Road to Next
A quarterly report exploring emerging investment trends in
private financial markets and the venture capital ecosystem.
Mental health and wellness: Responding to rising demand
The COVID-19 pandemic put a spotlight on mental health across the country, changing the game for telehealth services and the accessibility of health care. Mental health is carving its own industry thanks to the surge in telehealth solutions for mental health and wellness (MHW) and the continued increasing demand.
Q4 2024
The lack of treatments for mental, behavioral, or emotional disorders has boosted efforts to support mental well-being, including in consumer channels.
Expansion-stage dealmaking shows a growing demand for treatments. Deal counts are above pre-pandemic levels, marking the rise of a burgeoning industry.
Clinics and outpatient services dominate the MHW industry, requiring sizable financing needs for treatment facilities.
The recent surge in investments is expected to create more exit opportunities in the coming years, but substantial returns for investors are unlikely in the near term.
Heather Gates, Audit & Assurance Private Growth leader
Within the mental health and wellness space, companies will likely look to build platforms that can combine and enhance multiple products and services, to better enable accessibility for different kinds of consumers.
Trending this quarter
Expansion-stage deals show MHW industry gaining traction
The MHW industry is split by prevention and treatment. Preventive approaches include basic necessities and qualitative factors like sense of belonging and hope. Treatment areas offer new health care opportunities, and that demand is growing with 23.1 percent of US adults living with a mental illness. To meet demand, more treatment options are needed, including clinics, telehealth, pharmaceuticals, and alternative medicines. Private investors are increasingly supporting MHW initiatives, with significant capital deployments since the pandemic. Despite a market correction in 2022, deal activity reached a record high, and 2024 shows potential for recovery with $1.3 billion in total value already outpacing 2023.
Clinics and outpatient services dominate. Personalized offerings grow.
Improved data-gathering, evolving social values, and social media prevalence are influencing greater awareness and understanding of mental health, including talks about safeguards. This has driven major investment in ways to improve direct treatment and back-end processes for better patient experiences. Over the past decade, health care services and technology systems have led expansion-stage deal counts. Clinics and outpatient services have seen more than 20 expansion-stage deals annually since 2020, focusing on short-term care and procedures, including diagnostic testing and rehabilitation. The sector draws private investment due to its size and public sector focus. Personalization is a growing theme, with several industry unicorns offering personalized care and treatment options, highlighting investor interest in flexible models, consumer products, and digital platforms.
MHW financing activity lands in coastal hubs
Expansion-stage financing for MHW companies coalesces in coastal hubs, but only recently given the industry’s emerging status. This trend is expected given the inclination for startups seeking capital to start in New York and San Francisco, but idiosyncrasies in regional health care systems may add to startups launching in broader areas. Compared with other industries, more geographical areas have notched material sums of expansion-stage capital for local MHW players. Coastal cities prevail, though there's a notable balance in deal count between the east and west coasts. Agile telehealth models and enterprise systems will stay concentrated in these areas, but health care services and hospital systems may support surges in smaller region deals.
$10.6B
expansion-stage investments
since 2020
11
number of active MHW unicorns
56%
cumulative deal value for
novice founders
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