Investing in the behavioral health industry has evolved rapidly in the last five years. From dizzyingly high funding levels to dramatic drops in annual totals, the recent past makes visualizing the future a daunting task.

But long-term industry trends and emerging investment patterns offer some idea of what direction up-and-coming behavioral health companies are heading.

Specifically, data from thousands of companies and public sources compiled by PitchBook paint a picture of likely exits — and their expected return on investment.

PitchBook’s VC Exit Predictor uses machine learning and historical data from tens of thousands of companies to effectively forecast exit outcomes and ROI. It also presents the probabilities of a successful exit or failure to exit, of being acquired or of going public.

Companies are assessed on 34 features. Only companies with at least two or more funding rounds are considered by the model, according to PitchBook.

The behavioral health companies that rank high for successful exits exemplify several current truths of the investment market today.

Several of the behavioral health companies primed for an exit are larger, more developed and have been able to win over investors through several funding rounds.

These companies are, or could be, places where venture capitalists may turn to for safer, more secure investments in an unfriendly, high-interest-rate investment climate. Venture capital will continue to play a part in the behavioral health industry. Venture capitalists are increasingly looking past digitally focused companies to those with more traditional care settings but do something unusual in the brick-and-mortar world, such as focus on unique populations or integrate service types.

Here are the nine companies that ranked the highest on several measures of potential success via PitchBook’s VC Exit Predictor. Behavioral health companies that only ranked high on a few measures were excluded. Companies that operate as vendors in the behavioral health space or only have behavioral health as a secondary part of their business were also excluded.

In other words, this list focuses on organizations that provide behavioral health services only with the highest rankings by most measures.

Most likely to exit via IPO

The PitchBook VC Exit Predictor scores Lyra Health’s and Pelago’s chances of exiting via IPO at 85% and 66%, respectively. Each offers digital behavioral health services to employers and other enterprises on an in-network basis. Pelago has shifted its partnership approach to focus entirely on at-risk models.

Lyra has a bit of a maturity jump on the rest of its digital mental health peers. It was founded in 2015, well before the ramp-up in foundings of similarly focused companies in the two years before and during the COVID-19 pandemic. The company has raised a huge amount of cash since its founding — $910 million, according to Crunchbase. This includes a $235 million round raised in 2022.

Earlier this year, Pelago raised $58 million and has raised a total of $152 million, per Crunchbase.

These types of businesses are proving to be reliant on getting ever increasing amounts of capital as they build out their infrastructure, market to new clients and turn over capital to previous investors. This fits the profile of companies that may want to consider an IPO exit. Several experts previously told BHB that IPOs are always an option for companies, but were not an option that made a lot of sense in the context of the current financial environment.

Both Pelago and Lyra Health have a 97% score for any successful exit. Lyra has an opportunity score of 70, which means it is in the 70th percentile of similar companies of having a good (internal rate of return) IRR, a measure that estimates profitability of investments.

Likely M&A targets

At an 89% chance and an 83% chance, respectively, RealizedCare and Concert Health have the highest probability of being acquired via M&A, according to PitchBook. Several percentage points separate the next most likely M&A target.

M&A is a familiar strategy for RealizedCare. The company was born out of the merger of virtual reality-focused digital therapeutics provider BehaVR and virtual pain management provider Fern Health. The deal was announced in November 2023.

BehaVR acquired OxfordVR in December 2022 and raised a $13 million round to support the deal.

The prospect of exiting via M&A versus IPO is generally a more likely and favorable outcome. The current market track record for digital therapeutics companies that focus on behavioral health has been paved by the stumbles of Akili Inc. (Nasdaq: AKLI). Digital health company Virtual Therapeutics announced it would acquire Akili, taking it private. The deal, as well as other recent stumbles with digital therapeutics, has been seen as a moment of reckoning for this particular intersection of tech and behavioral health.

Concert Health is one of a small handful of companies that makes the oft-talked-about need to integrate behavioral health and physical health a reality. It provides what is sometimes called integrated behavioral health.

Specifically, it offers mental health and support services to primary care, women’s health and pediatric practice. Most recently, the company has teamed up with one of the academic epicenters of integrated behavioral health. It raised $42 million in 2022.

Likely exits, uncertain avenues

All of the companies mentioned so far have a 90% chance or higher likelihood of a successful exit, with the exception of Concert Health (85%). Concert was noted for its high likelihood of being acquired.

The digital anxiety disorder-focused startup NOCD was in a three-way tie for top overall success probability with Pelago and Lyra Health at 97%. RealizedCare and the Medicaid-focused addiction treatment provider Boulder Care tied at 93%. Digital pediatric and family mental health provider Brightline scored at 91%.

Brightline, Boulder Care and NOCD are worth considering on their own because they have relatively elevated likelihoods of going public when compared to other companies in the 90%+ overall success threshold — at 34%, 22% and 21%, respectively. 

All-around high ranks

Of the companies that BHB reviewed, Meru Health has the lowest overall success score at 82% and the third lowest opportunity score, at 73. Still, it ranks high as a likely acquisition target with an 83% likelihood of exiting via M&A.

Meru Health offers digital services and telehealth that is focused on addressing depression. It has focused on work with commercial health plans, announcing a national expansion via a partnership with The Cigna Group (NYSE: CI) in January 2022.

In March, the company announced that it would offer its services to employers and payers with a 100% at-risk model. The company takes a lifestyle approach to mental health issues.

Editor’s Note (Aug. 28, 2024): BHB learned after publication that a company previously mentioned in this article, Lucid Lane, ceased operations. The story has been updated to reflect that information.