Risk capital investors spot big promise in SE Asia’s mental health startups

Last month, mental wellness app MindFi raised $750,000 in pre-seed funding from investors including iGlobe Partners and M Venture Partners. As the startup carves out its expansion plans, it is now looking to raise its next round.

Its founder Bjorn Lee said the COVID-19 crisis has accelerated the adoption of the app significantly. The pandemic has given rise to mental health awareness across the world with employees battling issues such as burnout and loneliness, among others.

“Because of the lockdown, the engagement surveys that companies usually run…told them that people [who were telecommuting] were feeling very, very stressed at home,” Lee said. “That’s when our outbound sales efforts…began to finally resonate. [Companies told us they] wanted to help them with their self-care.”

MindFi, established in 2017, offers both self-guided tools and one-on-one therapy on its app. It claims to have over 30 enterprise clients and is said to have served around 50,000 employees so far.

MindFi is not the only startup in the sector that has raked in capital this year. Singapore-based mental wellness app Intellect raised $2.2 million in its pre-Series A round last month to expand its operations. Separately, Malaysia-based digital health startup Naluri, which offers mental health support and chronic disease management for common non-communicable diseases, bagged $5 million in June.

Investments in Southeast Asia’s mental health space are increasingly gaining steam as fund managers gear up to cash in on the wave early.

According to figures available with healthtech advisory firm Galen Growth, investors have deployed a total of $36.8 million in mental health startups so far this year, up from $1.5 million in the whole of 2019. Startups tracked include those that have declared a focus on mental health, and do not include healthtech platforms that are agnostic of diseases and may provide mental health services.

 

Entrepreneurs believe it is a good time to be raising capital given how consumers have embraced digital health out of necessity over the past year and a half. And they are not depending on risk capital investors alone. Azran Osman-Rani, chief executive and co-founder at Naluri, said the company is looking at raising its Series B round next year, and hopes an industry player will lead it.

“[Our last round] was not just a pure VC betting on an industry trend. But pharmaceutical companies, diagnostic companies, other healthcare companies saying this is an important development in our respective industries. And we want to take a stake in it. They’re not just financial investors, but we also have commercial projects with them,” Osman-Rani said. One of their investors is Duopharma Biotech, a Malaysian pharma company. Naluri is understood to have made about $1 million in revenue in 2020, and believes it will be $3 million this year. It has around 10,000 active users currently.

Though mental health apps are increasingly being used by individuals, startups are looking to establish a B2B model since the money primarily lies with employers and insurers.

“It’s a slower sales cycle, but it’s a larger cheque size,” Lee said. “We’ve had offers to do a B2C startup but just never felt that the unit economics was right.” By pivoting to B2B last year, MindFi could attract companies with other features like a wellbeing analytics dashboard for human resource teams.

Approaching the right payers makes mental wellness more accessible as well, said Joan Low, founder of therapy app Thoughtfull.

Since few people in Southeast Asia understand the cause and symptoms of mental health problems, knowing where and how to seek help is not something they can navigate on their own.

For example, a study published by Singapore’s Institute of Mental Health in 2018 found that almost 14% of the people in the city-state suffer from a mental disorder at least once in their life. Yet, 78.4% do not seek help.

Even as the report did not cite the exact reasons behind people’s apprehension, experts tracking the sector said a lot of it is because there is still stigma associated with mental illness. Moreover, people are often unable to recognise the symptoms or are afraid to seek help.

Besides, there is also the question of affordability, said Low. Mental health treatment is still largely seen as a ‘good-to-have’ option and not a ‘must-have’ one. “When it comes to discretionary spending, [not] all markets are equal when it comes to the ability of someone to pay for mental healthcare out of pocket,” she added.

Expand Table

CompanyFunds raised so far (USD)Examples of backers  
MindFi$1.25 miliGlobe Partners; M Venture Partners; PatSnap co-founder Jeffrey Tiong; Koh Boon Hwee; Zopim co-founder Qing Ru Lim
Holmusk $34.19 milOptum Ventures; Health Catalyst Capital; Heritas Capital
ThoughtfullDeclined to discloseDeclined to disclose
Naluri$7.85 milIntegra Partners; Duopharma Biotech; M Venture Partners; Sumitomo Corporation Equity Asia
Intellect$3 mil Insignia Ventures Partners; Y Combinator; XA Network
Source: Reports, DealStreetAsia DATA VANTAGE

Insurance companies coming on board

The market is responding. Last year, AXA announced it was working with Naluri to roll out a digital mental wellness-focused programme for AXA’s corporate clients. Going forward, AXA is in talks with another mental wellness startup.

Meanwhile, Dr Amitabh Deka, Aon’s head of wellbeing solutions in South Asia and Aon Care, said the insurer has partnered with MindFi last year even as discussions between the companies had started before the COVID-19 days.

To be sure, some companies and insurers in Singapore allow employees to make claims for physical counselling sessions under Employee Assistance Programmes (EAPs), but industry players say only around 3% of the employees tap on this scheme. Deka said EAPs are still important given the trust and familiarity people have with traditional providers.

That, however, gives rise to the key question here:  With so many apps mushrooming to provide similar services in the region today, has the space become too crowded?

