My colleague Paul Duck sent me an interesting article with a provocative title – Approaching 1,000 Mental Health Startups in 2020 and a few questions came to mind immediately. What is a “mental health start-up”? How much capital went into them? How can you characterize and differentiate between them? And how will they change the behavioral health service landscape?
The article was based on an analysis by venture capitalist Stephen Hayes who defined “mental health start-up” as any specialty company in the mental health space that was developed to be scalable. His definition includes non-tech start-up companies but excludes any “non-scalable” treatment centers, clinics, individual practices, or “locally focused solutions.” His research found 717 mental health startups dating back to 1987—of which 68 were “non-tech.” Getting a perspective on the “number of entities” in any market space is something our team at OPEN MINDS wrestles with every day. The numbers are all over the map, depending on the definition. For example, we have identified 2,927 health and human service technology products offered by 1,040 organizations and more specifically 1,604 technology products serving the behavioral health market offered by 654 organizations (access the OPEN MINDS technology products database on our website www.HealthTechNavigator.org, a free OPEN MINDS resource). Another example is the research that Edouard Gaussen of Mantra Health published in Mapping out the Mental Health startup ecosystem, which found that 230 mental health tech startups that were founded between 2008 and 2018 that received venture capital funding.
The estimated capitalization of these mental health start-ups varies. The 717 start-ups since 1987 had a reported $4.5 billion dollars invested. The smaller group of venture capital backed mental health tech startups that received investments in 2017 received a little more than $320 million with average funding amounts varying from $2 million to $6 million per startup. How this squares with the “big picture” of health care investments in general and digital health investments in particular is difficult to reconcile. The just-released data in the Q4 AND ANNUAL 2019 DIGITAL HEALTH (HEALTHCARE IT) FUNDING AND M&A REPORT found $8.9 billion invested in health tech startups in 2019 with telemedicine and analytics leading the pack.
There is also the issue of what is the focus for these start-ups and the investment—the number of organizations and the amount of capital investment don’t tell the whole story. The analysis identifying 717 mental health start-ups over 30 years categorized the companies in seven buckets: non-tech (which includes pharmaceuticals and treatment services (68), mental wellness apps (172), B2B tech tools (134), consumer testing/measurement tech (119), telehealth (114), digital therapeutics (62 ), and peer-to-peer technology (48). The 230 venture-capital backed start-ups fell into six categories: computerized cognitive behavioral therapy, telepsychiatry, provider tools, consumer tools, hardware, and applied artificial intelligence. In our OPEN MINDS database of health and human service technology solutions, we have grouped the 2,927 available health and human service solutions into 45 primary functions (see www.HealthTechNavigator.org).
As I mull over the available market intelligence on startups and investment in the behavioral health market, I think there are a few big takeaways. Most analyses exclude local investments – and rarely include tax-exempt organizations. There is a lot of investment money, but it skews heavily to tech-focused companies. And the field is crowded (as well as ill-defined and uncoordinated) with too many organizations and solutions of all types. Also, the positioning of the stakeholders in the field is at odds. The tech start-ups are struggling with integration into the existing health and human service system and, as a result, lack widespread adoption at scale. The consumer experience at traditional health and human service provider organizations remains “terrible.”
I think that, in the years ahead, there will be challenging competition for both the tech startups and provider organizations. The competition will be driven by demand by payers and consumers for lower prices – while insisting on a seamless, integrated and convenient consumer experience. Success will likely go to the entities that can figure out the winning “hybrid” solution. A solution that is both virtual and bricks-and-mortar – using technology for on-demand mass customization of all consumer services regardless of the platform or location. This winning solution will likely be one that marries the advantages of private sector capitalization of out-of-industry innovation with the on-going tax advantages and community trust of the traditional non-profit provider organization. The 2020s should be an interesting decade!
For more on tech investments in the field, take a look at some of our recent coverage:
- Express Scripts Announces Digital Formulary
- Papa Inc. Raises $10 Million To Expand App-Based On-Demand Senior Services
- Fitbit & WellCare Georgia Medicaid To Offer Fitbit Devices For Diabetes In 2020
- AMA Startup To Launch Medicare Advantage Plan ‘Zing Health’
- Anthem & K Health Launch ‘CareSpree’ App For Scheduling & Texting With Clinical Professionals
- Emilio Health Raises $5 Million To Redefine Behavioral Health For Children & Their Families
- Sidekick Partners With Bayer To Provide Digital Therapy Expansion For Peripheral Artery Disease
- VirTrial Acquires SnapMD & Bolsters Virtual Care Management Platform
- Amazon Web Services Announces Amazon Transcribe Medical For Medical Speech Recognition
- TAO Connect Digital Therapy Platform Introduced For Students Of University Of Lethbridge
And for key perspectives on the technology, investments, and complex consumer care, join me at The 2020 OPEN MINDS Technology & Analytics Institute October 26-28 in Las Vegas. Our keynoters for the institute are Kathleen McGrow, DNP, chief nursing officer and director of industry solutions for Microsoft and Neil Gomesa, chief digital officer and senior vice president for technology innovation and consumer experience at Thomas Jefferson University and Jefferson Health.