Therapy is a growing market.
At least this is the trend observed since the start of the COVID-19 pandemic. Total annual spending on mental health in the United States, estimated at approximately $280 billion in 2020, increased sharply in subsequent years across all age groups, driven in part by the rise of social media platforms. telehealth.
Today, more than a fifth of American adults receive mental health treatment in a given year, according to a recent federal government estimate. Much of this comes in the form of individual therapy.
Founders and investors in the industry have taken note. Funding for mental health-focused startups increased from 2020, with large rounds going to companies developing telehealth offerings, AI-based platforms and services aimed at specific groups, such than adolescents or the elderly.
Yes, investment in mental health startups has declined since the peak in 2021. However, we are still seeing a steady flow of deals and big deals, as evidenced by the chart below:
Startups focus on covered care
One of the unifying themes of the biggest investments this year is the focus on providing insurance-covered mental health care.
It was a key talking point for Talkiatry, a New York startup specializing in psychiatric care, which raised $130 million in mid-June, the biggest funding of the year in the field of psychiatric care. Mental Health. This round consisted of a combination of Series C equity financing led by Andreessen Horowitz and debt financing from Banc of California.
In its funding announcement, Talkiatry said it is networking with providers that extend coverage to a majority of privately insured Americans. The startup, as its name suggests, also focuses on connecting patients with psychiatrists who can both provide therapy and prescribe medication when needed.
Grow Therapy, a New York startup that raised $88 million in a Series C round led by Sequoia Capital this spring, also bills itself as a provider of covered mental health care. The startup offers an online platform to connect people with therapists who work with their insurance plans.
Meanwhile, Brightside Health, which closed a $33 million funding round in March, is marketing its mental health offering as “affordable help, with or without insurance.” The San Francisco-based company offers online therapy for anxiety and depression, works with most major insurers and also offers flat monthly rates for those who pay out-of-pocket.
The good match
Investors are also backing large fundraising rounds for startups that are perfecting screening tools and targeted services to connect people with the therapists best suited to their needs.
Among them, San Francisco-based Two Chairs offers a platform that works with its proprietary algorithm to help match the right therapist with a patient. The company closed a $72 million Series C round this spring, comprised of a mix of debt and equity.
Boston-based InStride Health, which secured $30 million in Series B funding in March, has a more targeted approach. The three-year-old company provides outpatient care for pediatric anxiety, considered the most common mental health disorder among children and adolescents.
Backpack Healthcare closed a $14 million Series A in May and is also focused on pediatric mental health. The startup is particularly focused on expanding mental health care to children and families covered by Medicaid, who previously faced limited options.
What you should not do
As newly funded startups hope to set an example of the right approach to mental health care, they can look to their predecessors for a lesson in how to do it wrong.
For that, they can turn to Done, a private equity-backed telemedicine startup whose CEO and clinical president were arrested last month for alleged fraud involving the drug Adderall.
Founded in 2019, Done describes itself as an online platform specializing in psychiatric care for ADHD, or attention deficit hyperactivity disorder. According to the U.S. Department of Justice, the company “exploited the COVID-19 pandemic to develop and implement a $100 million scheme to defraud taxpayers and provide easy access to Adderall and other stimulants without a legitimate medical purpose.” (Done has said he disagrees with the charges.)
A few years earlier, another funded startup, Cerebral, was investigated for prescribing Adderall and Ritalin for ADHD without properly screening patients. The company was also recently fined $7 million for its privacy practices. Cerebral raised more than $460 million in 2020 and 2021 from SoftBank and others, but has not secured new funding since.
Demand for therapy continues to drive deals
Although investment results in mental health are mixed, venture capitalists still see opportunities in the field as demand for therapy and treatment remains strong, with continued high levels of unmet need.
For now, the focus areas of the most recently funded startups, including expanding healthcare coverage and targeting underserved populations, seem like a smart approach. We’ll be watching to see how effectively they continue to scale.
Related Crunchbase Pro list:
Illustration: Dom Guzmán
Stay up to date on recent funding rounds, acquisitions and more with the Crunchbase Daily.
