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 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 getting 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 Large
Incumbent scale is infrastructure-heavy, gradual, and linear, and focuses on deep integration inside their established markets.
In distinction, startups goal for technology-driven, exponential, and international scale, leveraging digital platforms to serve hundreds of thousands of customers rapidly. Whereas startups have the velocity benefit, reaching scale much 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 expertise 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 might be scalable, accessible, and reasonably priced.
Nevertheless, the supply mechanism to those populations, although digital, is obfuscated by way of 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 shopper. This view is promoted by each business and academia.
A current HLTH Inc. abstract, titled Boston Think Tank: Event Takeaways – Scaling Digital Health: 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 Health at Enterprise Scale: Evaluation Framework for Selecting Patient-Facing Software in a Digital-First Health 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 many years to realize, and the market gained’t wait. The shopper is just not the incumbent. The shopper is just not even sufferers – it’s individuals.
For now, demand surges, however digital well being is stuck in the middle.
Demand Surge: Psychological Well being & Substance Use TAM, SAM, and SOM
To grasp the dimensions 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 buyers to guage market potential. The framework is summarized properly by Ali Gamaleldin here.
The TAM, SAM, and SOM in psychological well being and addictions represents a unprecedented, 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 international scalability after the correct answer is carried out.
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. An absence of complete epidemiological information prohibits the TAM, SAM, and SOM from being calculated for Asia, however progress alternatives are monumental. That is much 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 various, multicultural societies in North America and Europe can actively check and validate these rising markets. These areas are ripe for follow-on growth and digital scale.
However has this been carried out earlier than? What different industries have addressed alternatives with excessive TAM, SAM, and SOM? Is there a roadmap?
The Present Market and Roadmaps
Rock Health Capital appeared optimistic about 2024. Nevertheless, in actuality digital psychological well being firms solely raised $682 million within the first half. MedTech Strategist mirror this cautious optimism, and Galen Growth | Insights You Can Trust 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 components 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 motive is that regardless of the continuing hype surrounding digital well being, a transparent winner – or winners – haven’t emerged. Worse – in contrast to different industries which have remodeled to digital, we nonetheless haven’t seen a worthwhile enterprise mannequin.
Trying to Different Industries
In different industries, vital TAM, SAM, and SOM alternatives have 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:
- decreased prices (one may argue healthcare is dearer than ever)
- made the assistance looking for course of and entry much less advanced (attempt to get hold of fast entry to a digital well being product)
- opened doorways to non-traditional clients (e.g. non-insured, minimally-insured, college students, and so on.)
Substitutions & Dietary supplements
Digital well being right this 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 deal with the TAM.
Neither strategy addresses the core challenges of value, 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 by way of 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” situation is fully potential. Which means that a single evidence-based firm or platform may doubtlessly dominate the market by capturing a big majority of customers and market share, producing international community results, leveraging information – and maybe most significantly – profiting from investor fatigue in ventures which might be stagnant.
Digital well being is at a crossroads. To actually 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 hundreds of thousands 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 Health
