“We’re certainly not slowing down”: General Catalyst’s fast-paced approach to investing in behavioral health

Venture capital firms in recent years have pumped billions of dollars into behavioral health companies, recognizing the great need for their services and untapped opportunities to consolidate a fragmented market.

Among the most active venture capitalists is General Catalyst, which has a portfolio of more than a dozen companies focused on behavioral health, Eleanor Health and Itemsto Ripple and special min. Managing Partner Holly Maloney has helped spearhead the company’s behavioral health efforts.

“Behavioral health, in particular, has been a very important focus area for us,” Maloney told Behavioral Health Business. “And for me, in particular.”

In addition to Eleanor, Elemy, Rippl and SonderMind, other examples of General Catalyst’s behavioral health investments include Circulo, Equip Health and Osmind. The firm’s strategy, Maloney explained, has been to support businesses that “think about things holistically” and support whole person care, rather than operating with a very silo approach.

That’s partly why she has her fingers in everything from autism treatment to eating disorder recovery.

“It all centers on our health insurance investment thesis, which focuses on making our system more personalized, proactive, at lower cost, and creating greater accessibility for underserved communities,” said Maloney, who co-leads investment in medical care for 10 people. General Catalyst team.

Along with its own portfolio, General Catalyst has 15 partnerships with healthcare systems, where it serves as its strategic innovation arm. That growing list includes Banner Health, Intermountain Healthcare and Universal Health Services Inc. (NYSE: UHS), the latter of which operates a network of more than 330 behavioral health centers.

While many companies have only focused on the behavioral health space since the COVID-19 pandemic, Cambridge, Massachusetts-based General Catalyst has been exploring it since 2018, when the company held its first health summit. mentally, Maloney said.

“This was… long before COVID, when the massive light was shown on the crisis that is in our country,” he said.

Building ‘an ecosystem of companies’

Mental health startups especially have seen high levels of venture capital interest since mid-2020.

Through the first three full quarters of 2022, there were at least 225 funding deals in mental health last year, according to the latest quarterly data from CB Perspectives. The previous year saw at least 349 financing deals.

Combined during 2021 and 2022, investment in mental health amounted to more than $7.5 billion.

General Catalyst has been a part of some of the largest individual fundraising rounds during that period. In April, mental health and addiction treatment provider Eleanor Health announced a $50 million Series C. A month later, Osmind, a company that creates a care and community platform for people with treatment-resistant mental health disorders, announced a $40 million Series B.

“We are really focused on developing and investing in an ecosystem of companies that together will break down the silos that have existed between mental and physical health for a long time,” Maloney said.

Broadly speaking, there are five pillars to General Catalyst’s healthcare investment strategy.

As Maloney noted above, the firm aims to support startups that are breaking down silos and expanding access to care. The SonderMind patient-therapist matching platform is a good reflection of that concept.

“It’s really hard to connect with care, it doesn’t matter in real time, but possibly never,” Maloney continued. “[We’re] focused on companies that are really focused on creating that layer of access. That led to early investments in companies like SonderMind, companies that were insurance enabling therapists, so they could think of a much broader patient population and really bring that near real-time connection to care.”

In addition to these two pillars, General Catalyst seeks to invest in companies focused on results and risk-taking models.

Population-specific business models and workforce support are also key focuses for the company. Rippl, a tech-enabled startup launched with a mission to better serve older adults with mental health conditions, including dementia, is an example of those two pillars.

Founded by former Starbucks Corp. (Nasdaq: SBUX) executive Kris Engskov, Rippl exited stealth mode in September, armed with $32 million in seed funding.

“It’s not news to anyone that we have this massive workforce crisis, so we’re really focused on companies that are looking to significantly expand that workforce,” Maloney said. “For many years, [Engskov] she was in the C suite at Starbucks, which may not seem like a natural progression, but then she ran a long-term care facility. I think of Starbucks as one of the first workforce transformation companies, because they fundamentally rethought what it meant to be a barista. How do you recruit talent? How do you train and educate?

Sharper Care to Define 2023

While recent years have seen an influx of venture capital into the behavioral health space, some are forecasting 2023 to be more tepid due to the general state of the US economy. That may translate to fewer deals. funding, but it could also simply mean smaller funding rounds and more conservative investments.

In anticipation of having to stretch their cash reserves, many venture capital-backed companies have I already started to reduce costs cutting his staff.

Even some of the new behavioral health companies in the General Catalyst portfolio have been affected by this trend. In fact, SonderMind, Eleanor and Elemy cut back towards the end of last year, BHB previously reported.

“Given the current economic conditions, we made the decision to accelerate our path to profitability, to ensure that we can remain independent and continue to deliver high-quality technology-assisted mental health care,” SonderMind CEO and co-founder told BHB. , Mark Frank. in an email.

However, Maloney doesn’t expect a major setback with behavioral health in 2023, at least not when it comes to General Catalyst and its long-term vision.

“There may be fewer super-broad horizontal companies coming in and leaving giant checks,” he told BHB. “But we are about to start investing from our dedicated healthcare fund. And I have a high degree of confidence that… a lot of that will go to mental health. We’re certainly not slowing down.”

As for the trends that will define investment in behavioral health in 2023, Maloney sees an increased focus on higher-acuity care.

Until now, much of the investment activity has revolved around lower-acuity, highly-scalable models that are better understood. That will change soon, she believes.

“Now we really need to figure out how we’re going to get involved and take care of those areas of the population where the outcomes are incredibly poor and the cost is very, very high,” Maloney said. “I think it’s going to be a consistent narrative going into next year.”

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