The behavioral health investment industry has undergone profound changes in the last five years. From the dizzying heights of record-breaking funding to the sharp downturns in annual investment totals, navigating the industry’s rapid evolution and predicting its future has become a complex challenge. Yet, despite the volatility, several long-term trends and emerging investment patterns are beginning to crystallize, giving investors and industry leaders a clearer sense of what’s ahead for behavioral health companies.
The Role of PitchBook’s VC Exit Predictor
One of the most innovative ways to look at potential investment opportunities in behavioral health investment is through PitchBook’s VC Exit Predictor, a machine-learning tool designed to forecast exit outcomes and estimated return on investment (ROI). By analyzing historical data from thousands of companies, PitchBook’s model predicts the likelihood of successful exits, including both initial public offerings (IPOs) and mergers & acquisitions (M&A). This tool’s predictions are invaluable in providing insight into which companies may offer the best return for investors.
PitchBook’s model evaluates companies based on 34 different factors. Importantly, only companies that have undergone at least two rounds of funding are included in the analysis, ensuring that only established, growing companies are considered. For the behavioral health investment sector, PitchBook has filtered out companies that do not primarily focus on behavioral health services, honing in on those that are likely to provide the most impactful opportunities for investors.
The companies that rank highest in terms of exit potential in the behavioral health investment space represent a blend of digital innovation, unique care models, and proven track records of success. These companies are attracting attention from venture capitalists, particularly as investment conditions become more cautious in an environment of higher interest rates.
The Investment Shift in Behavioral Health
Historically, much of the investment in behavioral health companies has focused on digital solutions. However, the trends of the past few years show an increasing shift toward more traditional, brick-and-mortar models — albeit with a twist. Instead of solely focusing on virtual or telehealth solutions, investors are looking for behavioral health investment opportunities in companies that integrate innovative, real-world service offerings, such as unique care models or approaches that focus on underserved or niche populations.
This shift in focus is not merely a reaction to changing market conditions, but also a response to the growing demand for more comprehensive and accessible behavioral health care. As more attention is given to the integration of physical and mental health, companies that offer holistic solutions are seen as increasingly viable investment opportunities.
Behavioral Health Companies with the Highest Likelihood of Exiting Successfully
Most Likely to Exit via IPO
The VC Exit Predictor tool reveals that two behavioral health investment companies stand out as the most likely to go public: Lyra Health and Pelago.
- Lyra Health: As one of the most well-established players in the digital behavioral health investment space, Lyra Health boasts an impressive 85% likelihood of exiting via IPO. Founded in 2015, Lyra was one of the first companies to offer comprehensive digital mental health services to employers. Over the years, the company has raised a staggering $910 million, including a notable $235 million in a funding round in 2022. This long history of growth, along with its robust financial backing, positions Lyra as an IPO contender. The company’s services, which cater to enterprises looking to provide mental health support to their employees, have garnered significant attention as demand for workplace mental health resources continues to rise. Lyra’s maturity relative to its competitors and its innovative approach to mental health care make it a prime candidate for a public offering.
- Pelago: Though slightly younger than Lyra, Pelago also ranks highly in terms of IPO potential, with a 66% chance of going public. Founded in recent years, Pelago has rapidly gained recognition for its digital behavioral health investment services, which are tailored to employees and offered in-network with various organizations. Recently, Pelago has refocused its business model, placing a greater emphasis on at-risk models, making it a more attractive option for investors in a post-pandemic market. Despite its younger age, Pelago’s impressive growth trajectory and its strong financial backing (including a $58 million funding round earlier this year) make it a solid IPO candidate. Both Lyra and Pelago exemplify the shift toward digital behavioral health investment solutions that can scale quickly, making them prime candidates for public offerings in the near future.
Both companies, with their high capital requirements and rapid infrastructure expansion, fit the mold of companies likely to consider IPOs. However, while an IPO is often seen as a desirable exit strategy, it remains to be seen whether market conditions — particularly the ongoing uncertainty due to higher interest rates — will be conducive to successful public offerings in the near term.
