Chasing the Mental Health Unicorns
Do you want to invest in the next unicorn?
Since the term unicorn was coined in 2013 by Aileen Lee, venture capitalists have been desperately trying to find the couple of investments that will justify their fund’s 3x return claims. But when everyone is going after the same deals in hyped sectors like fintech, it becomes increasingly more difficult to get your foot in the door.
In the quest for success, VCs are starting to become creative in finding high-potential investable niches. And one such niche is mental health.
Why Mental Health
Ask yourself the following question: what are the unstoppable trillion-dollar trends that will make our future better? How can these trends be translated into innovative and scalable startup opportunities?
My answer: making mental health services and therapies accessible and affordable to all. Why? 300 million people suffer from depression and anxiety, which costs the global economy more than $1 trillion/year. And this is only the tip of the iceberg.
Even better, investing in this trillion-dollar challenge could bring us closer to achieving the Sustainable Development Goals by promoting mental health and wellbeing (target 3.4) and access to quality essential healthcare services (target 3.8).
Disclaimer: this is the most exciting part of my job — identifying the global challenges that can bring about world-class startups!
Mental Health: The Basics
There are three factors that prevent mental health interventions — stigma, cost and access.
Although stigma is in a downward trend in certain countries and settings — for example, U.S. colleges have done a good job in promoting the right mental health care, at the right time — we are still lacking widespread awareness and acceptance of mental health.
On the cost front, there is a direct relationship between mental and physical health. 70% of people with a behavioral disorder also suffer from physical health conditions, which costs health care systems — and individuals who have no choice but to pay out-of-pocket — thousands. For example, the cost to treat the diabetes of a patient with depression is, on average, $20K higher than for a patient without depression. From a macro level, 60% of overall medical expenditures are driven by 23% of members who suffer from mental or substance use disorders.
Both stigma and cost lead people not to seek the help they need. Although we are used to checking in with the doctor when we feel sick, we don’t do it as often when we feel mentally ill. Indeed, in low- and middle- income countries, up to 85% of people with mental health conditions receive no treatment.
Why Now
COVID has accelerated the need — and at the same time reduced the availability — of mental health services. In China, healthcare workers have reported high rates of depression (50%) during the COVID pandemic. Other population segments are also at high risk of mental health issues — social isolation increases the risk of cognitive decline and dementia in older adults. And while all these uncontrollable life events are happening to us, mental health facilities have been closing down.
It is clear that the need is there. But what about the solutions?
Pockets of Opportunity
In addition to the macro-trends that are putting the mental health sector in the spotlight, there are micro trends that are disrupting how we interact with, access and afford mental health services. I handpicked three areas I believe are the next frontier of mental health innovation:
- Stress & Loneliness: how can we support each other in the digital world through peer-to-peer solutions focused on sharing, collaboration and wellness? (startups to watch for: 7 Chairs, Shine)
- Accessibility and Affordability: how can we democratize access to mental health services through both self-help and virtual therapies? (startups to watch for: happify, ginger.io)
- Lost Productivity: how can we integrate and advance mental health solutions in the workplace? (startups to watch for: thrive global, unmind)
Where VC Meets Mental Health
There are +1,000 startups worldwide tackling mental health issues, $4.5 billion invested over the last 3 decades, and ~$600M invested in H1 2020 alone (which is +10% of the digital health VC investments as a percentage of total funding). There are even VCs who exclusively invest in mental health startups (my favorite: whatif.vc).
But a fundamental question prevails: is the mental health startup ecosystem ripe for billion-dollar companies? Let’s look at a few high-level insights that bring us closer to the answer:
- There is only one mental health unicorn in the world: meditation app Calm.
- Although there have been few exits in the mental health space (~30), there is a growing number of late-stage companies, primarily based in the U.S.
- Top-tier VCs have entered the mental health space with a generalist approach — targeting either wellbeing or large mental health conditions (e.g. depression, substance abuse). Some example are: Google Venture’s investment in Quartet Health, Lightspeed’s investment in BetterUp, or NEA’s investment in Simple Habit.
- Most mental health startups are tackling the prevention of mental health conditions and/or are trying to make mental health solutions more accessibility and affordable.
- The top funded mental health startups are low tech (apps) or deploy artificial intelligence/machine learning.
- The mental health sector is not crowded — yet! –and there are opportunities for further innovation with advanced technologies (e.g. predictive analytics).
The Visionaries
Although there are some mental health solutions that have become mainstream (virtual consultations à la Talkspace), and others who are leading the industry forward by working on the three ‘pockets of innovation’, there are also a few startups who are disrupting how we identify and treat mental health through advanced technologies. By analyzing voice patterns or collecting real time data, these visionary startups are working toward disrupting, rather than incrementally advancing, the mental health industry. Some of these startups are Spring Health, Mindstong, Oxford VR or Ellipsis Health.
Mental Health in Israel
As an investor in Israel, I always look at how local tech innovation is contributing to solutions in other parts of the world. Mental health is no exception. Although the mental health industry is tiny in Israel, it is already giving birth to startups that are moving the needle globally. Here are some of them:
- Valera Health: Application that analyzes insurance claims in order to help payers and providers identify patients with comorbid medical and behavioral health conditions.
- XR Health: VR/AR telehealth platform to address a wide variety of neurocognitive, emotional, and physical symptoms.
- Eleos Health: Voice technology that records, transcribes, and analyzes every session and provides analytics that allow the therapist to better prepare for the next session.
- Vocalis Health: AI-based platform that uses voice analysis to evaluate an individual’s health status.
- Wisdo: Mobile app that enables users to share their stories, connect with others who have been through similar experiences, and give and receive helpful advice.
- MyndYou: AI-driven voice bot, MyEleanor, that conducts check-in phone calls with at-risk and older adults in their homes, engaging with them while detecting wellness and medical issues. The solutions provide actionable insights to clinical care teams via an analytics platform.
So, Where Are the Unicorns?
With only one mental health unicorn — Calm became the first one in 2019 — investors continue to question the timing and maturity of this niche segment.
Yet, the timing (COVID fueled) is right — in March 2020 alone, Calm was downloaded 958K times — and while the sector has not produced dozens of billion-dollar companies just yet, I believe that in the next 4–5 years we will see a wave of unicorns as mental health solutions become increasingly accessible and mainstream.
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About the Author: Melina Sánchez Montañés is an entrepreneur in the public, non-profit, and financial sectors. She is a venture capital investor at Impact First Investments and the Partnerships Director at the Global Impact Tech Alliance.
