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Mental Health Startups: Where Are The Exits?

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The mental health space is maturing as startups are starting to hit growth stage. There are also significant efforts from both The Establishment (providers / payors / pharma) and Big Tech, case in point the Breathe app from Apple. Below is a snapshot of some of the more prominent startups operating in the US where (a) the product is primarily digital and (b) mental health is a major part of the offering. 

Company Founded Latest Round Total Raised
Talkspace 2010 Series D $106.7M
Headspace 2010 Series B $75.2M
Ginger.io 2011 Series C $63.2M
Calm 2012 Series B $143.0M
Lantern 2012 Series A $21.4M
Pear Therapeutics 2013 Series C $134.0M
Spire  2013 Series A $10.1M
Quartet Health 2014 Series D $159.5M
Lyra Health 2015 Series B $103.1M
Modern Health 2017 Series B $42.4M

Overall the mental health landscape is — pun intended — healthy. I published an article Sep 2017 about the innovation in the space and find the trends continue holding. VC funding has by certain metrics grown more than overall funding for digital health. The author of the landscape below was himself an investor in mental health who decided to become an entrepreneur instead.

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But there is still one big item missing — big exits. Without them, there is a high risk the momentum will slow down, with fewer VCs, entrepreneurs, and operators committing to the space. The table below compiled by Stephen Hayes is telling — incidentally, the article he published last month is great for those wishing to explore the topic of mental health deeper.

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As the table shows, the vast majority of exits are therapeutic solutions rather than digital products. And most haven’t fared that great, case in point Neuronetics founded in 2003, raised $176M total, went public in 2018 at $264M and is today worth $64M. In this case the journey to IPO was longer than most VCs target, the initial market cap was low compared to their funding, and the stock hasn’t recovered since.

Indeed, why aren’t there big exits? Even for valuations the trend is lumpy at best. Calm famously became the first unicorn in mental health a year ago, in Feb 2019, but no company has reached that milestone since. Part of the reason is time. If we ascribe 2010 as the year when mental health startups rally started blossoming then we should start seeing the first major exits a decade later (i.e now).

That said, consensus is the top reason is business model. The stigma among consumers has reduced at least in the US but it is still there (i.e. it’s hard to get people to use and even more so pay for a mental health product). Providers, payors and pharma have a high barrier for adoption since they need to see significant data on efficacy and savings. We are talking FDA approval and / or long-term studies on top of the long sales cycle, which can add 2-3 years for such a B2B2C model to get traction. Then there is the often used hack of going through self-insured employers or HR benefit specialists which allows entrepreneurs to move faster, but that pathway has got very noisy.

So what to do? There are obviously no easy answers but perhaps allying with the larger players is indeed the key. In other words, significant partnerships with Big Tech especially for distribution, and clinical validation from The Establishment. Side benefit: brings the startup closer to the potential acquirer.


This article is inspired by a conversation with Maurice Chiang. Originally published on “Data Driven Investor,” am happy to syndicate on other platforms. I am the Managing Partner and Cofounder of Tau Ventures with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). Many of my writings are at https://www.linkedin.com/in/amgarg/detail/recent-activity/posts and I would be stoked if they get people interested enough in a topic to explore in further depth. If this article had useful insights for you comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are my own.

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Amit Garg
I have been in Silicon Valley for 20 years -- at Samsung NEXT Ventures, running my own startup (as of May 2019 a series D that has raised $120M and valued at $450M), at Norwest Ventures, and doing product and analytics at Google. My academic training is BS in computer science and MS in biomedical informatics, both from Stanford, and MBA from Harvard. I speak natively 3 languages, live carbon-neutral, am a 70.3 Ironman finisher, and have built a hospital in rural India serving 100,000 people.

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