Therapy’s on the rise.
Since COVID-19, U.S. mental health spending, initially pegged at $280 billion in 2020, has surged, thanks to telehealth platforms.
Today, over one-fifth of American adults receive mental health treatment annually, mainly through one-on-one therapy.
Founders and investors have noticed. Funding for mental health startups boomed from 2020, focusing on telehealth, AI platforms, and services for specific demographics like teens and the elderly.
Although investment peaked in 2021 and has since cooled, deal flow remains robust.
Focus on Insurance-Covered Care
The biggest investments this year emphasize insurance-covered mental health care.
Talkiatry, a New York-based psychiatric startup, raised $130 million in June, the year’s largest mental health financing.
The Series C equity round, led by Andreessen Horowitz, combined with debt financing from Banc of California, focuses on in-network providers for privately insured Americans.
Talkiatry connects patients with psychiatrists who offer both therapy and medication management.
Similarly, Grow Therapy, also New York-based, secured $88 million in a Series C led by Sequoia Capital. Grow Therapy’s platform matches patients with therapists who accept their insurance.
Brightside Health, from San Francisco, raised $33 million in March. They market their therapy for anxiety and depression as “affordable help, with or without insurance,” working with major insurers and offering fixed monthly prices for self-pay patients.
Matching Patients with Therapists
Investors are also backing startups that refine screening tools and services to pair patients with the right therapists.
San Francisco’s Two Chairs, which uses a proprietary algorithm for matching, closed a $72 million Series C this spring.
Boston-based InStride Health, focused on outpatient pediatric anxiety care, secured $30 million in Series B funding in March.
Pediatric mental health is their primary focus, addressing a common disorder among kids and teens.
Backpack Healthcare raised $14 million in May for pediatric mental health, emphasizing care for Medicaid-covered children and families, who often have limited options.
Learning from Missteps
While new startups aim to set a high standard, they can learn from past missteps.
Done, a telemedicine startup, saw its CEO and clinical president arrested last month over a fraud scheme involving Adderall.
The DOJ accused Done of exploiting the pandemic to defraud taxpayers and provide stimulants without legitimate medical purpose. Done disputes these charges.
Cerebral, another startup business, faced investigations for improper ADHD medication prescriptions and was fined $7 million for privacy violations.
Despite raising over $460 million in 2020 and 2021, Cerebral has not secured new funding since.
Therapy Demand Drives Investment
Despite mixed results in mental health investing, venture capitalists see continued opportunity as therapy demand remains strong and unmet needs persist.
Newly funded startups’ focus on insurance-covered care and underserved populations seems promising. We’ll watch how they scale and adapt.
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