In recent years, we have seen a decline in investments in digital health. This is due to a number of factors, ranging from rising interest rates and regulatory issues to market consolidation (for example, there is a trend towards integrating mental well-being solutions into broader healthcare platforms, reducing individual investments in smaller niche players). On the other hand, according to Healthtech Alpha (backed by Galen Growth), 62% of the funding volume in digital health in Q1 2024 was allocated to specific therapeutic areas. Ventures with a focus on disease-agnostic raised a total of $2.5 Billion, followed by Mental Health raising $579.84 Million. In this post based on the insights from a recent panel discussion on investments in digital mental well-being by DŌBRA, we will dive into the key trends and challenges for venture capital in this vital space.
The Shift in Investment Focus
In the ever-evolving world of venture capital, there has been a significant shift in investment focus over the past few years. Previously, the emphasis was predominantly on growth, often at the expense of profitability. However, recent trends indicate a shift towards a more balanced approach where profitability is increasingly valued alongside growth. This change reflects a growing awareness among investors that sustainable businesses must eventually generate profits.
Leen de Bruyne, Scale-up Entrepreneur and Founding Partner at Living Hope VC, highlights this shift: “Two years ago, you could mention every word when you did fundraising, but not profit. Profit was not cool; it was all about growth. In the last two years, investors became more conscious that companies, at a certain moment, should make money.”
The market dynamics have also changed, with investors now preferring to finance later-stage rounds, which are perceived as less risky. This is partly due to the realization that the days of endless new rounds of funding might be over. As de Bruyne puts it, “You cannot trust anymore that there will be endless new rounds and that a new investor will pour money into the startup for a higher valuation.”
The Impact of Geopolitical Factors
Geopolitical factors have also played a significant role in shaping the fundraising environment. The ongoing war in Ukraine, for instance, has created additional challenges for startups in Central and Eastern Europe.
Vital Laptenok, General Partner at Flyer One Ventures, an early-stage venture capital firm, explains, “Here in Warsaw, part of CEE, we not only have the effects of the global market but also the impact of the war in Ukraine, which negatively affects the fundraising environment.”
Despite these challenges, great founders and high-quality products still manage to attract investment. However, the bar is now much higher than in 2020 and 2021., and the competition among VCs for the best founders is fierce. “The competition among VCs for the best founders is pretty high now because everyone wants to take less risk. Early stages are OK, but I would say Series B or C are easier now. I think it’s the other way around. It’s much harder to fundraise at higher valuations because the probability of exit and high return for later stages is lower than at the early stage. Seed stage is pretty much OK, pre-seed may be more challenging,” Laptenok notes.
Fundraising Challenges and Development Strategies
Fundraising has become more challenging, particularly for early-stage startups without proven income. For B2B startups, the situation is somewhat easier, but B2C startups face significant hurdles in demonstrating financial metrics at the pre-seed stage.
Darya Danilava, Co-Founder & Adviser at Elatra, an online coaching platform for tech companies, reflects on her experience, “From the perspective of a startup founder, it is incredibly difficult to raise without income now. As a founder of a B2B startup, for us, it is easier, but I think for B2C, it is quite tricky to show financial metrics at the pre-seed stage.”
Also, Danilava highlighted several trends this year compared to her prior fundraising experience. “Previously, it was essential to secure the whole round before signing with investors. This year, we got commitments for half the round and had talks with investors who asked for metrics and traction. We realized that having commitments for half the round allowed us to continue working with clients and show progress. This approach now seems acceptable, and we can make multiple extensions to the round. It benefits us as we get better valuations for each extension, making it a win-win situation,» Danilava says.
Nonetheless, opportunities still exist. Vitaly Laptenok suggests that acquiring users has become easier due to reduced competition and less investment money in the market. “You can acquire users much cheaper than it used to be,” he says.
