breakout year for cryptocurrency startups or 2018 brought consumer genetic testing startups to the mainstream. All three industries were previously considered contrarian or edgy before eventually winning over the staunchest critics over the course of their skyrocketing popularity.
Unlike cryptocurrency or consumer DNA tests, there is more at stake in mental health. With so much investment pouring into the mental health industry, new companies may be able to entirely rethink mental health services in a way that better serves patients while saving hospitals and insurance companies money at the same time. At the same time, however, the pressure to grow and provide returns on that investment could lead to problems that set mental health care even farther back than it is today.
Whether the interest will last, and sustain access and affordability to critical care for millions of Americans, will hang on the decisions of a handful of Silicon Valley VCs writing the checks.
Silicon Valley wants to optimize mental health
Venture capitalists are largely optimists by nature.
To succeed as a VC, an investor has to see promise in a company or founder when no one else does and continue to support them through years of building the company, a journey that comes with its own set of mental health challenges.
In healthcare, that’s magnified even more. The industry makes it notoriously difficult for startups to succeed, and even those that do take decades to do so.
“There are certain industries you can date and some you have to marry,” Threshold Ventures managing partner Emily Melton told Business Insider. “Investing in healthcare is marriage.”
Investors were previously wary of investing in mental health startups. With the stigmas surrounding mental health, many who sought treatment didn’t discuss it publicly, and investors struggled to see how large a market those startups could potentially serve.
Now, however, several investors that spoke with Business Insider were optimistic that startups could radically change how the mental health field operates, resulting in increased access, affordability, and availability of care for a large number of Americans in need. The industry is also large enough and fairly diversified so that multiple companies could ultimately succeed.
“It’s the only area where we undertreat people in a country where we regularly overtreat,” Venrock partner Dr. Bob Kocher told Business Insider. “We deny access to care and don’t give enough.”
Kocher and others pointed to several solutions as evidence that there is room for experimentation before the industry lands on which is most sustainable. There are options that serve patients directly, such as children’s behavioral startup Brightline, where patients pay for the service directly. There are also startups, like Lyra, that sign deals with big employers to offer their services as a perk at little to no costs for employees.
Most of these startups rely on a combination of digital communication, such as text or video calls, between patients and credentialed therapists. The digital element helps remove some of the barriers to access for certain groups, like full-time caregivers or rural patients, and can afford more flexibility for therapists’ schedules.
There are also companies like Headway that work with therapists directly to help them accept insurance, making treatment more affordable to more people with access to health insurance. The model is similar to the consumer-pay models in that there are a range of communication options, something Kocher and others said is a unique element of mental health treatment.
“Anytime you take a great consumer product like therapy and make it 10 times cheaper, no matter how you do that, and there’s all this latent demand, you have an explosive category,” Accel’s Kumar said.
Awareness could be driving investor interest
It also helps to get more people talking about it, Kumar said.
Kumar told Business Insider that when he started therapy several years ago, it wasn’t a topic he discussed often, if at all, at work. Now, people just “tweet it out,” he joked.
The visibility has helped reduce the stigma around seeking treatment and has helped more cautious investors get on board, Kumar said.
“There’s a growing awareness that, left untreated, mental health or diet has real consequences downstream,” he said.
Those consequences are costs to hospitals, clinics, and insurance companies that ultimately have to treat patients experiencing acute mental health symptoms. Just like monitoring a patients’ blood sugar can help diabetic patients adjust their behaviors, investors want to be able to catch and treat mental health symptoms before they become critical.
“We’re not having to manufacture demand. People need this care, and now there’s an awareness they need this care,” Kumar said. “The need for really great mental healthcare in this country has never been more acute,” he added.