Why healthtech VCs are investing in mental and behavioral health

This year could be a record-setting year for VC investments in mental health and wellness.

It’s one of the reasons Vator and HP focused on this topic during our second of four SplashX Invent Health salon-styled evening gatherings this year.

As we do for all our Invent Health salons, we have a VC panel taking a deep dive into this topic for almost an hour, which invariably is never enough time.

The discussion ranged from how we innovate around diagnostics, treatment and prevention, to how we change perverse economic incentives that often have clinicians prescribing expensive drugs vs providing alternative treatment solutions, such as cognitive behavioral therapies.

The panel consisted of moderators Archana Dubey (Global Medical Director, HP Health Centers, HP) and Bambi Francisco Roizen (Founder and CEO, Vator) and panelists Ambar Bhattacharyya (Managing Director, Maverick Ventures), Billy Deitch (Principal, Oak HC/FT), Hubert Zajicek (CEO, Health Wildcatters), Stephanie Tilenius (Board Director, Investor, Vida Health), Liz Rockett (Investor, Kaiser Permanente Ventures), Lisa Suennen (Senior Managing Director of Healthcare, GE Ventures).

Dr. Dubey kicked things off by asking each member of the panel to talk about their philosophy when it comes to investing in behavioral and mental health, as well as some of the companies they have put money into. Here’s how each of them responded.

Lisa Suennen: “I run GE Ventures healthcare program. I started looking at mental health issues long ago because of my family. You really should meet them. Officially, I actually joined a startup in the behavioral health space in 1989. For those of who were alive in 1989, back then this was a huge topic of conversation. I built that company up to about $800 million in revenue. We took it public and we got acquired by Magellan, so a lot of what you see as Magellan today, which is the largest provider of behavioral health services in the country, I believe at this point, came from that original company.

In my 20 years now of investing, we look at all sorts of mental health companies. We’ve only made a couple of investments and one, Neuronetics, is an investment in the GE Ventures portfolio. It is unique, or almost unique, in that it’s a medical device to treat major depressive disorder, which is very uncommon. There’s a couple of other devices out there that are used to treat mental health disorders non-invasively as well. But we looked at a lot of different things and there’s a lot to say about them.”

Liz Rockett: “I am an investor with Kaiser Permanente’s venture fund. Just briefly on the fund, we’ve been around for 20 years. We invest broadly in things that are strategically aligned with, or are important to KP. So we have a pretty broad mandate. We invest across everything from IT and digital to later-stage services companies to clinical technologies like medical devices and diagnostics. This will be such an interesting conversation because I think as many folks here on the panel know, we’re in a time when mental and behavioral health has become a very common of discussion topic in the venture world, and it’s a little bit like motherhood and apple pie, we should be doing more and there’s so much opportunity.

From my perspective, we’re in the very early days of what innovation can be in mental and behavioral health. Lisa’s experience doing managed cared in this arena is one of the few examples we have from prior to really the last five to 10 years of innovative ways of addressing things. At KP Ventures, we’ve invested in a few ways of expanding access, including Ginger.io and other tools that are more looking at ways to take modes of treatment that we’ve long known work very well but we rarely deliver at scale, like cognitive behavioral therapy, and investing in the companies that are digitizing that to create radical transformation and access to those sort of things. So Big Health is one of those in the cognitive behavioral therapies space. Omada, of course, is kind of the hallmark of that approach, though they’re a little more focused on chronic conditions.”

Hubert Zajicek: “I run Health Wildcatter, it’s a healthcare seed accelerator in Dallas, Texas. In the course of how did we get into it, we invest in digital health and in medical device companies and, over the year, of course we have run into some great mental health companies, mental health startups, on the digital health side. As far as the trends go, we’ve talked about the stigma and the reasons why things are different. I’m from Europe originally so I had to learn that there’s a differentiation between health and mental health when I first moved here 20 years ago. I learned that mental health coverage was up to $10,000 based on my health insurance. That’s been removed now, so that’s one step. Another thing that is happening, and especially these last couple of weeks being a sad reminder, is that we need to continue the discussion, the conversations, around the topic because, even today, there’s still a stigma attached in many, many facets.

As we move the ball forward on making a change and extending a helping hand and helping people, we have to realize that’s not mental health, it is living a balanced life. I’m a physician by training and, viscerally, that’s what it’s all about. One out of three people ends up with depression, or some sort of a mental health issue. The truth is it will hit all of us, or if it’s not us then it’s one of our loved ones, within 20 years, easy. So what is it? It’s about being imbalanced and responding in a way that really causes harm to us or our loved ones or family. All of us need help in that department. All of us do. I think if we can wrap our brains around that then we will embrace it more as a wellness agenda that has to be embraced, as opposed to a mental health issue that some people have.”

