Mental & Behavioral Health Startup Market Update — March 2020
CONTAGION FEARS
CONTAGION FEARS
As total deaths from COVID-19 surpass 30,000 and the chief of the IMF contends that the world economy has slipped into a recession as bad or worse than the Great Recession of 2009, mental wellbeing is at risk worldwide.
Indices tracking sentiment point to fear driving investment activities across the globe. According to CNN’s Fear & Greed Index, which tracks seven indicators of investor sentiment, investor sentiment is at 23 out of 100 (0 being extreme fear, 100 being extreme greed). Furthermore, the general emotional state of the world has deteriorated. According to the Hedonometer, a Twitter-based population happiness tracker developed by Quokka Labs, the general happiness of the population has fell to the lowest levels since 2008.
Prior to the spread of the novel coronavirus, over 18% of adults in the U.S. suffered from anxiety disorders, according to the Anxiety & Depression Association of America. While the effects of COVID-19 and related measures on the mental wellbeing of the world have not been quantified yet, mental health practitioners are reporting spikes in anxiety and depression symptoms. “Since Covid-19 has impacted the US, it should be anticipated that the rates of clinical depression and anxiety will rise,” Hope Kelaher, Manhattan-based therapist and clinical social worker says.“There is also the concern of the rise of other co-morbid conditions such as substance misuse/dependence. Since Covid-19 has entered New York City, it has been my experience that more people are seeking mental health services whether it be for themselves, their loved ones, or their families to help manage the stress of being quarantined.”
Since human interaction is relegated to video chatting on Zoom or phone calls, quarantine isolation can take a heavy toll, especially on people that live alone. Research published on 2003 SARS outbreak in the British Journal of Psychiatry finds that psychiatric problems were exacerbated significantly by isolation.
As shelter-in-place orders are implemented in certain areas across the world, suicide crisis hotline calls have surged. Even President Trump warned about an increase in suicides in the U.S. due to the economy staying closed. While it is evident that President Trump is certainly more concerned with the wellbeing of the economy than mental health of the U.S. population, suicide risk, in a time of extreme isolation, warrants our society’s sincere vigilance.
MENTAL HEALTH MACRO
▪ In early March, Anthem (NYSE: ANTM), the health insurance provider, completed its acquisition of Beacon Health Options, the largest independently-held behavioral health organization in the U.S. serving over 10% of the nation’s population. The deal was initially announced in July 2019 and terms of the deal were not disclosed. The acquisition complements Anthem’s push into the healthcare services space. Benefits for patients include more extensive provider networks and access to personalized behavioral healthcare. Beacon and other mental healthcare companies have proven that behavioral healthcare can provide savings to insurance companies by reducing ER visits. Anthem also announced its philanthropic arm, the Anthem Foundation, will award a $100,000 grant to Mental Health America. Unrelatedly, the Department of Justice filed a lawsuit accusing Anthem of Medicare fraud on March 27.
▪ On March 27, the Coronavirus Aid, Relief, and Economic Security Act, a $ 2 trillion stimulus aid package for the U.S., was passed by the Senate. The stimulus package will strengthen mental healthcare services across the nation. The package includes a $425 million for Substance Abuse and Mental Health Services Administration (SAMHSA) programs. This includes a $250 million for Certified Community Behavioral Health Clinics, $50 million for suicide prevention programs, $100 million for mental health and substance use disorder emergency grants. The package also includes a $4 billion for community health centers. In addition to funding, the package will reduce restrictions around telemedicine, and will allow sharing of substance use disorder records with health care professionals.
▪ On March 23, Acadia Healthcare Company (NASDAQ: ACHC), a multinational behavioral healthcare provider with over 40,000 employees, announced the suspension of the sale of its U.K. operations which accounts for 35% of 2019 revenues. The rationale behind divesting the U.K. operations was to improve profitability and achieve growth. Acadia’s U.K. business operates 361 behavioral healthcare facilities. The sale would also help improve the company’s debt position. As of the end of 2019, the company had $3.61 billion of long-term debt, and a debt-to-equity ratio of 1.44. Acadia had $404 million of earnings before interest and taxes in 2019.
▪ On March 27, the Australian government announced a details of a $1.1 billion coronavirus relief package directed towards mental health services, home medical assistance, domestic violence support and emergency food relief.
MENTAL HEALTH STARTUPS
▪ On March 11, Lyra Health, a provider of mental health benefits for employers, completed a Series C financing round of $75 million. The round was led by IVP. Providence Ventures, Venrock, Greylock Partners, Tenaya Capital, Glynn Capital, Crown Venture Fund, Meritech Capital Partners, and Casdin Capital also participated in the round. Funding will be used to expand the company’s platform technology and network of mental health providers. According to Pitchbook, the financing round pushed the company’s post-money valuation to $557 million. Lyra Health, based in Burlingame, CA, has 125 employees and has raised over $175 million to date. More specifically, Lyra offers mental health benefits platforms to employers, and connects members to a curated network of therapists and providers, resulting in significantly faster access to care and better outcomes than traditional employee assistance plans. California-based IVP is a later-stage venture capital and growth equity firm founded in 1980, with $7 billion of committed capital.
