Masawa Market Watch: increase in mental wellness market activity in 2021
Investors’ conviction on the rise as deals surge in Mental Health
The effects of Covid-19
Mental health as an investment theme has been on the rise in the last few years. The rise was further facilitated by Covid-19, which made the world take a deeper and more holistic look at personal wellbeing. With the constant uncertainty and isolation because of covid, the topic of mental wellness has broken through the social stigmas that surrounded it for years. Mental health has now become a hot topic of public conversation, which is clearly reflected in the recent uptake of investments in the space.
Investments surge in 2021
According to the CB Insights State of Digital Health report Q4, 2021, Investments in mental health were up by ~139% year-on-year compared to 2020. The number of deals also surged from 258 in 2020 to 324 in 2021. While the lion’s share of these deals went into early-stage startups, there was a surge in investments in later-stage companies as well. This is evident in the fact that the average deal size was $20M — up by over 50% compared to 2020, which suggests that investors have much more conviction and are much more willing to make larger investments for the right solutions. Most notably, Q4 2021 alone saw ~$2 billion being invested in mental health.
Valuations continue rising with several mega fundraising rounds
2021 saw several mega-rounds for mental health startups. Betterup, a US-based startup focusing on online professional coaching through behavioral changes, raised their series E round at a valuation of $4.7 Billion. Cerebral, another American startup, providing a wide range of mental health services like counseling, therapy etc. raised their Series C round at a valuation of $4.8B. In the covid era alone, the number of unicorns in the mental health space rose from 3 (pre-2020) to 10 in 2021.
NA Private Equity activity on the rise
North America remains the leader in mental health investments with 61% deal share in Q4 2021, of which 59% was in the US alone. The EU and Asia together accounted for 38% of the deals.
As a new and fragmented market, mental wellness is beginning to start seeing consolidation, primarily driven by private equity deals. According to a report by Epstein Becker Green and Vector Medical Group, by Oct 2021, ~$1B went into mental and behavioral health PE deals in the US alone. KKR, one of the biggest PE companies in the world, announced the creation of Geode health, a mental health services company that would provide high quality online and in-person mental healthcare through partnerships with psychologists, psychiatrists and therapists. CloudMD announced the acquisition of MindBeacon, one of North America’s leaders in clinically validated internet-based CBT. Earlier in March 2021, Blackstone had invested $100M in Ginger which later went on to merge with another wellness startup — Headspace, with a post-merger valuation of ~$3B, making it one of the largest companies globally in this space.
The European market for mental health solutions is much younger and nascent compared to the US. However, in light of Covid-19, a steady increase in innovation — further assisted by favorable policy changes, the EU mental health market is set to grow in the coming years. With rising awareness and number of deals and US-exits, investors’ conviction is expected to stay high.
Dhruv is a budding financial analyst with a keen interest in mental wellness. Having graduated with a Master in Finance from ESSEC Business School, he is on a journey to explore impact investing. He is a keen gamer, an avid reader and a big time foodie.