In this challenging environment, having a strong track record and high energy levels are crucial for founders. Alexander Chekan, Chief of Staff at Palta, the health & well-being tech company behind Flo, emphasizes the importance of founder-market fit and genuine passion for the product, stating, “Doing a startup is a multi-year endeavor, and you need perseverance and intrinsic motivation.”
Building Sustainable Businesses
Today we see the focus has shifted towards building sustainable and successful businesses rather than merely aiming for exits. This approach requires startups to meet specific metrics and have the right people on board to raise subsequent rounds of funding.
Vitaly Laptenok explains, “Our goal in our fund is to get seed-stage startups and make them ready for Series A. Understand what exactly you need to have, what metrics, and what people you need to have on board to raise the next round.”
Alex Chekan emphasizes the importance of optimizing for sustainable growth and profitability. “At Palta, we have five different businesses in the group, each at different stages. For our largest business, Flo (a period tracker), we plan an IPO. We optimize for building a sustainable business model, reducing cash burn while growing over 50% year-over-year in the healthcare segment. We aim to grow without relying heavily on external fundraising. Sustainable growth and profitability are preferred options now,” he says.
The Future of Digital Mental Well-being
However, motivating users to engage with mental health and well-being products remains a challenge. Danilava points out, “From a B2B perspective, it’s easy to sell mental health and personal growth products to CEOs and top managers, but they are often too busy to use them. Products may be available to all employees, but only a small percentage use them. We now provide toolkits, education programs, and webinars to increase usage within companies. It’s not enough for the product to be available; it must be used”.
“The problem with mental health products is not knowledge but motivation. Whoever solves this motivation problem will win. Current market leaders have failed to deliver on this promise. You can’t fix mental health with just meditation. Hard things need to be made easier, like Duolingo did for education. Similar innovations are needed in the mental health market,” says Laptenok.
In this case, gamification and AI in mental well-being solutions hold great promise to enhance engagement. As a great example, Chekan named Headapp from Germany: the team is trying to help people overcome anger with game mechanics similar to Duolingo.
AI at the present stage can already do a lot of things, but regarding to mental well-being, Chekan stopped on a few specific options. The first one is personalization (in the past, we had no way to truly personalize the message and deliver it in the right way, at the right moment, using the right tone of voice that touches the intrinsic motivation of a particular user). The second is the facilitation of group discussions. “I am a big believer in creating social pressure and accountability within small groups, and maybe not so small. Now, we can embed the system with a coach, a therapist, or whoever in these small groups, and they will nudge the real people. Because people are accountable to each other, not to the machine, they will comply better and adhere better to the recommendations of these agents,” continues Chekan.
However, the digital-only solutions are not enough. They are scalable and affordable to billions of people—that is true. But it’s not enough to fix some more serious issues. “For instance, there is a war in Ukraine and thousands of people with PTSD, and you’re not going to fix it with just visiting an app, right? So, you need VR, pharmaceutical, and biotech solutions. You need substances like ketamine or shrooms, guided by therapy, but done in a scalable way. We’ll see a lot of innovations in that direction as well,” finalizes Chekan.
In the final part of our series of posts from our event in Warsaw, we dive into the ethical aspects of using AI, which is the most relevant and pressing topic in the digital mental well-being domain. Usually a significant portion of the debates in this issue centers around algorithmic bias, data privacy, the transformation of the doctor-patient dynamic, etc. These concerns underscore the complexity of deploying AI in sensitive areas, where the stakes involve not just efficacy but the profound impact on individual dignity and equity. What do experts think about this? What should we keep in mind as we embark on this journey?
Embracing Technology in Mental Health Care
Tom Van Daele, Clinical Psychologist and Research Coordinator in Psychology and Technology at Thomas More University of Applied Sciences, addressed the perception that mental health professionals are hesitant to adopt technology. He acknowledged that some professionals are not tech-savvy and that ethical concerns play a significant role in this reluctance.
