A spate of startups focused on mental health recently made enough noise as a group that they caught the eye of the Equity podcast crew. Sadly, the segment we’d planned to discuss this topic was swept away by a blizzard of IPO filings that piled up like fresh snow.
But in preparation, I reached out to CB Insights for new data on the mental health startup space that they were kind enough to supply. So this morning we’re going to dig into it.
Regular readers of The Exchange will recall that we last dug into overall wellness venture capital investment in August, noting that it was mental health startups inside the vertical that were seeing the most impressive results.
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I wanted to know what had happened even more recently.
After all, Spring Health recently raised $76 million for its service that helps companies offer their workers mental health benefits, Mantra Health disclosed that it has raised $3.2 million to help with college-age mental health issues and Joon Care announced $3.5 million in new capital to “grow its remote therapy service for teens and young adults,” per GeekWire.
Sticking to theme, Headway just raised $32 million to build a platform that “helps people search for and engage therapists who accept insurance for payments,” according to our own reporting, and online therapy provider Talkspace is pursuing a sale — it looks like an active time in the mental health startup realm.
So, let’s shovel into the latest data and see if the signals that we are seeing really do reflect more total investment into mental health startups, or if we’re overindexing off a few news items.
The state of mental health venture investing
To prepare the ground, let’s talk about the general state of healthcare investing in the venture capital world. Per CB Insights’ Q3 healthcare VC report, venture capital deal volume and venture capital dollar volume reached new record highs in the sector during Q3 2020.
The quarter’s 1,539 rounds and $21.8 billion in invested capital were each comfortably ahead of prior records set in Q2 2018 for round volume (1,431) and Q2 2020 for dollar volume ($18.4 billion) for healthcare startups.
So, at a minimum we can see that the fields are fertile for health tech investing in general.
Now, let’s look more closely at mental health startups — a subset of healthcare investing — to see what the venture capitalists have been up to:
What do you make of the chart and its data? Do you read it from a bullish perspective, that rising deal volume more than makes up for falling dollar volume? Or does the drop in invested funds seem to color the chart more pessimistically than record mental health VC deals can ameliorate?
To better understand what is going on inside of those final three bars in the chart, I looked up the last two times that Calm and Headspace, leading lights in the meditation space, raised capital:
- February 2019: Calm raises $88 million.
- February 2020: Headspace raises $93 million.
As you can already see, the periods in which Calm and Headspace last raised are the two quarters that saw the biggest results in terms of venture capital dollars invested in health tech startups. So, we can see that the occasional outsize round can skew this particular niche’s data rather sharply.
And, there’s another one coming, with Calm reportedly looking to raise $150 million at a multibillion valuation. Whichever quarter that round is announced in will be a local maximum for the market, we reckon. So, when we compare rising deal volume with falling dollar volume given our expectation that an impending quarter will either set a new dollars-invested record or come close, it’s hard not to come out somewhat bullish on the mental health startup space’s VC results, as they stand today.
Which simply feels correct, if I am being honest. What a goddamn year. I am super tired and now that winter has arrived to my neck of the woods, I am sadder to boot and generally more irritable. I doubt you are any better. So, it makes sense that as our year of discontent and grief continues, startups that might be able to help are seeing growth and doing well, thus making them able to attract outside capital.
The only surprise in the above data is that the upward tilt of rounds in the mental health realm isn’t steeper, but I suppose that there are yet more remote work startups out there for investors to fund.
News that Calm seeks more funding at a higher valuation is not transcendental thinking
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