Venture Capital’s Readiness to Pounce on Mental Illness Investment

Private equity investors are still cautious about investing in serious mental illness (SMI) care due to the challenges associated with the population. However, venture capital firms may be more willing to invest in innovative SMI care models. Despite the hesitation, the economic cost of SMI is more than $300 billion each year. PE investors typically prefer models and organizations with a proven track record and that can scale easily, which can be challenging for SMI care. Many investors focus on the lower-acuity side of care, which doesn’t face the same challenges as SMI care. Additionally, reimbursement is a critical factor in SMI investment as people with SMI are over-represented in the Medicaid space. Traditionally, PE-backed companies have focused on commercial payers. However, some PE investors are becoming more comfortable with Medicaid-heavy businesses. On the other hand, venture capital firms may be better suited to invest in SMI care due to the need for new care models. Several venture-backed startups have emerged in the SMI care space, and some venture capitalists see this area as prime for innovation. GV, formerly Google Ventures, has already invested in new types of SMI care, including a New York-based startup that focuses on the peer-support model. The future of SMI investment may lie in venture capital rather than private equity.