Monetizing mental health technology

Around the start of the Covid-19 pandemic, the mental health technology industry was booming. A favorable economic climate (low interest rates and lots of venture capital funding) coincided with a strong need for affordable and accessible mental health care—what digital mental health expert David Cooper, PsyD, calls “easy money and people with really good intentions.”

In startup culture, funding companies with potential rather than a proven track record is common. Most startups do not need to be profitable right off the bat. But when the economy took a downturn, digital mental health companies without clinical know-how or a clear path to profitability started to struggle.

“That changed the timeframe for which the economics needed to be figured out and gave a real jolt to the industry that people weren’t necessarily expecting,” Scult said.

When the money started to run out, mental health technology companies had a few options, said Cooper, who is a member of the MHTAC. Companies could take a “down round” and raise funds at a lower valuation—which can send the message that a company is struggling. They could find a way to increase revenue—which is tough in a crowded market—or “extend the runway,” meaning try to keep the lights on as long as possible with remaining funds. One way to do that is through layoffs. In many cases, psychologists are among the first to go because they are seen as service providers who can be rehired later if funds allow.

“Health tech and startups tend to focus on this hyper-growth model, and with that often comes over-hiring,” said Kay Nikiforova, head of clinical and research at health equity startup Violet and a member of the MHTAC. “Clinicians who provide direct care are viewed as a dispensable resource, rather than as part of the organization.”

Perhaps surprisingly, psychologists working in other roles—including clinical strategy, clinical research, product development, and marketing—are also some of the first to go. While those layoffs might temporarily extend the runway, Cooper said they are likely to harm a company’s long-term viability when it comes time to demonstrate the quality of their services in an increasingly saturated market.

“Who can assess your product’s quality, advocate for it with credibility, and help you improve quality compared to your competitors? All of the psychologists you just laid off,” he said.

Cutting clinicians is bad for business, and it can also cause real harm. Patients may feel abandoned, and even those who stay engaged with technology products may be less likely to seek out mental or behavioral health care in the future, Wright said.

“These apps could be a gatekeeper, in a good way, where they allow people a less stigmatizing or more cost-effective way to approach their emotional well-being,” she said. “But if someone has a bad experience, how does that impact them in the long run?”

For patients who have never had an experience with mental health care and who cannot access or afford traditional private practitioners, an app could be the next best thing. An abrupt termination of their burgeoning therapeutic relationship or other ethical breach could sour their views on therapy.

“Technology can be a path toward a more inclusive field of psychology, but the people building these apps aren’t always thinking about ethics,” Jackson said.

Another concern is that the rocky early days of digital mental health care might bias psychologists against the industry, which could limit its growth potential.

“If these challenges cause us to see technology as a threat, rather than as a tool, that could have negative implications for the profession,” Wright said.