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Venture capital investment in mental health boomed in the past year

The positive social media response to Simone Biles withdrawing from Olympic competition highlights how the artificial line between health care and mental health care is finally beginning to dissolve. And startup investors have taken notice.

By the numbers: Venture capital investments in mental health startups rose 72.6% between Q1 2020 and Q1 2021, per CB Insights.

  • GIMBHI reports that mental and behavioral health deals more than doubled between 2019 and 2020, and in Q1 2021, it accounted for 19% of all digital health funding.

Driver No. 1: Soaring customer demand, much of which has been driven by the pandemic, without adequate provider supply (particularly in non-urban areas). Not just among adults, but also for kids and teens.

  • Google searches for both therapists and psychiatrists soared over the past 18 months, while most any corporate HR rep can tell you that employee burnout has become one of their most pressing issues.

Driver No. 2: Greater acceptance of telehealth, partially enabled by improved video chat technologies. This is true of patients, providers and insurers — helping encourage some "tech" entrepreneurs and investors to enter the space.

Driver No. 3: Last year's Mental Health Parity and Addiction Equity Act makes it harder for insurance companies to deny care.

Driver No. 4: Valuation momentum for early VC-backed companies like Lyra Health (now worth $4.6 billion). Nothing attracts venture capitalists like when other venture capitalists pay high prices.

The bottom line: COVID-19 exposed many of America's health system gaps, and we're seeing money rush in to fill them.

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