- The COVID-19 pandemic has caused a wellness boom across Europe, with mindfulness apps growing rapidly.
- By the start of 2022, investor appetite in the competitive health market is beginning to level off.
- Venture capital poured a record $771 million into European startups treating mental illness in 2021, per dealroom.
Wellness was once synonymous with sticky eggs and mental training—a glitzy practice reserved for the upper classes of Hollywood.
But with a slew of pandemic-fueled lockdowns restricting human interaction, large segments of the population have suddenly turned to an unexpected but convenient outlet for maintaining their wellbeing: wellness apps.
Startups like Headspace, Calm and Meditopia have risen to prominence across Europe as people have sought relief from seemingly endless restrictions. The number of downloads of health and fitness apps increased from 565 million to 811 million in one quarter in 2020, According to Data.ai.
Investors quickly took notice of the new demand and invested $8.3 billion in health and wellness startups in 2021, nearly double the $4.3 billion invested in 2020. According to Dealroom.
These apps have helped people manage their mental health through self-help mechanisms like meditation and mindfulness. But psychologists have made it clear that they are not substitutes for clinically approved treatments for mental health conditions.
Now, there is a new wave of startups looking to go beyond wellness and tackle mental illness. Companies that pride themselves on everything from digital therapies to the infrastructure needed to manage mental healthcare $771 million in Europe in 2021.
In 2022, a group of seed-stage startups providing clinical services for mental health and illness secured funding, with several partnerships with the UK’s National Health Service (NHS).
“The scale of the problem with mental illness became clear after COVID-19,” Joseph Zipfel, SFC’s chief investment officer, told Insider. “The NHS has become really open to working with early stage companies on a large scale. This wasn’t something we were seeing a few years ago.”
Despite the growing investor interest, there are a number of problems with relying on startups to treat mental illness. Many of these platforms may be “well-intentioned,” but “providing patients with a diagnosis just for the sake of diagnosis” carries the risk of “mental disorders,” according to Dr. Mauricio Alvarez-Mongaras, a clinical fellow at UCLA. , He said.
He added that the lack of regulation or accreditation requirements was a “double-edged sword”. “These apps are sometimes created by people who don’t have clinical experience.”
But startups aiming to secure venture capital funding hasn’t been easy, according to Arden Thompson, founder of Thalamos, a startup that digitizes mental health law administration. Thompson, who raised $1 million last summer for his startup, said VCs found it “more interesting to talk about mindfulness and yoga,” as there were “fewer mental illness-focused, acute mental health solutions.”
Despite this, he said, the return on risk in this area for venture investors, “if they can beat that, will be massive” due to low competition but high customer retention and social impact.
It’s currently an emerging sector, but health tech-focused funds have been most interested, said Ben Lackey, co-founder of Syndi Health, a startup that provides digital infrastructure for mental health and mental health patients. “Investors who know the space and the problem understand it.”
But Henri Magid, founder and CEO of employee mental health platform MyMynd, said the startups were now attracting attention from public venture capitalists, who were “waiting to blackmail the major players” — a sign of the sector’s growing momentum.
Investors haven’t reached a consensus on what a thriving mental healthcare system looks like yet.
For Damien Marmion, an investor in Syndi Health, the next step is “to shift toward a horizontal service that brings all of these solutions together in one place, like Syndi.”
However, Lascelles and AlbionVC investor Molly Gilmartin said the next step is to verticalize mental health, meaning startups will instead establish a special focus on underserved markets, for specific conditions such as schizophrenia or anorexia.
But the prospect of switching to portrait mode also highlights the growing pains in this segment.
Gilmartin agreed that while “there are many opportunities for founders to develop clinically focused tools” for niche demographics, founders who focus on specific sectors will have to consider scalability and specificity as part of the equation below.
“The more individual we are, the more careful you have to be about privacy,” said Dr. Alvarez-Mongaras.
Many of these services are also supported by one-on-one human contact, such as therapy sessions – and maintaining them is a major issue that startups need to consider as they begin to scale.
He added, “There is something about the human relationship between people, having an element of shared experience and being a social being, something that artificial intelligence will not be able to replace.”