Likely M&A Targets
Mergers and acquisitions (M&A) continue to be a dominant exit strategy for many behavioral health investment companies. The current market conditions, including increasing competition and consolidation within the sector, make M&A a highly viable exit path. PitchBook’s VC Exit Predictor points to two companies with particularly strong prospects for being acquired: RealizedCare and Concert Health.
- RealizedCare: Born from the merger of digital therapeutics company BehaVR and virtual pain management provider Fern Health, RealizedCare is a prime candidate for M&A. The company leverages cutting-edge technologies, such as virtual reality, to treat pain and mental health conditions. Its recent acquisition of OxfordVR and a successful $13 million round of funding demonstrate RealizedCare’s ability to scale quickly, making it a promising acquisition target. M&A offers a more predictable exit route, particularly in a market where digital therapeutics companies have faced challenges in scaling independently. Given the challenges faced by some companies in this space, such as Akili Inc., which faced difficulties despite raising substantial funding, an M&A exit might be a more favorable and realistic outcome for RealizedCare.
- Concert Health: Specializing in integrated behavioral health investment, Concert Health combines mental health services with primary care, pediatric practices, and women’s health services. This approach addresses the growing demand for integrated care models that combine physical and mental health support. Concert Health’s successful $42 million funding round in 2022 and its collaborations with major healthcare institutions make it an attractive target for acquisition. The company’s ability to integrate behavioral health into traditional care settings offers an innovative model that is appealing to healthcare organizations looking to expand their service offerings.
While both RealizedCare and Concert Health have excellent prospects for M&A, it is important to note that the landscape for acquisitions can be highly competitive. As more companies in the behavioral health investment sector expand their offerings and establish their niche, consolidation will likely increase, further increasing the pressure on these companies to secure strategic partnerships or acquisition deals.
Companies with Uncertain Yet Promising Futures
While many companies in the behavioral health investment space have clear exit paths, a few remain somewhat uncertain but still highly promising in terms of overall success.
- NOCD: Focused on treating anxiety disorders, NOCD has emerged as one of the leading digital health companies targeting mental health conditions. With a 97% likelihood of a successful exit, NOCD shares the top spot in terms of overall success likelihood with Lyra Health and Pelago. However, the company’s IPO prospects remain uncertain, with only a 21% chance of going public. Despite this, NOCD’s strong overall success rating places it among the most promising companies in the space, and its ability to address a growing market of individuals seeking treatment for anxiety disorders positions it for continued growth.
- Boulder Care: A Medicaid-focused addiction treatment provider, Boulder Care has carved out a significant niche in the addiction recovery space. With a 93% likelihood of a successful exit, Boulder Care shows great promise, although its IPO likelihood is also on the lower side at 22%. Still, the company’s innovative approach to addiction treatment makes it an appealing acquisition target for larger healthcare organizations looking to expand their behavioral health investment portfolios.
- Brightline: As a provider of digital mental health services for children and families, Brightline has earned a reputation for offering valuable support to a highly underserved demographic. With a 91% chance of overall success and a relatively high 34% likelihood of going public, Brightline’s prospects for an IPO are more promising than those of many other companies in the space. This positions Brightline as one of the most interesting companies to watch in the coming years.
The Future of Behavioral Health Investment
In an era marked by increasing attention to mental health, the future of behavioral health investment looks bright. Companies like Lyra Health, Pelago, RealizedCare, and Concert Health are poised to capitalize on the growing demand for mental health services, whether through public offerings or acquisitions. Investors are increasingly drawn to companies that offer comprehensive solutions, integrate various service types, or cater to niche populations, rather than simply focusing on digital solutions alone.
Despite the challenges of the current investment climate, including higher interest rates and economic uncertainty, behavioral health investment remains a dynamic sector that continues to attract significant attention. As the industry matures, the companies that are best able to integrate traditional care with innovative new models will lead the way, offering substantial opportunities for both investors and consumers alike.
For those looking to invest in the future of behavioral health investment, understanding the exit potential of these top companies can offer valuable insights into where the industry is headed. Whether you’re an investor exploring new opportunities or an entrepreneur looking to enter the market, keeping an eye on these emerging trends will help you stay ahead of the curve in the rapidly evolving behavioral health investment landscape.
