Top Trends in Digital Behavioral Health Investment

Despite the pandemic, digital behavioral health had its best year ever in terms of venture funding in 2020, when companies in the space brought in a combined $2.4 billion dollars. 

That figure comes from Rock Health, a venture fund that invests in digital health companies. The company recently explored the digital behavioral health market’s key trends, which include heightened investor activity in later-stage deals; growing interest in both general and specialized providers; a rise in strategic consolidations; and more opportunities in the substance use disorder (SUD) and developmental disorder arenas.

Heightened interest in late-stage deals

While Seed and Series A financing rounds typically account for a higher proportion of digital behavioral health investments, later-stage deals have been getting bigger, according to Rock Health.


In fact, the company reported that the average size of a later-stage investment — Series B and on — has nearly tripled in the past five years or so, growing from $23.7 million in 2016 to $64.2 million in 2020. 

Plus, all seven of 2020’s mega-deals in digital behavioral health were later-stage investments.

“The increase in average deal size for later-stage digital behavioral health companies signals that investors believe there is large public market awareness and willingness to invest in these companies,” Rock Health CEO and Managing Director Bill Evans said in the article detailing the trends. “Investors want to heavily capitalize on this and scale these companies quickly to be on the leading edge of this wave.”


Room for generalist, specialist models

Both generalist and specialist digital behavioral health models have been bringing in money as of late, according to Rock Health.

Generalist examples include companies that have a larger portfolio of offerings and address both behavioral and non-behavioral issues. Examples include companies like Calm, Headspace and Pear Therapeutics. Meanwhile, specialists are all behavioral-focused and include companies like Lyra Health, Ginger and Modern Health. 

Because demand for behavioral health services is so high, both groups are seeing plenty of funding. In 2020, generalist companies raised $1.6 billion, while specialist companies raised $804.3 million. 

Rise in strategic consolidations

More and more companies are consolidating to expand their clinical and digital capabilities.

Only seven digital behavioral health companies have gone public or started the process to go public. Those include Teladoc, Livongo, Amwell, SOC Telemed, Hims & Hers and Talkspace. Instead, exit by acquisition is a much more common path for companies in this realm, Rock Health observed. 

More opportunity in SUD, IDD

Finally, given the relatively small flow of investment into digital SUD and IDD companies, Rock Health believes there’s ample opportunity for entrepreneurs and investors to disrupt the space. 

You can read Rock Health’s full analysis here.

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