Before Alexa or Siri sits down with you for a therapy session: mental health market 2021
Headline figures first: in 2020, investors poured the best part of $2Bn into mental health startups. 2021 is shaping up to increase that to $3Bn, six times over the amount from as recent as 2017. The underlying market driver is obvious: the collective psychological fallout that followed from months of uncertainty, lockdowns, layoffs, furloughs and Zoom fatigue following the Covid-19 breakout. But also, mental health has established itself as a form of health and part of the cultural mainstream in modern societies. How has the tech industry followed these developments? What kinds of technological solutions are likely to actually help?
Let’s have a closer look at the developments in this space, attempt to categorise the market and argue what makes most sense from a perspective of someone who talked to around 40 teams, saw 200+ products, and (as part of a team) ended up investing in one.
We’re all aware that mental health around the world took a hit because of Covid. But how hard has it been hit, exactly?
In 2019, around 11% of U.S. adults reported having symptoms of anxiety or depression. This metric skyrocketed to 41.5% by February 2021. Increases were largest among young adults aged 18–29 and those with lower secondary education. In Europe, individual countries have also carried out surveys on the mental state of their citizens. In all these countries, it has deteriorated. In the UK alone, some 25 million people experienced anxiety in March 2020.
And then lockdowns piled anxiety on top of the anxiety resulting from the uncertainty around the general nosedive the world has taken. The monotony of our environment, the lack of human interaction, with the backdrop of an incessant stream of dreadful news led to depression in a lot of people.
And then, we were forced to adapt to our jobs’ chaotic reinvention processes. Seismic shifts at work are a massive stresor on their own, let alone on top of a pandemic. There was no time for measured roll-outs of remote work though, companies had to improvise, employees had to learn in the deep end. The employers, even those for whom employee wellbeing is not an alien concept, are still playing catch-up with the fallout.
But wait, at least mental health is now a thing, right?
Yes, at least that is demonstrably true. Along with its horrors, the pandemic brought on a reduction of the stigma around mental health. The change has been coming, but it definitely did accelerate during this global crisis. Since we’re all affected, one way or another, there’s less need to pretend we’re fine, maybe?
It’s okay, buddy, it’s not the 1950s anymore
Credit: KC Greene
Plus, obviously, with lockdowns in place access to traditional face-to-face therapy has become restricted. And just as was the case with e-grocery, q-commerce and general e-commerce, the demand has seismically shifted online.
Considering all of the above, no wonder the demand for online therapy went up three-fold.
The market reacted with a proliferation of new mental health-focused startups, adding to an already pretty long roster of solutions. In June 2020 there were around 1,000 entries on a list created by WhatIf Ventures. A year later, the list already had around 1,500 startups!
So to recap the chain of events:
- many people’s lives have moved completely online
- reduced number of social contacts and the stress of restrictions and pandemics have led to anxiety and often depressive symptoms
- many people started to seek help for the first time
- the reduced social stigma played a part
- due to the lockdown and various national limitations, they were often only able to get help online
- demand for online solutions and therapies has opened doors for mental health companies and start-ups
- investors identified it as a growing market and followed
No slowdown in funding in sight
Little wonder then that VCs see this sector as both quickly-growing and a blue ocean. This sentiment directly translates into a large number of rounds, often extremely fast ones. From March 2020 to May 2021 Lyra Health — which helps companies improve access to effective mental health care for their employees — closed four rounds (Series C to F) while it had managed to collect only three since 2015. Such a rapid succession of funding rounds usually only happens when business is booming, and Lyra has announced it doubled their number of clients in 2020.
In 2021 mental health startups continue to fight for the pandemic (not-yet-post-pandemic?) market. Deal count grew to 64 in Q1 2021 — a 36% rise when compared to 47 deals in Q1 2020. That’s one deal every business day, for three months.
Mental Health Unicorns
Lyra Health — 2.3B USD valuation
Lyra Health offers a mental health platform for employees and their dependents which includes therapy, coaching, medication support (customers including Morgan Stanley, eBay, and Genentech)
BetterUp — 1.73B USD valuation
BetterUp offers a leadership development platform through coaching. Its new BetterUp Care solution is an integrated mental fitness offering and includes access to coaching with specialists in behavioural health, nutrition, and sleep. It aims to bring a comprehensive approach to improving employees’ well-being.
Modern Health — 1.17B USD valuation
Modern Health offers digital mental health programs including therapy and coaching. In February, it acquired Kip, which develops a virtual tool to match users with therapists.
Ginger — 1.1B USD valuation
Ginger provides an on-demand virtual mental health platform for employers. With its latest raise, it plans to expand its partnerships with insurers and health plans.
