The behavioral health industry is experiencing some significant trends as it continues to mature. One of the key trends is the increase in investments in expansion-stage mental health and wellness (MHW) companies. According to a report from Deloitte, investors have poured $10.6 billion into these companies since 2020. While deal sizes and volumes have declined since their peak in 2021 and 2022, there is still a strong demand for services and opportunities for expansion. In 2024 alone, the total deal value has already reached $1.3 billion, surpassing the previous year.
Another notable trend is the rise of non-traditional investors in the mental health industry. Venture arms of healthcare companies and other non-traditional VCs have participated in more than 30 deals in the first three quarters of 2024. This shift in investor demographics reflects the global nature of mental health as an issue and the potential for significant returns in this sector. Examples of non-traditional investors include CVS Health Ventures, Optum Ventures, and global sovereign wealth funds.
Despite the increase in non-traditional investors, the overall number of active investors in the mental health industry has declined in recent years. However, the industry has seen a growing number of serial entrepreneurs taking the lead. In 2024, 24% of founders closing expansion-stage deals had previously founded at least one other startup, indicating a maturing industry where experienced leaders are driving growth and innovation.
While the number of deals in the mental health industry has decreased, the valuation of these deals has increased significantly. The median expansion-stage deal value in mental health has doubled from 2023 to 2024, reaching an average of $15.7 million. This increase in valuation reflects the rising demand for mental health services and the higher standards that investors are now applying to capital allocation in the industry.
Despite the challenges faced by expansion-stage mental health companies, there are still 11 active unicorns in the industry, with three new unicorns emerging since 2023. However, exits from these companies remain limited, with only eight startups exiting in the first three quarters of 2024. The report suggests that 2025 may see a more active period for exits, as the market stabilizes and investors gain more confidence in the industry.
Overall, the behavioral health industry is evolving rapidly, with new trends shaping the landscape for investors, entrepreneurs, and companies alike. As the industry continues to mature, we can expect to see more innovation, investment, and growth in the mental health and wellness sector.
