Mental Health is Attracting Investors, and it’s Just Getting Started

Venture capital investments in the sector tripled in 2020.

The end of the pandemic is in sight. Vaccine rollouts are proving effective, and even with new variants and uneven distribution, COVID-19 is being brought under control. The global economy was severely impacted, and some sectors are still suffering. However, some industries, such as mental health companies, are seeing an unprecedented influx of funding.

The mental health crisis has been ongoing for decades, but it has taken the pandemic to bring it into focus. Recent technological and medical advances have allowed new techniques and products to address numerous problems, and mental health startups have seen funding soar.

According to Rock Health, in 2020, venture capitalists invested USD $1.8 billion in mental health mental startups, triple the amount in 2019.

Mental health issues surged during the pandemic, but the story is ongoing

A study by Mental Health Foundation has shown that untreated mental health issues account for 13% of global disease. Projections suggest mental health problems will be the leading cause of morbidity by 2030.

The United for Global Mental Health Organization reported the global economy loses over USD $1 trillion a year to anxiety and depression.

Mental health problems worsened globally in 2020. By early April, almost half of Americans said the pandemic was negatively affecting their mental health.

Another study in the UK found that between early April to mid-May, over half of adults and two-thirds of young people reported their mental health worsening. Those at the front-line face similar problems.

A Canadian survey during the pandemic found 47% of health workers needing psychological support.

Governments are waking up to the problem. In March 2021, the UK government expanded mental health services, backed by £500 million. In May, the Australian government pledged AUD $2.3 billion to mental health services.

At the end of 2020, the US Congress designated around $4.25 billion for substance use disorders and mental health.

Venture capitalists invest record amounts in mental health startups

Mental health-related startups have seen an explosion of interest from venture investors. According to CB Insights, startups in the sector received 5.5 times the amount in 2020 compared to 2016, with the number of deals rising from 69 to 124.

The US now has seven mental health unicorns compared to just two in 2020. Even as the pandemic comes under control, the funds are still flooding in.

In Q1 2021, USD $795 million have gone to mental health startups. This isn’t purely altruism – investing in the industry has proven incredibly lucrative. The WHO reports that every $1 invested in evidence-based care for anxiety and depression returns $5.

What startups are attracting investment?

Unicorns such as Genoa, Lyra Health, Calm, and Talkspace are already well-known. Online mental telehealth platforms have become incredibly popular.

However, it is a highly competitive market, and there is a broad range of other approaches.

For example, Clarigent Health uses AI to analyze and detect mental issues. MindDoc is an app that asks daily questions to monitor emotional states.

Sentio Solutions combines an emotion-sensing wristband and app for real-time monitoring.

One sector that is particularly interesting and in-demand is biotechnology. Numerous innovative companies developing new kinds of treatments have entered the market in the last few years. Their timing has been perfect.

A great example is Bright Minds. The company put together a solid science team to create safer, more effective, next-generation pharmaceutical products that can be used for large amounts of patients.

CEO Ian McDonald explains the company’s origins: “Bright Minds was only founded in 2017. Having experienced loved ones suffering from mental health issues, we knew some people weren’t getting the help they needed. We were in a position to do something about it, so we assembled a group of the world’s leading researchers and set to work.”

The company has managed to make remarkable progress in a very short time. McDonald says, “Our industry requires a lot of funding, so while we were making fantastic progress, it was still going to take a lot of time.

Then COVID-19 happened, and suddenly investments were easier to obtain. We were able to raise around $30 million to further our research. As a result, we’ve made incredible progress.

“Although the prime focus has been on making products that ease mental health problems, the funding has allowed us to push the boundaries of research. For example, we have a partnership with the National Institutes of Health (NIH), enabling us to test our new products for chronic pain and epilepsy.”

McDonald is aware of how fortunate the company has been. “Before the pandemic, we had already established robust intellectual property, an impressive track record for getting products to market, and a team with big Pharma pedigree who successfully built and sold multiple companies.

We were in a good position when COVID-19 arrived, and mental health suddenly became an urgent issue. The funding we received has allowed us to develop an effective range of new products. They will help a lot of people.”

The pandemic has shifted a lot of priorities. Campaigners have been arguing for decades about the need for better mental health funding, and it has sadly taken the tragedy of the pandemic to make that happen.

The upside is that the money flooding into the sector from governments and venture capitalists, will help a lot of people for the foreseeable future.

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