By TREVOR VAN MIERLO
In 2021, digital psychological well being and substance use startups attracted a record-breaking $5.1 billion in funding. Regardless of the surge, the promise of scalable, transformative digital well being platforms stays unfulfilled.
Following the surge, funding plummeted. Not like different industries which have been revolutionized by digital-first options, digital well being struggles with fashions that fail to handle value, complexity, and entry.
What we’re left with coming into into 2025 are a smorgasbord of options clamoring to connect themselves to conventional enterprise incumbents (Well being Insurance coverage Suppliers, Digital Well being Data, Hospital Techniques). These incumbents have achieved scale – however not the kind of scale that digital well being must flourish.
Incumbents Construct Deep, Startups Go Broad
Incumbent scale is infrastructure-heavy, sluggish, and linear, and focuses on deep integration inside their established markets.
In distinction, startups goal for technology-driven, exponential, and world scale, leveraging digital platforms to serve tens of millions of customers rapidly. Whereas startups have the velocity benefit, attaining scale just like incumbents requires win-win partnerships and elementary shifts away from established enterprise fashions.
The funding market does see the super alternative: an enormous, rising world customer-base proactively demanding assist as social stigma decreases. And as time passes, this customer-base grows exponentially with expertise pervasiveness.
What traders see is unmet demand for psychological well being and substance use therapy, and a historic alternative for digital well being to step up and ship options which can be scalable, accessible, and inexpensive.
Nonetheless, the supply mechanism to those populations, although digital, is obfuscated by way of the blurred lens of incumbent buying energy. We are able to’t get previous incumbents’ dimension, their attain, and their connection to sufferers. On this widespread view, incumbents are the shopper. This view is promoted by each business and academia.
A current HLTH Inc. abstract, titled Boston Assume Tank: Occasion Takeaways – Scaling Digital Well being: De-Risking Adoption summarizes this: “To successfully scale digital well being options, a rigorously crafted technique is required – one which meets the intricate calls for of healthcare techniques whereas navigating potential adoption hurdles“.
Final April a JMIR Publications printed Digital Well being at Enterprise Scale: Analysis Framework for Choosing Affected person-Dealing with Software program in a Digital-First Well being System. It begins: “The digital transformation of our well being care system would require not solely digitization of present instruments but additionally a redesign of our care supply system and collaboration with digital companions.“
Each will take a long time to realize, and the market received’t wait. The client shouldn’t be the incumbent. The client shouldn’t be even sufferers – it’s individuals.
For now, demand surges, however digital well being is caught within the center.
Demand Surge: Psychological Well being & Substance Use TAM, SAM, and SOM
To know the size of the chance in digital psychological well being and addictions, we flip to TAM (Complete Addressable Market), SAM (Service Out there Market), and SOM (Serviceable Obtainable Market) – frameworks broadly utilized by traders to judge market potential. The framework is summarized properly by Ali Gamaleldin right here.
The TAM, SAM, and SOM in psychological well being and addictions represents a rare, if not immense, enterprise alternative far surpassing many different industries in scope. The scale of the market is a results of excessive prevalence (1 in 8 residents), persistent demand, and world scalability after the correct answer is applied.
In North America and Europe alone, the annual TAM for psychological well being and substance use help is at the moment estimated at $1.2 trillion.
In Australasia the TAM, SAM, and SOM are estimated at $60, $15, and $3 billion, respectively. A scarcity of complete epidemiological knowledge prohibits the TAM, SAM, and SOM from being calculated for Asia, however progress alternatives are huge. That is just like Central and South America, that are additional compounded by various economies and cultures, government-led healthcare techniques, and cultural perceptions of psychological well being.
However regardless of setbacks in Asia, Central, and South America, the varied, multicultural societies in North America and Europe can actively take a look at and validate these rising markets. These areas are ripe for follow-on growth and digital scale.
However has this been accomplished earlier than? What different industries have addressed alternatives with excessive TAM, SAM, and SOM? Is there a roadmap?
The Present Market and Roadmaps
Rock Well being Capital appeared optimistic about 2024. Nonetheless, in actuality digital psychological well being corporations solely raised $682 million within the first half. MedTech Strategist replicate this cautious optimism, and Galen Progress | Insights You Can Belief states that digital well being is poised to outperform 2023, however with the funding specializing in AI are these numbers indicative of digital well being breakthroughs?
There are a number of elements behind the fast lower in funding from 2021, together with a correction resulting from pandemic-driven surge, overvaluations, and investor fatigue, however markets are opportunistic.
However let’s face it – the first purpose is that regardless of the continuing hype surrounding digital well being, a transparent winner – or winners – haven’t emerged. Worse – not like different industries which have reworked to digital, we nonetheless haven’t seen a worthwhile enterprise mannequin.
Trying to Different Industries
In different industries, important TAM, SAM, and SOM alternatives had been leveraged to disrupt business incumbents.
Within the above examples, every firm disrupted incumbents by addressing issues like value, complexity, or entry. These of us within the digital well being business must truthfully ask ourselves if any of the options we’ve created have:
- lowered prices (one might argue healthcare is dearer than ever)
- made the assistance looking for course of and entry much less advanced (attempt to acquire fast entry to a digital well being product)
- opened doorways to non-traditional prospects (e.g. non-insured, minimally-insured, college students, and so on.)
Substitutions & Dietary supplements
Digital well being at the moment is dominated by substitutes, like telehealth and digital therapeutics (mimicking conventional care), and dietary supplements (engagement apps and wearables). These instruments improve failing fashions and don’t tackle the TAM.
Neither strategy addresses the core challenges of value, complexity, and entry. True disruption remains to be lacking.
Digital Well being: A Drawback in Search of an Reply
Huge parts of digital well being’s TAM stay untapped, and the issue is evident: whereas the demand for psychological well being and substance use interventions is big, conventional and hybrid fashions – specializing in dissemination by way of incumbents – fall quick with excessive prices, and restricted scalability.
What’s clear is that the quickly increasing market, which is burgeoning globally, is ripe for disruption.
Catching the breath of digital well being CEOs, product managers, and traders is that Within the realm of digital well being, a “winner-take-all” situation is totally potential. Which means a single evidence-based firm or platform might doubtlessly dominate the market by capturing a big majority of customers and market share, producing world community results, leveraging knowledge – and maybe most significantly – making the most of investor fatigue in ventures which can be stagnant.
Digital well being is at a crossroads. To really revolutionize care, we should transfer past incremental enhancements and embrace options that disrupt the established order – options that scale globally, scale back prices, and open doorways for the tens of millions ready to leap at accessible care.
Dr. Trevor van Mierlo has constructed psychological well being and affected person help merchandise for greater than 20 years and is the CEO of Evolution Well being