“Funding is a telltale sign [but] it doesn’t tell you what the platform does,” said Julien de Salaberry, founder and chief executive at Galen Growth, highlighting the difficulty of knowing which of these apps will succeed.

Differentiating oneself would require the startup to stand out in terms of the clinical evidence it has published, regulatory approvals it has secured, and the number of active monthly users it has.

According to Thoughtfull’s Low, the emergence of more players in the region is a positive thing. “I found the pie is so big that actually there are not enough players to feed the need,” she said, pointing to the long waiting list that typifies face-to-face counselling. Apps like hers allow counsellors to provide therapy to many more people at one go.

Echoing the same sentiments, Deka said: “Maybe their communication style attracts [different people].” More competition is good for the market as consumers will have “lots to select from,” he added. Aside from MindFi, Aon will be offering services from another undisclosed mental health app soon.

For insurers, the selection depends on whether the startup is able to deliver what it promises – not just for the following six months, but for the next two to five years.

Small therapy outfits have also got propositions from insurers. Dr Joel Yang, a clinical psychologist at Mind What Matters, said the firm has been approached by eight companies – from large pharma corporates to startups, asking to promote their apps to the clinic’s clients. But Dr Yang said he prefers not to actively push these apps, as it is difficult for his team to assess its suitability given everyone’s different preferences.

While he is glad that these apps normalise seeking mental health treatment, he thinks it is only useful as supplements, not substitutes. Digital tools, even with the use of artificial intelligence, cannot catch non-verbal cues, or may be subject to self-censorship.

Southeast Asia’s market still tiny

Despite growing enthusiasm to embrace mental wellness technology, companies in Southeast Asia still sorely lags behind the global market and its leader, the US.

Even as funding in Southeast Asia has increased manifold this year, it is still way behind the US wherein companies in the sector bagged more than $2 billion, with the worldwide figure touching over $2.4 billion. Only three ventures were funded in the region this year, compared to 64 in the US and 108 globally, Galen Growth’s data showed.

 

Southeast Asia funding in mental health is also behind startups in the oncology space, in contrast to the situation in the US. In Southeast Asia, $108 million in funding was deployed in oncology startups in 2021 so far, while in the US, that figure was $1.51 billion.

 

Most of the ventures in Southeast Asia are still in their early stages – therefore, the rounds they are closing are very small, said Galen Growth’s chief research officer Dr Dario Heymann. For instance, a $1 million round in the region would already be considered significant, while companies in the US are able to raise hundreds of millions. Such figures are difficult to match up even in the years to come, said experts.

de Salaberry attributes such headwinds to the dominant cultural stigma against seeking mental health help, especially in non-rural areas, with the regulators’ focus being more on chronic ailments like diabetes and heart diseases, as well as elderly care.

Investors here focus on multi-verticals instead of being healthcare-focused, which could explain why the funding rounds are small.

“Southeast Asian investors who are very return-oriented are looking into low-risk, high-return [firms],” Dr Heymann added. “Most digital health solutions require huge research capabilities [so] they’re not willing to take the risk of them because they don’t understand the research behind it.”

Holmusk’s Nawal Roy said he never stopped raising funds in the first four years after he founded the venture in 2015. Institutional investors were not keen on the behavioural data analytics firm, so he had to pull together small cheques of under a million from angel investors.

“For assets like this, there is no clear-cut ROI in a very short window. And the investor community is not able to relate to it,” said Roy, who is now based in New York, which is where Holmusk’s other headquarters is.

Holmusk runs analyses for both diabetes and mental health, but Roy said almost 90% of its clients are focused on the latter. The company has more than 40 customers, including Johnson & Johnson and Otsuka Pharmaceutical – the latter invested about $1 million in the company in April this year, according to Accounting and Corporate Regulatory Authority regulatory filings.

By the time Holmusk wanted to raise its Series A round, it was much easier. Roche had bought over Flatiron Health – similar to Holmusk but one that looked at cancer research – for $1.9 billion. Holmusk announced it secured $21.5 million in May 2020. Optum Ventures, which led the round, had approached them, Roy said.

The firm is now looking to close a $150 million round by the end of this year. Roy declined to disclose details about the deal, but said it will probably be led and joined by US investors. Holmusk is looking to make an acquisition with the new funding.

The scene in Southeast Asia is gradually improving, at least starting with general healthtech players. Several of them bagged double-digit funding this year. Doctor Anywhere raised $65.7 million in August, Homage secured $30 million earlier this month, and Halodoc nabbed $80 million in May. Singapore state investor Temasek was a backer in all of them.

Going forward, investors expect action to hot up in the nascent mental health sector over the next few years.

According to Seemant Jauhari, managing partner at healthcare-dedicated VC fund HealthXCapital, with the greying population in the region, the continent is expected to house 60% of the world’s 65-and-over population by the 2030s which could prove to be an impetus to take mental health conditions seriously. This is even as Asia is “still going through the pains of accepting mental health issues”, he added.

“A longer life doesn’t necessarily mean a healthy one. A lot of them will have mental health issues, and we need to be ready to cope. There is scope, but it will happen over the next 5 to 10 years,” he said at a DealStreetAsia healthtech webinar last month.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.