Stephanie Tilenius: “I’m a founder and CEO of Vida Health. I sit on a couple of public boards and I have been an investor in the past. What we’re doing is combing chronic care and mental health because there’s a lot commonalities, so if you look in the system today, someone who has diabetes and depression is four times more expensive and they often need a combination of a diabetes management program, which we have, but they often need some good tea and a therapist. What we’re doing is combing digital therapeutics and real telemedicine inside the app to actually get out front. We’re seeing a 64 percent reduction in depression, for example, and we’re handling people who have diabetes and depression.

I really believe that the forefront of what everyone’s talking about here is these digital therapeutics meeting people where they’re at in a very personalized way, and solving the mental health problem. We all know that a lot subscriptions that are out there are ineffective for a lot of people. They’re expensive but only 23 percent of them are effective, so hopefully digital therapeutics will solve some of that.”

Billy Deitch: “I’m from Oak HC/FT; we are a venture capital and growth equity firm and invest totally in healthcare and financial technology. I spend all my time on the healthcare side, and everything that we invest in is focused on improving the quality or lowering the cost of healthcare in this country. In terms of behavioral health, we’ve invested in a handful of businesses, one of which is Quartet, another of which is axialHealthcare, another of which is U.S. Healthvest, which is, you may not have heard, but it’s an outpatient behavior facility business.

In terms of my own personal interest in the sector, and in this ecosystem, my wife is practicing clinical psychologist. My father-in-law’s a neurologist. My mother-in-law is a psychologist. My wife’s aunt is a psychologist. I have benefited myself, and everyone in my family, from psychologists. It’s something I have compassion about and love hearing about ways that we are destigmatizing this world. A lot of times we talk about mental health, behavioral health, we see it not as an illness that should be treated. Everyone in this room is crazy, that’s what my father once told me. He told me that to say, ‘Don’t worry, everyone’s life might seem perfect but everyone has their issues.’ There isn’t a person who couldn’t benefit from behavioral health, so expanding access, even to people who don’t maybe suffer from deep clinical depression, but just having that place where you can sit down and take a breath and understand what’s going on, that’s my long term dream for what happens in behavioral health in this country.”

Ambar Bhattacharyya: “I work at a venture capital fund called Maverick Ventures. We have our focus on the healthcare sector, mostly in digital health though we do some biotech as well, and then the other half is in technology. I’ve been keenly interested in the mental health space, I guess from a personal basis. My dad’s a neurologist so I grew up with it. He had a radio show growing up every Saturday morning at 9 a.m. and we grew up in rural America so people would call in with their different various mental health problems and my mom, my sister and I would listen to various people that we’d see at the local K-Mart talking with my dad on the radio about what’s going on, so we kind of grew up with it. I became a psych major in college, did my research and my thesis on cognitive neuroscience. So I’ve spent a few years in this space, both from a family and educational perspective.

From an investing lens, I’ve been interested in mental health in two discreet fashions, because I think the problem has been well stated by everyone here and I don’t think we have a great silver bullet solution for it. So my approach has been two-fold: one is look for new modalities that, I’ll call it, on the fringe of technology that may have an interesting approach for how to look for solutions to mental health. So we’ve been seed investors and early investors in two companies. One is Limbix, which is using virtual reality to treat a host of mental health issues, like depression, anxiety, PTSD, things of that sort. And, in a former life, I was a seed investor in Ginger as well, which is using data from your phone to understand if that’s a leading indication of depression and things of that sort. That’s on one bucket. On the second area, I’ve been interested in mental health and thinking about it holistically. I think my fellow panelist had a great point in that we separate mental health and health all too often, which I think is inappropriate. If you look at the data, folks who have mental health issues tend to have higher medical costs as well from a payer perspective. It’s bizarre that we think about these in an isolated fashion. So one of our most recent investments is in a company called Cityblock.

Cityblock is a primary care focused company on the Medicaid segment, Medicaid and tools. What they’re focusing on is holistic health, so think not just primary care but having a therapist, thinking about the social determinants, what’s happening at home, actually going to their home, looking at what’s in the pantry because these things all have an impact on how people live their life day to day. How happy they are, how sad they are, if they get sick more often. So I’m really interested in both of modalities: the holistic side and the tech side.”