Venture Capital Firms Invest Heavily in Mental Health Startups

The Covid-19 pandemic took an enormous toll on people’s mental health. The World Health Organization estimates that the prevalence of anxiety and depression increased by 25 percent during 2020. Meanwhile, the Centers for Disease Control and Prevention found that one-third of Americans have recently reported symptoms of anxiety or depression. Some patients struggle to book appointments with therapists, however, either because their insurance doesn’t cover their specific needs or because demand for mental health services has skyrocketed. 

“Since Covid, the need has gone through the roof,” said Kevin Taggart, managing partner at a firm focused on the behavioral-health sector. “Every mental-health company we are working for is busy. A lot of them have wait lists.” To meet this rising demand, a number of mental health businesses have launched in recent years offering a wide range of services. Along with traditional psychiatric facilities and offices, some companies provide telehealth platforms for online therapy as well as meditation apps and other digital tools. In fact, virtual platforms utilized during the pandemic have made it easier for professionals to provide care while also making the sector more attractive to investors. In 2021 acquisitions of behavioral-health firms surged by 35 percent compared to the previous year, with the large majority of deals involving private equity firms and venture capitalists.

For instance, the venture firm General Catalyst has claimed stakes in startups like Eleanor Health and SonderMind, which raised $150 million from investors last year. All told, investors placed $5.5 billion into mental health technology startups last year, a 139 percent increase from the start of the pandemic. Although these platforms aim to provide key services to a broader public, critics say that private equity-backed mental health organizations run the risk of focusing more on profits than people. This could lead to an environment where care becomes less personal and clinicians are pressured “to see more patients than they can handle.” 


  1. Why are venture capitalists and private equity firms investing heavily in the behavioral health sector?
  2. Do you think mental health services owned by private equity companies could become more focused on profits than providing quality care? Why or why not?

Source: Khadeeja SafdarFollow and Gregory Zuckerman, “Millions of Americans Are Turning to Therapy, and Investors See an Opportunity,” The Wall Street Journal, May 9, 2022.