“There’s always people who are not tech savvy or don’t know how to make proper use of them. But on the other hand, ethics essentially comes into play. We dramatically fail to help all people in need. So I can only applaud anything that can add to more people seeking and finding some sort of support,” Van Daele said.
However, Van Daele also stressed the importance of caution when using AI in mental health. “It’ll do pretty impressive stuff for like 95% of the cases. But 5 or sometimes even 1% that worries me where it gets hallucinations or you get recommendations that are not fully substantiated or potentially even false. So, it’s important to carefully choose when and how and for what purpose you could use them.”
DŌBRA Solution: Magic Mirror
Tetiana Kochetkova, Product Owner and Co-Founder of Magic Mirror at DŌBRA, shared her insights on how her startup addresses these ethical concerns. Magic Mirror is a mobile app designed to facilitate decision-making and expand users’ perspectives by leveraging a hybrid approach that combines AI, professional profiling, and cognitive psychotherapy.
“Magic Mirror is built on the idea that the best partner for a person to think through problems is themselves. We see that negative self-image and negative self-talk impact a lot on our activities, and it’s harming us a lot,” Kochetkova explained. “We are trying to build some way to get into a partnership with myself—a person who I can trust and also do that in a safe space.”
To ensure ethical use of AI, Magic Mirror employs a three-tier AI ethics checkup: at the protocol level, verified by experts; at the data level, ensuring privacy and security; and at the ethics level, providing appropriate emergency responses and referrals to specialists as needed.
“AI in Magic Mirror serves as a ‘train for your thoughts,’ accelerating decision-making and improving self-image in a manner as modern transport makes movement faster and comfier. It’s designed to be a supportive tool that guides users to better understand and address their own mental health needs with a focus on mental well-being,” Kochetkova added.
Leveraging Technology to Combat Loneliness
Dr. Christina Spragg, Clinical Psychologist and Global Workplace Mental Wellness Consultant, highlighted the potential of technology to address issues like loneliness and grief.
“Technology, including AI, can help by facilitating online support groups where people with similar experiences can connect. For instance, someone in a small town who feels self-conscious about sharing personal issues can find support online while remaining anonymous. This is a powerful way to combat the loneliness and isolation exacerbated by our increasingly digital lives,” Spragg noted.
Ethical AI and Compassion in Mental Health
Van Daele further emphasized the importance of ethical AI in mental health care, particularly in providing compassionate responses. “People, on average, do want to be compassionate. It is however sometimes just difficult to find the right words. If you want to outsource this to AI, I think it’s perfectly fine if the alternative is that you won’t be giving a compassionate response.”
He noted the progress in destigmatizing mental health and the increasing willingness of people to seek help. “Over the last decade, we’ve seen an increase in the destigmatization of mental health. I think it was a very first important threshold for people to acknowledge ‘I’m not okay and I need help.’ The next step is the kind of support we can give those people who clearly indicate that they need some help.”
Conclusion
In conclusion, as we advance the integration of AI into mental wellbeing, we are reminded of our capabilities and responsibilities. The discussions from Warsaw provide crucial insights into the ethical deployment of AI technologies in mental health, emphasizing both the vast potential and the profound responsibilities we carry in shaping this evolving landscape.
We continue to share insights from our recent event in Warsaw, focusing today on the intriguing connection between nutrition and mental well-being. Current scientific studies have begun to uncover the profound influence that diet has on our mental well-being. DŌBRA is at the forefront of this exploration, with one of its startups dedicated to this innovative issue.
The Science Behind ‘Food for Mood’
It’s fascinating to note that approximately 95% of serotonin—a neurotransmitter crucial for mood regulation—is produced in the gut. Yet, only 21% of people experiencing mental health symptoms are aware of the significant relationship between the gut and the brain. In developing the ‘Food for Mood’ mobile app, DŌBRA targets common symptoms of poor mental and physical well-being. “We then align those symptoms with scientifically backed products that have proven efficiency in mitigating these particular issues,” says Max Roslovs, Product Owner and Co-Founder of the Food for Mood app at DŌBRA.
