4 trends driving the future of the digital behavioral health industry
Digital behavioral health companies are stepping up their services to address increased demand.
Although vaccination may be providing a light at the end of the tunnel for the physical effects of the pandemic, the impact on mental health is likely to continue. Four in 10 U.S. adults reported symptoms of anxiety or depressive disorder in January, a fourfold increase since 2019.
Related: Employers turn attention to virtual care, mental health and DEI
Digital behavioral health companies are stepping up their services to address increased demand. Researchers at Rock Health point to four trends that are shaping the future of this health-care segment.
1. Investors are supporting early and late-stage innovation…
…although an increasing amount of capital is being put to work in later-stage deals to ensure mature products can scale to meet urgent demand. Last year was characterized by high growth in venture funding, with $2.4 billion invested in U.S.-based digital health startups that serve behavioral health needs, either exclusively or alongside other services.
“The increase in average deal size for later-stage digital behavioral health companies signals that investors believe there is large public market awareness and willingness to invest in these companies,” said Bill Evans, CEO and managing director of Rock Health. “Investors want to heavily capitalize on this and scale these companies quickly to be on the leading edge of this wave.”
2. There is room for both generalist and specialist models to meet high and diverse behavioral health demand.
Because generalist companies tend to have a broader portfolio of offerings, it stands to reason that they would raise more capital (and have larger average deal sizes) than companies exclusively focused on behavioral health. However, interest seems to be rising in specialist models, with those startups garnering $242.6 million of early-stage funding in 2020, while generalist models raised $49.4 million in early-stage capital.
3. Consolidation of clinical and digital capabilities has sped up and likely will continue.
Following the overall exit trend of digital health startups, behavioral health startups are most likely to exit through acquisition rather than by IPO. Meanwhile, the 2020 acquisition market included nine merger and acquisition deals in which either the acquirer or target was a digital behavioral health company.
4. Capital to substance use disorder and developmental disorders represent an opportunity for innovators and investors.
U.S. venture-backed startups that exclusively focus on mental health are more common than those that address substance use disorders.
“Digital behavioral health startups had their work cut out for them in 2020 — and still do,” researchers concluded. “For the generations that have lived through this pandemic, the trauma of COVID-induced social isolation, home confinement, deaths and job losses may be ever-present. There is also work still to be done to address pre-COVID-era issues exacerbated by the pandemic, such as reaching underserved communities and reducing costs that inhibit access to behavioral health care.
“However, we have faith that our individual experiences during the pandemic will compel us to continue breaking down any lingering stigmas, possess a deeper level of empathy for those of us who have, are or will suffer from these conditions, and work toward ensuring that everyone who needs it has equitable access to quality and affordable behavioral health care.”
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