▪ On March 4, Ginger.io acquired LiveBetter for an undisclosed amount. Ginger.io offers a platform to employers to provide instant access to behavioral healthcare to employees. LiveBetter provides an interactive, conversational app experience paired with evidence-based activities proven to decrease stress, boost confidence and support people with challenges including anxiety and stress. LiveBetter also announced that it will become a nonprofit. After the purchase, Ginger is granting LiveBetter a license, which will enable it to operate the app for free. San Francisco-based Ginger.io was spun out of the MIT Media Lab. The company employs over 250 people and has raised $63 million in financing to date.
▪ On March 18, San Francisco-based Quit Genius raised $11 million in Series A funding led by Octopus Ventures and Triple Point Ventures. Other investors included Startup Health and Y Combinator. Quit Genius is a developer of a behavioral therapy platform that employs cognitive behavioral therapy intended to help people quit smoking. Proceeds of the funding will be used to expand into other types of addiction such as alcohol and opioid. Quit Genius has raised $13.7 million of funding to date, and has 30 employees.
▪ On March 23, Finland and California-based Meru Health, a developer of a mobile-based clinic for patients with depression, raised $8.1 million of Series A venture funding. Meru has 29 employees and has raised $12.75 million to date. While investors for this round were undisclosed, previous investors include Y Combinator, Plug and Play, Freestyle Capital, Lifeline Ventures, Reaktor Ventures, FoundersX Ventures, R Ventures, Bonit Capital, Courage Ventures, Prodeko Ventures, and Leksell Social Ventures. Earlier in March, Meru Health announced a partnership with Swiss startup dacadoo, a developer of a digital health engagement platform which helps employees manage their health.
▪ On March 18, PursueCare, a Connecticut-based provider of a telehealth opioid addiction treatment network, raised an undisclosed amount of Series A financing from Seyen Capital and OCA Ventures. Proceeds of the financing will be used to help meet demand for its virtual medication-assisted treatment programs due to COVID-19. Other previous investors of PursueCare include Starboard Capital and WRD Capital.
▪ On March 26, Pear Therapeutics received FDA clearance for its neurobehavioral app aimed at insomnia. The app is called Somryst and it is the first prescription digital therapeutic for insomnia. It is also the first digital product to be reviewed under the FDA’s new software precertification program. Boston-based Pear Therapeutics is a developer of digital therapeutics designed to treat disease and enhance the efficacy of pharmaceuticals. It has raised $139 million in venture funding to date and employs 80 people. According to Pitchbook, Pear was most recently valued at $494 million. Notable investors include Temasek, 5AM Ventures, Novartis, and Jazz Venture Partners.
▪ In late February, Mindyra, a Connecticut-based developer of software that supports behavioral healthcare providers and patients, formed a strategic partnership with Electronic Caregiver, a 24/7 virtual care and health technology company. Mindyra’s software will be made available to Electronic Caregiver’s provider customers to facilitate diagnoses and development of evidence-based treatment plans.
▪ On March 24, Cognoa, a digital therapeutics company focused on pediatric behavioral health, announced the appointment of David Happel as CEO. According to the company, Brent Vaughan will Cognoa through the transition. Vaughan is slated to joint Morningside Group, a healthcare venture capital firm and Cognoa’s sole investor. In February, the company announced a partnership with Autism Learning Partners to provide an autism screening app for parents. California-based Cognoa has raised $63.1 million of venture funding to date, and according to Pitchbook, the startup was valued at $68.6 million. Morningside Group was founded in 1986, by the Chan family of Hong Kong, to make private equity and venture capital investments.
▪ On March 3, Reno, NV-based Mind Medicine, a neuro-pharmaceutical company for psychedelic-inspired medicines, went public on the NEO Exchange under the ticker MMED. Prior to going public, the company raised $24.2 million from Blake Mycoskie (American entrepreneur that founded Toms Shoes), Kevin O’Leary (founder of SoftKey), Bail Capital, Grey House Partners, Cannell Capital, and other investors.
▪ In early March, Funxion, a technology-enabled fabric startup, was chosen to be a part of Plug and Play’s Spring 2020 Batch. Funxion is working on apparel and accessories that would allow continuous monitoring of physical and mental health.
▪ On March 31, What If Ventures, an early-stage fund investing in mental health and addiction recovery focused startups, will release their Q1 2020 mental health market update. Visit WhatIf.VC for more details.
The colorful pie chart above represents funded U.S.-based mental healthcare startups by count, based on data from GIMBHI’s proprietary database. Measurement & Testing, Mental Wellness, Interactive Software, and Telehealth are the largest buckets in the mental health tech startup ecosystem. Mental Wellness includes startups focused on meditation, mindfulness, positive psychology, sleep, emotional health, among other areas. Headspace, Calm, and Happify are companies included in the Mental Wellness category. Interactive Software includes companies focused on software to help treat or cope with mental health disorders, intellectual disabilities, or developmental disabilities. However, this category would exclude prescription software therapeutics. Rethink and myStrength are companies in this category. The Telehealth bucket includes startups Talkspace and AbleTo. Measurement & Testing includes startups such as Lineagen and Neurotrack.
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Authors: Shiv Bhavnani, CAIA, Jo Angustia
Email Address: shiv@gimbhi.com
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