This initiative goes beyond merely recommending supplements or dietary changes. “We’re gradually altering their consuming behavior by guiding individuals to make these adjustments. It’s about fostering a more mindful approach to nutrition and well-being, showing that small, informed choices can significantly improve how they feel daily,” continues Max Roslovs.
Mental Well-being and Nutritional Interventions
The gut is often referred to as a “second brain” because it is the main producer of serotonin, which influences our physiological state and sense of well-being. “So, when you feel anxious and have an upset stomach, it’s not just a coincidence. Although I am not a nutritionist, I am encouraged by the growing amount of research in this area. It can sometimes be confusing with all the supplements out there, but clearer research shows that certain types of probiotics and prebiotics can significantly impact serotonin production. This is a promising starting point for improving our well-being: we could all benefit from a little more serotonin,” said Dr. Christina Spragg, Clinical Psychologist and global Workplace Mental Wellness Consultant.
During the panel discussion, Dr. Tom Van Daele, a Clinical Psychologist and Research Coordinator in Psychology and Technology at Thomas More University of Applied Sciences, commented on the historical separation between mind and body in medical treatments and the importance of their reintegration. “To move towards a more holistic approach to mental health, also focusing, for example, on nutrition, as a component and aspect to work on is definitely important. And for some people, it can be more tangible and concrete to say, I’m going to start focusing on what I eat, rather than I’m going to start being more mindful and live in the moment or whatever. So I think it’s an interesting starting point to also contribute to better mental health,” said the expert.
Conclusion
The dialogue between cutting-edge research and practical applications in nutrition and mental well-being is just beginning. As we dive deeper into the scientific studies and consumer experiences shared by initiatives like DŌBRA’s “Food for Mood,” it becomes clear that our approach to mental health is becoming increasingly holistic and integrative. This journey not only opens new avenues for individual wellness but also signals a shift in how we understand and manage mental health through diet, offering promising prospects for future innovations in health care. Rapidly evolving landscape presents exciting possibilities not only for individuals seeking to enhance their mental well-being through diet but also for educators, healthcare providers, and technologists dedicated to building a healthier future.
In today’s tech-driven world, the impact of digital tools on early intervention in mental well-being is profound and transformative. These tools not only offer widespread access to resources, but also embrace diversity in forms—from mindfulness apps to AI chatbots, catering to various needs and preferences. What key considerations should be taken into account when crafting tech solutions for early interventions? What insights do experts offer on this matter? We’re thrilled to share some insights from our recent event in Warsaw, where we dived into such a critical realm of digital mental wellbeing.
Criteria for Developing Digital Tools
While venture capital funding for mental health technology companies has fluctuated in recent years (up 75% in 2022 compared to 2021, and down in 2023 — on par with the decline in digital health investments), the diversity of innovative tools in the digital mental well-being industry has increased significantly. Among them, there are VR-powered therapy, biosensing technologies, AI-driven mental health platforms, etc.
Tom Van Daele, a Clinical Psychologist and Research Coordinator in Psychology and Technology at Thomas More University of Applied Sciences, highlights the importance of reevaluating. Traditionally, the focus has been on specific disorders like depression or anxiety. However, Tom suggests a shift towards a broader perspective. Rather than targeting individual conditions, he advocates for identifying universal factors that transcend diagnostic boundaries. Factors such as resilience-building and social support can be pivotal in early intervention efforts. By embracing a holistic approach, digital tools can better address the diverse needs of individuals navigating mental well-being challenges.
Challenges in Integrating and Evaluation Criteria
There are a number of different researches highlighting that dozens of adults and youth did not receive any mental health treatment. So, digital mental health technology can help to bridge the gap by offering scalable solutions that reach a larger number of individuals, and at lower cost.
