Funding for mental health-focused startups rises in 2020

Turning away from the public markets, IPOs, SPACs and Palantir for a moment, would you like to talk about startups again? I would.

This morning, I pored over venture capital funding patterns for wellness-focused startups. Broadly, according to a new report, these startups raised less money in the first half of 2020 than they did in the first two quarters of 2019. Deal volume fell from nearly 600 in H1 2019 to just under 500 in H1 2020, and dollars invested slipped from $6.1 billion to $4.6 billion in the same timeframe.

But, if we peer a bit deeper and look at the subcategories of wellness startups, interesting hotspots become clear.

The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

Inside the subcategories of wellness startups that CB Insights dug through while compiling the dataset, some, like fitness tech and sleep tech, saw fewer deals and dollars than they did in the first half of 2019. But one particular varietal is doing very well this year: mental health-focused companies.

The strong venture results that these startups have recorded in 2020 are not entirely due to a pandemic, a recession and political unrest that's causing more anguish than usual, though I'd be surprised if those factors didn't provide a tailwind of sorts.

Stepping back a few quarters, there's a bit more to the business side of mental health startups that I want to unpack.

This morning, let's remind ourselves about how startups like Calm and Headspace proved that their market was large and lucrative, review the venture capital data and see if the pattern of strong investment in the space is continuing in the current quarter.

We should see another unicorn or two out of the group, we reckon, before the eventual tech downturn. So let's work to understand where the category is today.