Companies offering virtual mental health services to younger people received 34% of all digital behavioral health venture funding in 2023, compared with 15% in 2018, according to a report last month from research and venture capital company Rock Health. Nearly half of mental telehealth companies serving younger patients sell to public entities such as local school districts, Rock Health found. In May, virtual pediatric mental health company Backpack Health received $14 million in a Series A funding round from venture capital firm PACE Healthcare Capital and others.
The increased mental health needs of young people since the pandemic is driving schools to act, said Adriana Krasniansky, head of research at Rock Health.
“Schools realize there’s a need but they also know that the health system is not meeting that need,” Krasniansky said. “So many kids and parents don’t talk about mental health, or they haven’t seen a provider, and the schools bear a lot of risk in that.”
The increased funding comes at a critical time. In April 2023, U.S. Surgeon General Dr. Vivek Murthy called the growing number of young people suffering from mental health challenges the "defining public health crisis of our time.”
Cartwheel, which received a $20 million Series A funding round last September, provides therapy, psychiatric evaluations and other services to students by working with school districts. The company, founded in 2022, works with around 120 school districts across 10 states, up from around 50 customers across five states this time last year.
For schools, partnering with virtual mental health companies can be cheaper — and easier — than hiring full-time staff. There is a shortage of mental health professionals in schools. In 2023, there was just one psychologist for every 1,119 students in kindergarten through 12th grade, according to data from the National Association of School Psychologists.
In November, Talkspace signed a three-year, $26 million contract with New York City schools to provide virtual therapy to teens in the city. The company, which rolled out an expansion of its youth-focused product Wednesday, also inked a two-year contract with Baltimore County schools in December. Both school districts have made the service free to teenagers.
“One of the hurdles to increasing usage in New York City and Baltimore County is getting parents and teens to understand that this is free,” said Liz Colizza, director of research and programs at mental telehealth company Talkspace. “They almost think it’s too good to be true.”
In July, staffing company AMN Healthcare said it was rolling out a platform that allows psychologists, occupational therapists, speech language pathologists and other professionals to conduct sessions virtually while students are at school. AMN said it is providing the service to school districts where it has an existing relationship.
“These are services required by the schools and there is growing number of students who need them,” said Kristin Martinez, senior director of teletherapy at AMN Healthcare. “And between the demographic changes and where therapists live there, it’s very difficult for schools really across the board to provide them.”
One roadblock to continued expansion of services, and companies' growth may be the Sept. 30 end of the Elementary and Secondary School Emergency Relief Funds program, a $189.5 billion allocation from the Education Department to states' local education agencies and districts. The funds allowed districts to purchase services from mental health startups. English said he has seen school districts cut budgets as well as make sure virtual programs are working.
“They want to see symptomatic improvement…they want to see parent satisfaction and student engagement data,” English said. “A lot of our work has been building out that infrastructure on our end so that we can prove the impact that we're having on students after we start to work with them clinically.”
