The digital mental health industry in 2024 was largely shaped by the dominance of large platform companies, which have become the powerful “Goliaths” of the field. These industry titans, with impressive technology, extensive customer bases, and massive investor backing, have set the standard for what it takes to succeed in the space. Their size and resources enable them to operate at scale, often offering a wide range of health services beyond mental health. This has left smaller, newer players—referred to as the “Davids”—scrambling to carve out a space for themselves in a market dominated by these big players.
Rock Health’s 2024 year-end funding report highlights this growing divide, showcasing how the major players in the field continue to dominate. Adriana Krasniansky, lead researcher at Rock Health Advisory, emphasized that the rise of these Goliaths requires a shift in mindset for smaller digital mental health startups. “Especially for behavioral health players, understanding that there are going to be certain really big players in the space and then a lot of smaller players is a really important mindset shift,” she explained. “It helps us understand that not every company needs to be a unicorn or a decacorn, or exit publicly to be successful. You can have a really strong impact in health care by changing care delivery for a certain population, or really improving a certain use case or part of that mental or behavioral health experience.”
The increasing prevalence of large platform companies has made it challenging for smaller digital mental health startups to maintain their independence. These Davids may no longer be able to aim for unicorn status or a massive exit. Instead, they are reevaluating what success looks like for their specific goals and audiences. As Krasniansky notes, they may need to rethink how they value their businesses and raise funds. Some smaller companies may opt to partner with larger organizations to help scale their operations, while others could find themselves acquired as part of the inevitable wave of consolidation that is expected to reshape the industry in the coming years.
In fact, Rock Health has predicted an uptick in mergers and acquisitions (M&A) across the digital health space, which includes mental health. Since 2023, startups with high valuations have been struggling to raise additional funding rounds at the same levels, and many companies in the Series B or C stages are finding it difficult to sustain operations. As a result, some smaller digital mental health startups are being forced into consolidation deals with larger companies. While M&A activity in 2024 has been slower than expected, 2025 is shaping up to be a “very fruitful year for M&A,” according to experts. As valuations for some later-stage startups continue to fall and fundraising rounds stall, many smaller players may not have the resources to continue independently, leading to a rise in consolidation across the sector.
Despite the challenges faced by smaller companies, the digital health sector as a whole has seen shifts in funding patterns. In 2024, digital health investment decreased overall, with a greater percentage of funding directed toward early-stage startups. These early-stage companies are attracting more funding, even though the median check sizes for Series D and C rounds saw a significant decline. Early-stage funding remains a strong pillar of the industry, with investors increasingly focused on new startups with innovative ideas. For smaller digital mental health startups, the ability to secure early-stage funding is essential, as it offers them a fighting chance against the larger, better-funded players in the field.
One area where smaller digital mental health startups have found an edge is in artificial intelligence (AI). AI-powered digital health companies made up 37% of the funded startups in the space in 2024, setting a record high. This surge in AI-focused companies highlights the growing importance of technology infrastructure in the digital health space. For small mental health startups, AI offers a unique opportunity to build foundational models that can power their platforms and services, providing them with a competitive advantage in an increasingly crowded market.
Despite the challenges and the growing dominance of large companies, mental health remains a prime area of focus for investors. In fact, mental health topped the list of the highest-funded clinical indications in digital health for the sixth year in a row, raising a staggering $1.4 billion in 2024. This sustained investor interest is due in part to the persistent gaps in the U.S. healthcare system, where high-quality mental health care remains inaccessible for many individuals. As more large companies add mental health services to their existing offerings, they are helping to address these access issues, making the sector even more attractive for investors.
Additionally, the intersection of mental health with other areas of healthcare, such as maternal health, has become an important area of focus for digital health companies. Platforms like Maven, a maternal health company, have expanded their offerings to include mental health services, providing a comprehensive solution for their customers. This convergence of services not only broadens the appeal of digital health platforms but also opens the door for smaller digital mental health startups to collaborate with other health-focused organizations.
In the coming years, digital health companies are expected to delve deeper into the relationship between mental health, physical health, and lifestyle factors such as nutrition and weight management. As Krasniansky notes, understanding the connections between mental health and physical health will be critical for the future of the industry. Smaller digital mental health startups have the opportunity to explore these intersections and create specialized solutions that cater to specific populations, allowing them to thrive despite the dominance of larger players.
For smaller digital mental health startups, the future of the digital health space will require careful navigation. These companies will need to be strategic about their goals, partnerships, and funding strategies in order to compete with the Goliaths of the industry. Whether through collaboration, consolidation, or innovation, the Davids of digital mental health have the potential to make a significant impact, especially as the demand for accessible and effective mental health care continues to grow. The key will be finding their niche, building strong partnerships, and leveraging emerging technologies like AI to create sustainable and impactful solutions for the populations they serve.
