Daybreak Health Raises $13M in Campaign to Bring Free School-Based Mental Health Services to Youth

San Francisco-based Daybreak Health has capitalized on burgeoning interest and new funding for school-based mental health services by raising $13 million.

The Series B funding round will support the virtual pediatric mental health care provider’s expansion into new states and the development of new care programs. Daybreak Health has raised a total of $25 million, according to Crunchbase.

Specifically, Daybreak Health’s expansion plans include hiring more clinicians and strengthening administrative capacity to handle new payers and state licensing requirements, especially state Medicaid programs. The company already plans to expand into North Carolina and Utah.

“We’ve seen the sea change from just a few districts, the early adopters, being interested in teletherapy to, now, almost every single district we talked to,” CEO and co-founder Alex Alvarado told Behavioral Health Business. “Even the biggest districts around the country [are] excited about teletherapy as a really important part of their mental health strategy.” 

At the time of its Series A funding round in March 2022, Daybreak Health had seven school district partners. Today, the company has scaled to provide services to over 60 school districts, encompassing over 1 million students, Alvarado said. It was founded in 2019.

Venture capital firm Union Square Ventures led the round. Lux Capital and existing investors Lightspeed Venture Partners, Maven Ventures and Y Combinator also participated.

America’s compulsory education system for youth makes them anchors within all communities. That position makes them vital sites and sources of health care during a time when youth mental health has never been worse. It’s been a frequent subject of discussion at the highest levels of power: It has frequently been addressed in Congress and by the Biden administration.

“We not only believe in Daybreak’s mission, but also its long-term vision of serving as an extension of our schools’ mental health infrastructure to make lasting, positive change for this generation,” Rebecca Kaden, managing partner at Union Square Ventures, said in a news release.

Several federal actions alone have brought billions of dollars to school-based health services, especially mental health services, following the impact of the coronavirus pandemic and gun violence in schools.

The company’s growth indicates the interest and engagement of school districts in implementing mental health programs with vendors.

The increased funding for school-based mental health services and willingness by districts to seek mental health services from outside sources gave Daybreak the signal that the startup was ready to seek a new funding round, Alvarado said. 

Daybreak Health has succeeded in raising capital at a time when overall digital health funding has plummeted from historic highs just a few years ago. Alvarado said the fundraising campaign was just as hard as the overall investment totals would suggest.

“The data doesn’t lie,” Alvarado said. “This funding environment was much more difficult. It’s a juxtaposition because the last time we raised was in 2021, which is obviously a very different environment on almost the opposite end of the spectrum.”

Still, the company needed to find investors who would “go outside of what the rest of the investors are thinking to take a leap of faith in this market.”

Daybreak Health didn’t need to do a fundraising round now. Alvarado said the company weighed whether or not to lean in its multiple years-worth of cash runway and wait for a better funding environment or to move now and make the most of an opportune moment to accelerate the company’s growth plan.

The federal funding landscape is only part of the overall landscape to consider. State governments have a much more direct impact on the funding and policies of local school districts. Alvarado maintains that the historically increased interest in school-based mental health will be the norm going forward.

Further, the company’s focus on working in-network with health plans helps make providing those services through Daybreak Health more affordable for school districts.

The company generates revenue from school district contracts and health plan claims. Daybreak Health works with private health plans and Medicaid. The new funding from states and the federal government also establishes new funding sources.

“What we’re trying to do is marry together the school district funding with insurance reimbursement to enable every single kid — no matter where they’re coming to us from — to be able to get the care for free and have that be sustainable for the districts,” Alvarado said.