(Compilation: MOC.vc, data source: State Of Healthcare Q1’21 Report: Investment & Sector Trends by CBInsights)
See a pattern here?
There are almost 400 mental health startups in Europe, the biggest funding-wise being Unmind, having raised $47m out of the $63m in total from a Series B announced in May 2021, led by EQT.
Doubts and limitations
The renowned psychiatrist and psychotherapist Irvin Yalom said “it’s the relationship that heals”. Technology alone is not able to deliver the same therapeutic outcomes as traditional therapy (yet?), because the human aspect of therapy is what matters most in the process. But technology can assist in more ways than one.
Efficacy
A number of studies have shown that technology-based interventions can be effective in preventing mental disorders. Many startups partner with research institutions that publish their studies, but this is still a new field that is going to require a lot of research.
There’s also concern that the hyper-focus on technology and virtual care is just sweeping the real problems under the rug. On the other hand, in some countries — Germany being a leading example — online solutions for mental health problems are already certified as medical services and are reimbursed. Selfapy — a depression treatment app, is for instance approved by the regulator as a ‘medical device’ and is eligible for coverage from public insurance. Clearly, there is growing confidence that technology can actually help.
Access
The global shortages of specialists may be more difficult to address. The US Substance Abuse and Mental Health Services Administration estimates that by 2025, the U.S. will have a shortage of 26,930 mental health counselors (172,630 needed; 145,700 available) and 57,490 psychologists (246,420 needed; 188,930 available). Before the COVID-19 pandemic, new patients often faced a one- or two-week waiting list to see a therapist. Now, the average wait time is six weeks (and three months for a psychiatrist), and — what further complicates matters — the search for the right therapist can take up to 2 years and 4 therapists before the patient finds the right one.
Cost
This is where tech shines. The cost barriers are very low in case of pure software solutions. Nearly anyone can afford Calm or Headspace, and there have been meditation programs, like Waking Up, by the bestseller author Sam Harris, which offer a free plan if you can’t afford the regular price. The cost of therapy is also lower with asynchronous chat-based solutions. A fairly new development is the fact that employers have begun to cover the cost of mental healthcare, either completely or in part.
Quality
There is also the question of what might be lost if mental health visits shift to online. Psychiatrists have been conducting video sessions before, but most of them prefer to see their patients face-to-face to preserve that human quality to therapy.
The same applies to patients. Some actually prefer virtual therapy, but many connect online only when faced with a choice between an online appointment or no appointment at all.
Right now, purely software-based solutions are more of a helping tool than actual therapy. They are able to monitor mood and mental health or suggest a form of self-help. However, for immediate and direct help you will need to see a specialist. The human touch is invaluable.
The landscape — sorting the players
Projects and approaches can be sliced up across a few different lines. Below, there are a few of the ways the taxonomies can be arranged. These, I believe, are the basic set of keys to understanding the positioning of different products. Lines, however, are usually blurred as there are few “pure” players in most categories.
Several approaches to segmentation can be used and the categorisation attempts outlined below often overlap.
- Wellbeing / Prevention / Treatment
- Wellbeing pertains to general monitoring of mental states. Products of this type are generalists, designed for journaling, meditation, mindfulness, and can be also used in therapy, but are not therapy per se). The German startup Moodpath is a good example — asking daily questions in order to evaluate a person’s wellbeing and screen them for symptoms of depression. The app periodically generates an electronic document with monitoring results that can be used for consultation with a healthcare professional.
- Prevention products are designed for the use-case scenario where problems appear but are not yet a crisis, or for management of mild and moderate symptoms, eg. panic attack prevention, lowering anxiety, and increasing mental resilience.
- Treatment products are usually designed around scientifically-proven interventions, like treatment of depression, paralyzing anxiety, etc. — used when there is a clear need for help.
2. Cognitive-behavioral therapy (CBT) / other talk therapies
- CBT is a type of therapy focused on actionable insights — exercises to do with guidance and by oneself, inserting new behaviours in place of old ones. It is very widely tested and accepted, and has a proven efficacy, but does not fit all cases. It is the most transferable into digital due to its algorithmic nature.
- Other types of talk therapy are actually the bulk of the industry and include: psychodynamic, humanistic, systemic, cognitive-behavioural, Gestalt, solution-focused therapies and others. What they all have in common is direct contact between the psychotherapist and the patient.
3. Talk therapy / automated self-driven / hybrid
- The product approaches vary from fully talk-therapy-based solutions to fully-software ones. Apart from differences in the value proposition, there are obviously vast differences in scalability and potential margins. In case of talk therapy, platforms usually have a gross margin of 10–30%.
