Funding In Youth Mental Health Is Growing. Where are the Opportunities?

There is a youth mental health crisis in the U.S., and no one understands that better than Dr. Nicki Tessler, CEO and co-founder of teen mental health company BeMe Health.

Tessler is a psychologist by training, but launched the company because of her experience as a mom.

“I was really looking at my two teenage daughters, and I was like, ‘I know too much.’ I couldn’t put my head on my pillow at night,” she said in an interview. “We were feeling the industry for adults was archaic. I would look at them, and it just didn’t resonate for them. And I felt like I needed to also model for them, to work boldly, to go after things you believe in, even if it’s a high risk. … I felt like walking that walk for them was really important.”

Tessler isn’t the only one recognizing a need for more youth mental health options. Tech-enabled mental health solutions focused on youth are more and more common and are gaining interest from investors. In 2023, investment in digital health startups addressing youth mental health accounted for 34% of total digital behavioral health funding, up from 15% in 2018, according to a recent Rock Health report.  

This space is only going to continue to evolve, and Medicaid is a growing opportunity for youth mental health companies.

The trends

Currently, more than 21% of young Americans battle a mental or behavioral health disorder, according to the Rock Health report. Challenges like systemic racism, social media and the Covid-19 pandemic exacerbated issues. And the kids aren’t the only ones affected: 53% of working parents say they’ve missed work at least once a month due to their child’s mental health.

Investors are taking notice. In the past, youth mental health was underinvested in — less than 5% of digital health investment went to pediatric digital health between 2011 and 2023, according to Rock Health. But funding is growing, with digital youth mental health companies like BeMe Health, InStride Health and Backpack announcing major funding rounds in 2024.

More funding is also going to early-stage digital health startups specifically targeting youth, versus later-stage companies that started with adults and expanded to children. In 2023, Seed and Series A funding accounted for 79% of the labeled venture rounds for startups addressing digital youth mental health.

“That tells us that they’re investing in founders and teams that are really plugged into this problem, and not necessarily in larger platforms that are just kind of adding on this component,” said Adriana Krasniansky, who leads research at Rock Health. “So that gives us some indication that there’s interest in targeted investments and specialized teams to build in this space.”

This is something Chirag Shah, partner at Define Ventures, also noted. The firm is an investor for Blackbird Health, a pediatric mental health provider offering virtual and in-person care. Shah said that in order to get the best outcomes for youth, it’s important to have “care models and care programs that are designed exactly for them and only for them.” 

According to another person interested in pediatric mental health, the startups that are tailored to youth are typically more successful.

“Traditional mental health companies, initially designed with adults in mind, typically fail to adequately address the unique needs of younger populations,” said Solome Tibebu, founder and CEO of Behavioral Health Tech, a community for mental health. “Unsurprisingly, they aren’t getting the engagement they desire from kids and teens. For these companies to achieve sustainable utilization and effectiveness over time, they must be co-designed and co-developed with young people involved throughout the entire process.”

In fact, investors are actively looking for startups that receive input from kids and teens, according to Carmen Heredia Rodriguez, chief of staff at RockHealth.org. For example, some companies have youth advisory boards, which can help them understand how youth interact with digital solutions and what will engage them.

BeMe Health is one of these companies. Its teen advisory board — made up of 166 teens — provides feedback on app features and ways the company’s app can support their mental health needs.

“What they will say to you is that they might be the most connected generation, [but] they’re also the loneliest generation,” Tessler said. “What they’re looking for is a combination of ways in which we meet them where they’re at, like mobile modalities or other kinds of ways in which they live in the world … and they still want human connection.”

In addition, there is a growing focus on condition-specific digital youth mental health startups. While the majority of startups in this space support multiple mental health conditions, 24% target certain conditions like depression, ADHD or autism, according to Rock Health. Examples include Equip, which treats eating disorders, and Expressable, a speech therapy company.

This is a trend Tibebu — who struggled with severe anxiety and obsessive-compulsive disorder as an adolescent — is particularly excited to see.

“My immigrant parents didn’t even have a vocabulary for the phrase ‘obsessive-compulsive disorder’ in either of their languages,” she said. “I had to turn to the internet to find support and connect with others, to know I wasn’t completely alone in my symptoms and experiences. Had I been able to find tools online that explained what I was going through and reassured me that I wasn’t the only one experiencing scary intrusive thoughts and bizarre compulsions, I could have saved myself and my family years of pain and suffering.”

Future opportunities

There is still more that needs to be done in the youth mental health space, which is why Rock Health recently launched the Digital Youth Mental Health Initiative with Pivotal Ventures, Penner Family Foundation, HopeLab and the Arthur M. Blank Family Foundation. The goal for the initiative is to “explore any untapped opportunities” for digital health innovators to improve youth mental health, according to Heredia Rodriguez.

One of these opportunities is supporting the Medicaid population. Rock Health found that only about 22% of the companies examined in its report contracted with Medicaid, despite Medicaid covering nearly half of all kids in the U.S.

“It’s a really, really compelling reason to engage with that program from a fiscal perspective, because you have this very captive market and very large captive market,” Heredia Rodriguez said. “But it’s also really important from an equity perspective as well, because Medicaid serves low income Americans and everyone, ultimately, should have the right to access mental health services regardless of your income.”

The mental health staffing crisis also needs to be addressed, Krasniansky stated. Some approaches Rock Health is seeing include using advanced practice practitioners, like nurse practitioners and physician assistants. Leveraging AI and self-service tools alongside other types of care can also help.

While a lot of the emerging youth mental health companies are virtual, Shah thinks that it’s important to have an in-person component as well. This is a major reason why Define Ventures invested in Blackbird Health.

“Pediatrics can’t be done purely virtually, not if you truly want to treat a variety of conditions that are typically present in young kids,” he stated. “You can do some things virtually. You certainly can’t do everything virtually, and a lot of diagnostics are really hard to do virtually, so you need an in person component.”

Tessler also hopes to see more partnerships to improve the youth mental health crisis.

“I don’t believe you can revolutionize mental health by being a little standalone operate like BeMe. … There are so many great people in the space,” she said. “We need all the entrepreneurs we can get, all hands on deck. It’s not about competing, it’s about complementing what others are doing and then together going after it.”

Photo: Abscent84, Getty Images