Digital Mental Health’s Crowded Market Means Startups Must Show Outcomes, Optum Ventures Partner Explains

OCD, anxiety, eating disorders – there’s an app for all of that. In fact, when it comes to the digital health space, the number of startups focusing on nearly every facet of mental health is expanding at breakneck speed.

In the late 2010’s, digital mental health companies were just beginning to come into the mainstream. However, fueled by the COVID-19 pandemic and more awareness around behavioral health needs, scores of companies have flooded the space within the last two years.

This influx of startups created a digital behavioral health ecosystem with companies focusing on a variety of conditions. Yet, in order to survive in the crowded market, outcomes are key.


“Seemingly since that timeframe there has been such an acceleration of funding and focus on the behavioral category,” Laura Veroneau, a partner at Optum Ventures, said during a panel at Going Digital Behavioral Health Tech 2022. “I think, in part, because of the public health outcries and the consumer demands, and, in part, because of the broad recognition of the importance of behavioral to the border holistic health ecosystem overall.”

In 2021, venture capital firms invested $5.1 billion in digital mental health companies, according to Rock Health. That trend has continued into 2022.

In the first quarter of the year, digital mental health companies raised over $1 billion.


“What we’ve watched happen is the creation of almost an entire sector in itself where not just one solution covers behavioral, the way that it might have been thought of historically,” Veroneau said. “But there’s companies focused on pediatrics and companies focused on high-cost areas like SUD or eating disorders or OCD. We’ve watched this creation or emergence of a whole sector of behavioral that can be invested in broadly. And not a one-size-fits-all solution.”

While many companies focus on a subsector of behavioral health, even these subsectors are getting crowded. In order to sustain themselves in the future, companies need to show how they are different from their competitors.

“I think there’s going to be a clear, necessary focus on what the differentiation is between these different types of solutions,” said Veroneau. “And with that, I think comes an additional burden on companies to not just be broadly expanding access in a way that’s not clearly differentiated by your peers or competitors in the space, but also focused on outcomes.”

This could lead to consolidation in order to offer border solutions and create a more comprehensive platform, according to Veroneau. She noted that the merger between telemental health company Ginger and direct-to-consumer wellness company Headspace led to an expanded offering for customers.

Digital health companies – including, but not limited to behavioral health-focused startups – are at-risk of commoditization, according to Veroneau. Moving forward, outcomes data will be key for companies to prove value to stakeholders.

However, historically, outcomes are difficult to measure in the behavioral health space.

“It’s not like the physical health side where there is a clear rubric of what outcomes mean, or what total cost of care means or the impact of delivering that care,” Veroneau said.

But this could be an opportunity for the digital mental health space to begin to define outcomes for stakeholders.

“I think that the big potential tailwind in this space is figuring out the outcomes, orientation, and using that to clearly articulate, … ‘The ROI is this, and the value for payer, the value for physician group or the value for an a-risk entity is XYZ,’” Veroneau said. “Because this is how we actually look at outcomes and our differentiation, and the value that we’re going to drive into the space.”

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