- Automated self-driven is the largest category. Pure software plays all fit here and there are hundreds of products. This is obviously the most scalable business model, with gross margins at SaaS business levels, but retention is much more difficult. Meditation as an entry point seems to work well for user stickiness.
Examples:
- Calm — meditation&mindfulness, but moving product more towards CBT
- Headspace — meditation&mindfulness but with elements of CBT from the beginning
- Meditopia — Meditation and mindfulness
- Happify — gamified exercises, US
- Selfapy — depression treatment app, DE
- There are various hybrid models, where both types of products are available from one provider. They differ in user journey logic (app → therapist, therapist → app, etc.) and margins are dependent on the logic and usage. These are actually the most interesting, as they combine the best of both worlds: humanity of therapy and scalability of tech. Examples: Lyra, Modern Health
4. Therapist marketplaces
- Marketplaces of therapists — therapists are unbundling from generalist medical marketplaces and search for the specialised marketplaces (let me recommend you the text on Marketplaces’ Success Factors by our team member Marcin Kurek), however players of this type are not very common, as this is not a very scalable model. Some examples include American BetterHelp — the largest therapist marketplace with over 16K therapists or Swedish Mindler with over 300 employed CBT psychologists
- Some overlap with coaching marketplaces — the BetterUp experience brings together coaching, AI technology, and behavioural science experts to deliver change at scale — improving individual resilience, adaptability, and effectiveness.
- Discovery marketplaces — to find the right therapist — as it is difficult to find the right psychoanalyst, some therapy marketplaces try to tackle this issue, for instance the human-assisted Wellbee, PL, and Nuna, ES, with broad therapist profiles and extensive video content, or match-guarantee Oliva.health which covers session fees if the match is wrong.
5. Text chat-based solutions
- Therapy in chat
some products address high costs of therapy by offering chat services with limited access to therapist but at a much lower price, e.g. TalkSpace, Ginger, 7cups. - Slack chat, like Spill.chat
- P2P platforms, e.g. Evryman — a male community for support and discussion
- CBT with therapist and self-driven, e.g. AbleTo (US)
There are of course many other approaches to taxonomies.
Compilation by: What if Ventures
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Workplace Mental Health solutions for business
One last way to split the market is the B2C / B2B division. Let’s have a closer look at the latter, as it clearly benefited from the changes to the market exacted by the coronavirus pandemic.
Employee mental health, as part of wider employee wellbeing, has become an area of concern to employers. Even from a purely financial perspective, a happier, more mentally resilient workforce results in lower absenteeism, hiring costs and insurance premiums. What has effectively been an “it’s none of our business” approach to mental health in the workplace is becoming more “let’s be proactive” instead.
Mindgram caught our attention because it is a complete product, taking care of employee wellbeing through a number of ways. Its users have a choice of dozens of group workshops conducted by therapists, coaches, and trainers. Additionally, there are mindfulness packages, relaxation training sessions, meditation and therapy programmes. From both a product and business point of view this approach makes the most sense, as it offers a balance between the quality of a personal approach to mental health and the scalability that technology can bring.
At MOC we have had, through conversations with around 50 companies and experts, formulated a thesis that envisioned this template of product and business. After keeping a close eye on the market for several months we clicked with the founders and their vision instantaneously, in our first meeting, and presented them with an offer in 5 days.
Taking a leap into the future
A lot of people actually prefer chat solutions such as BetterHelp, Talkspace, and 7 Cups, especially Gen-Z — the first generation to grow up with unabated access to the internet. A 2018 study conducted for the American Psychological Association showed that Generation Z is the most likely of all generations to report experiencing poor mental health as well as most likely to seek help from a professional. Majority of them actually prefer online solutions for mental health, since they are more anonymous and they feel safer getting mental support in their own rooms. There still might be market shifts ahead, as this generation matures.
Even if airborne diseases are completely eradicated, online chats or video talk-therapy are here to stay. They are a great solution for people who cannot come to therapy in person, or they simply don’t have access to a therapist in their area.
Choosing a therapist definitely needs to be better than it is in most cases at present — based in sparse referrals from friends and pure luck. All the discovery-aiding solutions will stay with us, although we can’t be certain of their being unbundled from healthcare provider platforms. The bundling-unbundling cycle might shift within the decade.
Beyond that? I am sure that AI-based solutions will soon(ish) be able to provide 90% of the quality of a CBT therapist. After that it’s not a huge jump of the imagination to see them integrated into AI assistants like Siri, Google Assistant or Alexa. Especially with the vast amount of data on your behaviour that your phone will have, don’t be too surprised if a few years down the line your device will tell you that it’s worried for you, because you seem depressed…
