The rapid growth and innovation mindset famously championed in Silicon Valley — encapsulated by Facebook founder Mark Zuckerberg’s mantra, “move fast and break things” — has long been a driving force behind the tech industry’s explosive success. However, when this startup ethos is applied to digital mental health, experts warn that the consequences can be grave and far-reaching, highlighting significant digital mental health startup risks. The recent 2022 Going Digital: Behavioral Health Tech conference brought these concerns into sharp focus, as four leading venture capital principals in the health tech space publicly condemned the “growth at all costs” mentality fueling some digital mental health startups.
This warning comes at a critical juncture for the industry. The rapid influx of venture capital and loosened regulatory frameworks during the COVID-19 pandemic have created both unprecedented opportunities and serious challenges in digital mental health care. The panelists emphasized that while innovation and scale are vital, they must never come at the expense of patient safety and long-term health outcomes — key factors often overshadowed by digital mental health startup risks.
The Perils of “Moving Fast” in Healthcare
Deena Shakir, a partner at Lux Capital, clearly articulated the fundamental difference between healthcare and other tech sectors: “You can move that fast and break things in tech. But when it comes to health care — if you move fast and break things — there are lives at risk if you’re misaligning investor-fueled growth at the expense of actually improving health outcomes.”
This distinction highlights a core issue: healthcare, particularly mental health care, involves human lives, complex diagnoses, and treatments that must be carefully administered. Unlike consumer apps or social media platforms where a bug or failure might be inconvenient or embarrassing, mistakes in healthcare can cause harm that lasts a lifetime or even cost lives.
Yet, the pressure to scale quickly and secure investor returns has led some digital mental health startups to prioritize growth metrics over quality and safety — a trend at the heart of the growing conversation around digital mental health startup risks.
Cerebral: The Case Study in Startup Risks
Though the panelists refrained from naming companies outright, it was widely understood that digital mental health startup Cerebral was at the center of the discussion. Cerebral’s story is emblematic of the tension between rapid growth and responsible care.
Launched just a few years ago, Cerebral skyrocketed to a $4.8 billion valuation after raising $462 million in venture capital funding. Its promise to revolutionize mental health care through virtual therapy and medication management captured investor and public attention alike.
However, this meteoric rise came with growing scrutiny. Cerebral now faces investigations by the U.S. Department of Justice (DOJ) and the Drug Enforcement Administration (DEA) over allegations of inappropriate marketing practices and questionable prescribing of controlled substances for mental health conditions. Critics argue that the company’s aggressive push to capture market share may have compromised clinical integrity and patient safety — a prime example of digital mental health startup risks materializing.
Aike Ho, partner at ACME Capital, reflected the panel’s concerns bluntly: “There’s a company out there that’s getting investigated by the DEA and the DOJ that’s not what I think is representative of what’s happening in the digital health space.” With a pointed rhetorical flourish, Ho added, “Who knew that the next drug cartel would be VC-backed?”
In response to the mounting pressure, Cerebral’s CEO David Mou recently acknowledged the company’s shortcomings, stating, “We made mistakes… and I’ll also admit that we will continue to make mistakes and learn.” While this admission signals a willingness to improve, it also underscores the risks of scaling too fast without robust safeguards — the very core of ongoing digital mental health startup risks.
Digital Mental Health is Not “Just Another Tech Sector”
Alyssa Jaffee, partner at 7wireVentures, stressed that digital mental health fundamentally differs from other parts of the tech ecosystem. “Many on this panel have advised against it for years — we don’t move fast and break things,” she said. “We really are different from the rest of tech.”
This point highlights a critical challenge: the excitement around digital innovation often obscures the reality that mental health care is a deeply complex, highly regulated field. Clinical care requires evidence-based approaches, careful diagnosis, and ethical prescribing — processes that cannot be rushed or compromised for the sake of rapid growth.
The COVID-19 pandemic served as both a catalyst and a magnifier for digital mental health. Lockdowns, social isolation, and general uncertainty led to a surge in mental health challenges worldwide, exposing the vast gap between demand and supply for mental health services. This crisis, coupled with the necessity for remote care, accelerated the adoption of telehealth and virtual behavioral health services.
Investors quickly responded, pouring record sums into the space. In 2021 alone, U.S. digital health companies raised over $29 billion, with $5.1 billion flowing into mental health startups. This capital influx spurred a proliferation of virtual behavioral health companies eager to scale rapidly — raising the stakes for managing digital mental health startup risks effectively.
The Role of Loosened Regulations and Its Consequences
One important factor enabling this rapid growth was the temporary loosening of regulations around telehealth and prescribing controlled substances during the pandemic. These regulatory relaxations were designed to increase access to care during a public health emergency. However, they have also created loopholes that some companies have allegedly exploited.
The controversy surrounding Cerebral and other startups like the now-defunct virtual ADHD treatment company Ahead has shone a harsh spotlight on these regulatory gaps. Lawmakers have taken notice: on June 6, a U.S. House committee demanded detailed information from the DEA on how they are enforcing and preventing abuse of COVID-era regulations for prescribing controlled substances via telehealth.
“I would not be surprised if regulators come knocking on our doors to ensure that there are guardrails that are put in place to make sure that no one is exploiting patients,” Ho cautioned.
The panel underscored the urgent need for clear industry standards and regulatory frameworks that balance innovation with patient safety — essential measures to mitigate ongoing digital mental health startup risks.
The Potential and Challenges of the Direct-to-Consumer Model
Despite the risks, the direct-to-consumer (DTC) model in digital mental health holds enormous promise. Aike Ho described it as “an incredibly powerful tool in aligning incentives with patient outcomes.”
In a traditional healthcare system, many factors can dilute the focus on patient wellbeing—complex insurance reimbursements, fragmented care, and misaligned incentives between providers and payers. The DTC approach can create a more patient-centered experience by giving individuals direct access to care and better transparency.
However, Ho and other panelists agreed that this model requires thoughtfully designed guardrails to ensure quality, safety, and sustainability. Without long-term commitments to clinical rigor, transparency, and ethical practices, the DTC model risks devolving into a race to the bottom on standards — another dimension of digital mental health startup risks to address proactively.
Charting a Responsible Path Forward
The digital mental health landscape is at a crossroads. There is tremendous opportunity to improve access to care, reduce stigma, and deliver better outcomes through innovative technologies. But the startup culture of “move fast and break things” cannot be allowed to dictate the future of healthcare.
Investors, founders, clinicians, regulators, and patient advocates must collaborate to create industry standards and regulatory frameworks that prioritize patient safety and clinical integrity. This includes:
- Developing clear clinical guidelines and best practices for virtual care and tele-prescribing
- Implementing robust oversight mechanisms to detect and prevent abuse or malpractice
- Encouraging transparency and data sharing to build trust and accountability
- Supporting sustainable business models that balance growth with quality and ethics
Only by embracing a culture of responsibility and long-term thinking can the digital mental health sector truly fulfill its transformative potential while minimizing digital mental health startup risks.
Conclusion
The cautionary lessons emerging from companies like Cerebral serve as a wake-up call for the entire digital mental health ecosystem. The stakes are too high to allow unchecked growth driven solely by investor enthusiasm.
As the industry matures, the imperative is clear: growth must be balanced with responsibility, innovation with caution, and speed with safety. By doing so, digital mental health can emerge as a trusted, effective, and patient-centered force for good — mitigating digital mental health startup risks and building a healthier future for all.
If you found this analysis insightful or have thoughts on how digital mental health can grow responsibly, please share your comments or reach out. Together, we can support innovation that truly serves the needs of those seeking care.
