Funding for Digital Mental Health Startups Reaches Record $5.1B in 2021

Digital health continued its tear in 2021, as the number of deals and the amount of funding in the space reached record levels. And if mental health had not already proven itself as a major engine driving activity, 2021 definitely underscored that fact.

Digital startups based in the U.S. hauled in $29.1 billion over the course of 729 deals, according to a newly released report by seed fund investment firm Rock Health. Both figures surpassed last year’s totals in funding and deals logged by the firm, which at the time were each the largest since Rock Health began tracking the data back to 2011.

Digital providers of mental health raked in a record $5.1 billion, which was the most among companies specializing in a particular area of care – including $3.5 billion more than which was given to providers of primary care. The funding was almost double that of which was bestowed on mental health providers in 2020.

Among virtual mental health operators receiving significant windfalls in 2021 were benefits platform Lyra Health at $200 million, obsessive-compulsive disorder treatment provider NOCD at $33 million and eating disorder treatment company Equip at $13 million. Rock Health cited the integration of behavioral care services into primary care platforms, along with the rise of more options for mental and behavioral needs, as significant drivers of the record-breaking dealmaking

In addition to funding, exit activity also figured prominent in the virtual mental health space in 2021, marked by such deals as Ginger and Headspace finalizing their merger, K Health’s purchase of Trusst and Amwell purchasing SilverCloudHealth and Conversa Health for $320 million. Rock Health estimated there were 23 exit deals per month among providers in 2021, which was almost double of that which occurred the year before.

Rock Health said that factors currently shaping the development of virtual health care providers across the board are improved infrastructure, the search to fill qualified people for jobs amidst the so-called Great Resignation, as well as the ability of providers to adapt business models as needed.

The ability of a provider to offer telehealth services at scale was one example cited by Rock Health of business model adaptability.

“In certain sectors like telehealth, startups found themselves in commodity businesses, winning enterprise customers not with product quality but with network scale and integration capabilities,” the report noted. “Changes like these are pushing digital health companies to reconsider their business models and go-to-market strategies.”

Almost $11 billion has been invested in digital mental health companies since 2017, according to Rock Health. Digital mental health providers have received more funding since 2018 than other health care specialities, including more than twice as much as for digital primary health care providers.