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. In contrast to different industries which were revolutionized by digital-first options, digital well being struggles with fashions that fail to handle price, 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 Programs). These incumbents have achieved scale – however not the kind of scale that digital well being must flourish.
Incumbents Construct Deep, Startups Go Large
Incumbent scale is infrastructure-heavy, gradual, and linear, and focuses on deep integration inside their established markets.
In distinction, startups purpose for technology-driven, exponential, and international scale, leveraging digital platforms to serve tens of millions of customers rapidly. Whereas startups have the pace benefit, reaching scale just like incumbents requires win-win partnerships and basic shifts away from established enterprise fashions.
The funding market does see the super alternative: an enormous, rising international customer-base proactively demanding assist as social stigma decreases. And as time passes, this customer-base grows exponentially with know-how pervasiveness.
What buyers 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 via the blurred lens of incumbent buying energy. We will’t get previous incumbents’ measurement, their attain, and their connection to sufferers. On this frequent view, incumbents are the client. This view is promoted by each trade and academia.
A latest 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 fastidiously crafted technique is required – one which meets the intricate calls for of healthcare programs whereas navigating potential adoption hurdles“.
Final April a JMIR Publications revealed Digital Well being at Enterprise Scale: Analysis Framework for Deciding on 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 current instruments but in addition a redesign of our care supply system and collaboration with digital companions.“
Each will take many years to attain, and the market gained’t wait. The client just isn’t the incumbent. The client just isn’t even sufferers – it’s folks.
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 grasp the size of the chance in digital psychological well being and addictions, we flip to TAM (Whole Addressable Market), SAM (Service Accessible Market), and SOM (Serviceable Obtainable Market) – frameworks extensively utilized by buyers 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 dimensions of the market is a results of excessive prevalence (1 in 8 residents), persistent demand, and international scalability after the right answer is carried out.
In North America and Europe alone, the annual TAM for psychological well being and substance use help is at present 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 programs, 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 enlargement and digital scale.
However has this been finished 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 firms solely raised $682 million within the first half. MedTech Strategist replicate this cautious optimism, and Galen Development | 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 speedy lower in funding from 2021, together with a correction as a result of pandemic-driven surge, overvaluations, and investor fatigue, however markets are opportunistic.
However let’s face it – the first cause is that regardless of the continued hype surrounding digital well being, a transparent winner – or winners – haven’t emerged. Worse – in contrast to different industries which have reworked to digital, we nonetheless haven’t seen a worthwhile enterprise mannequin.
Seeking to Different Industries
In different industries, vital TAM, SAM, and SOM alternatives had been leveraged to disrupt trade incumbents.
Within the above examples, every firm disrupted incumbents by addressing issues like price, complexity, or entry. These of us within the digital well being trade must truthfully ask ourselves if any of the options we’ve created have:
lowered prices (one might argue healthcare is costlier than ever)
made the assistance looking for course of and entry much less advanced (attempt to acquire speedy entry to a digital well being product)
opened doorways to non-traditional prospects (e.g. non-insured, minimally-insured, college students, and so forth.)
Substitutions & Dietary supplements
Digital well being immediately 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 handle the TAM.
Neither strategy addresses the core challenges of price, complexity, and entry. True disruption remains to be lacking.
Digital Well being: A Downside 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 gigantic, conventional and hybrid fashions – specializing in dissemination via incumbents – fall brief 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 buyers is that Within the realm of digital well being, a “winner-take-all” state of affairs is fully doable. Which means that a single evidence-based firm or platform might probably dominate the market by capturing a big majority of customers and market share, producing international community results, leveraging knowledge – and maybe most significantly – profiting from 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 assist merchandise for greater than 20 years and is the CEO of Evolution Well being
