How ‘David and Goliath’ Digital Mental Health Startups Can Coexist

Large platform companies dominated the digital mental health landscape in 2024. These top-of-the-food-chain predators work with large customers, have impressive technology capabilities and garner serious investor dollars.

These Goliaths leave small digital mental health providers, the relative “Davids” of the industry, looking for their place in the field. That’s according to Rock Health’s 2024 year-end funding report

“Especially for behavioral health players, understanding that there are going to be certain really big players in the space and then a lot of smaller players is a really important mindset shift,” Adriana Krasniansky, lead researcher at Rock Health Advisory, told Behavioral Health Business. “It helps us understand that not every company needs to be a unicorn or a decacorn, or exit publicly to be successful. You can have a really strong impact in health care by changing care delivery for a certain population, or really improving a certain use case or part of that mental or behavioral health experience.”

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Rock Health is an early-stage venture fund and advisory group specializing in digital health care. It also operates a nonprofit arm.

Smaller mental health startups should right-size their goals, Krasniansky said, which could change the way they value their companies and raise funds. Some of these Davids may opt to partner with larger companies, but some may choose to get absorbed by the bigger fish as part of a likely wave of consolidation.

Rock Health has expected increased M&A in digital health broadly since 2023, as companies with high valuations have not been able to raise future rounds at the same valuation and other companies struggle to become self-sustaining as they reach Series B or C stage. The spike in consolidation has yet to come to full fruition – and 2024 had the lowest M&A volume seen in a decade.

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Despite slower-than-expected increases in consolidation over recent years, 2025 is signaling that it could be a “very fruitful year for M&A,” with later-stage startups struggling with downward valuations or stalled fundraising rounds.

In 2024, digital health investing overall decreased in quantity and increasingly targeted early-stage startups. Early-stage funding median check sizes stayed relatively consistent, Krasniansky said, but took up a higher percentage of deals as total deal volume decreased. Series D and C round check sizes, on the other hand, significantly decreased.

Increased early-stage funding can be cyclical, Krasniansky noted, and dependent on which companies are raising later-stage rounds.

“We’re still seeing early-stage funding go to new startups across very different use cases in therapeutic areas, but new players have to understand and learn to navigate around and coexist with the Goliaths in the space,” Krasniansky said. “This is particularly important to create to support diversity of thought, of product approaches, etc.”

Raising money early on can give new companies an advantage, especially when it comes to developing artificial intelligence (AI) infrastructure or other foundational models, Krasniansky said. AI-enabled digital health startups made up 37% of companies in the space to receive funding, a record high.

Mental health is still an investor fan-favorite, according to the Rock Health report. The industry topped the list of highest-funded clinical indications for the sixth year in a row with $1.4 billion raised in 2024.

Two charts showing the top funded value propositions and the top funded clinical indications of digital health investing in 2024. Mental health topped the list of top funded clinician indications in 2024. Rock Health

 The high level of interest is driven in part because large companies continue to add mental health offerings to a larger suite of health care services, like with maternal health company Maven. Another tailwind is the persistent inaccessibility of high-quality mental health care in the U.S.

Digital health care players will continue to delve into the intersection of mental health and physical health, Krasniansky said, as well as the relationship between mental health, healthy eating, nutrition and weight management.

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