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Last April, Alex and I reported CB Insights data showing that venture investment into mental health startups had dropped sharply in Q1 2022 compared to the preceding quarter. But in the last couple of weeks, I have heard about several venture-backed deals into the subsector of health tech. They got me curious: In which areas of mental health are VC firms still willing to invest? Let’s explore. — Anna
Mood swings
The more the pandemic seemed to subside, the less venture capital investors seemed willing to commit to companies and sectors that had initially benefited from strong tailwinds when most of the world started staying at home. On public markets, the pandemic trade is over, with former darlings like Peloton and Zoom experiencing whiplash. Similarly, we saw a net decline in private investment into telehealth and mental health startups.
Market corrections after a period of hype are part of the investing game. But it would be hard to argue that mental health needs have decreased. According to the World Health Organization, incidents of anxiety and depression increased by 25% in the first year of COVID-19. Just because we are now hopefully leaving the worst of the pandemic behind us doesn’t mean everyone is suddenly feeling better — which is why a few recent funding rounds in the mental health space raised my attention.
Of course, a few mental health–related deals are anecdata. And since we are talking mostly about early-stage deals, this doesn’t mean that the investment decline has been reversed. In aggregate, we will only have more clarity once Q2 numbers are available. But what’s interesting is that these startups hint at some novel approaches to mental health in which VCs are still willing to invest. Or, dare I say, show us where their mind is at.
No longer underserved?
VCs might have no headspace left for the next Headspace. The broad-ranging mental health-focused platform and its most direct competitor, Calm, seem to have captured most of the mainstream market for bite-sized mindfulness. But there are still gaps in the mental health market to address — at least, some startups think so.
For instance, OYE hopes to “empower the Latinx community with accessible wellness tools and resources to feel better, grow personally, and build a community from wherever they may be.” Its English-Spanish bilingual app is set to launch this fall during Hispanic Heritage Month and already counts a superstar backing: Its co-founder is Colombian singer J Balvin.
“The Grammy-nominated and Billboard, Latin Grammy and MTV Video Music Award-winning artist has been open about his personal experiences with mental health, an issue that is still considered taboo for much of the Latinx community, as well as for many other cultures around the world,” the company said in a release announcing the launch. OYE’s funding is also internationally sourced, with a pre-seed round of around $3.5 million backed by several international venture firms, tech executives and entrepreneurs.
Mental health at work is also arguably a taboo. “Many employees find different barriers when it comes to opening up about their mental health at work,” EU-Startups noted. The online publication was commenting on a €7.49 million round ($8.02 million) raised last May by German startup nilo.health, which offers employers a mental well-being support platform for their workforces.
Children’s mental health might be less taboo, and apps like Headspace do incorporate kids-orientated meditations. But it is arguably less saturated than the adult segment, and more startups are hoping to address young people.
One of these kid-focused mental health startups is Berlin-based Aumio, which says its meditation app for children is already used by over 200,000 families in the DACH region. “The market for digital mental health products for adults has been growing steadily for years. But there are hardly any offerings for young people,” the startup’s founder, psychologist Jean Ochel told EU-Startups. “Aumio is the app I wish I had when I was a kid with ADHD.”
Tech and sector crossovers
Aumio is focused on mental health, but in a playful way, its ambition is to become “the Disney for mental health.” Ambitious for sure, but also backed by investors. A couple of weeks ago, it said it had raised a €3 million seed round (approximately $3.21 million) led by Partech and byFounders.
“Mental health will become as important as physical health in the coming years,” Partech investor Finn Weise predicted. This helps add context as to why VCs haven’t stopped investing in the space. As well-funded as Headspace and Calm are, it is hard to believe that there’s no opportunity left for novel approaches.
Parallel Learning is another startup that raised venture capital for a project that bridges mental health with another vertical: edtech. As TechCrunch’s Devin Coldewey reported, the New York–based company provides remote special education assessment and tutoring to kids who are struggling at school, perhaps because of ADHD or dyslexia. It now plans to source more psychologists and expand into other U.S. states thanks to the $20 million Series A round it announced last week.
Technology helps Parallel Learning scale in a way that in-person assessment hasn’t been able to, but it also has other advantages, CEO and founder Diana Heldfond told TechCrunch. “When it comes to psychological evaluations, even the tiniest distractions can throw it off. Being able to do this in a comfortable space like a child’s own home or a classroom is better than going to a psychologist’s office, being pulled out of class and being told you’re different.”
Bringing AI into the mental health mix is another promising innovation TechCrunch reported on. Thanks to an algorithm-based approach, a startup called Kintsugi says it’s able to detect depression in a person’s voice, which is helpful even for clinicians. It has managed to raise a $20 million Series A earlier this year, despite having two immigrant women as founders, not to mention several competitors.
Meanwhile, TRIPP is unique, both in terms of technology and the audience it addresses. As I wrote earlier this week, the startup recently raised an additional $11.2 million in funding to make the metaverse more mindful.
In practice, TRIPP’s main focus is a consumer offering available both on mobile and through AR and VR platforms, with gameplay elements and community aspects. This can help break a barrier for young men who still struggle with the stigma of addressing their mental health, founder Nanea Reeves told me.
B2C aside, TRIPP previously acquired PsyAssist, which supports patients going through therapy, including clinical trials with ketamine. This ties into the trend of leveraging psychedelics for mental health treatment, and addresses underserved segments, such as veterans suffering from PTSD. For TRIPP, this is a longer-term bet that could prove both fruitful and impactful.
Are all of these examples no more than anecdata in a sector that has lost steam overall? Maybe. After all, fundraising rarely fully grinds to a halt. But with so much work left to do in mental health, let’s hope that VCs are still placing more bets into the space.