Christina Spragg, Clinical Psychologist and global Workplace Mental Wellness Consultant, highlights the potential of digital tools in symptom tracking and psychoeducation. While these tools offer valuable support, Christina cautions against viewing them as substitutes for therapy. Unlike human clinicians, machines lack clinical intuition and struggle to interpret nuanced cues from patients. Despite their utility in certain aspects, AI tools cannot replicate the depth of human interaction essential in therapeutic settings. Thus, while embracing technological advancements, it’s crucial to recognize the inherent limitations and ensure a complementary approach to mental health care.
“Digital tools can also provide guided interventions for anxiety reduction, behavioral activation strategies to reduce symptoms of depression, virtual reality exposure for overcoming phobias. Wearable devices can be an “additional set of eyes” to track sleeping patterns, heart rate variability (which can be an indicator of stress), physical activity, and medication adherence”, — said Dr. Spragg.
This is confirmed by research of the Journal of Medical Internet Research, for example, finding that while 70% of users reported some benefit from mental health apps, only 25% felt these tools could adequately replace face-to-face therapy sessions. This underscores the importance of human interaction in achieving deeper therapeutic outcomes.
When evaluating the effectiveness of digital interventions, Christina emphasizes the significance of subjective experiences. Beyond objective metrics, such as physiological responses, individuals’ perceptions of improvement are paramount. Tom echoes this sentiment, emphasizing the need to acknowledge diverse responses to stress and mental health challenges. By embracing a person-centered approach, digital tools can accommodate the varied experiences and coping mechanisms of users.
DŌBRA Solution
Our studio is currently nurturing four startups, each deeply intertwined with the discourse on mental well-being. Among them is Bear Room, a mobile app dedicated to providing instant stress relief.
According to Jane Makarevich, Product Owner and Co-Founder of Bear Room at DŌBRA, more than half of respondents of the startup’s surveys aren’t aware or have any self-help tools. And when people feel under pressure, they can lead to bigger crises, for example anxiety, depression, psychosomatic disorders, etc. So a startup’s approach is based on the idea that immediate stress relief is provided by something called positive distraction. Positive distraction has been found to reduce negative emotions, disrupt rumination, and lead to increased use of positive, problem-oriented coping techniques. “These moments of respite—temporary, planned breaks from stressful experiences—play an important role in coping with stress, and ultimately help people feel refreshed and better able to cope with stressors after a reprieve. That is why we decided to work with this topic of instant stress relief to help people right here right now”, — says Jane Makarevich.
In conclusion, the journey towards effective digital interventions for mental health necessitates a multifaceted approach. By prioritizing universal factors, recognizing the limitations of technology, and valuing subjective experiences, we can develop more inclusive and impactful solutions. At DŌBRA, we remain dedicated to advancing the frontier of digital mental health interventions, guided by empathy, innovation, and a commitment to holistic well-being.
Recently, our Co-Founder Aljaxander Skrabowsky had an interview with Devby media outlet. Below are his most insightful ideas about various aspects of the venture studio phenomenon — from the model of working with startups to fundraising issues and DŌBRA’s unique features (published in abridged form with minor changes).
About Skrabowsky and “Dobra” before DŌBRA
Aljaxander Skrabowsky is an independent entrepreneur and impact investor, former co-founder, and director of the Belarusian Dobra Foundation. It was a non-profit organization dedicated to developing social innovations, promoting responsible and sustainable business practices, and organizing the Social Weekend contest of social projects for over 8 years.
During this time, more than 4,000 unique ideas took part in Social Weekend, with the contest supporting ideas worth over 1 million dollars. However, Dobra was liquidated by Belarusian authorities in the summer of 2021.
DŌBRA Studio Features
— We have tried different approaches to working with startups, so we came to the venture studio model evolutionarily, — Aljaxander explains. — The studio format seemed promising, as it allows the best of both the accelerator and the fund.
Our unique approach is focusing on one topic domain for all projects in a batch. We believe this increases startups’ chances of survival. Startup teams exchange expertise and developments at the operational level, strengthening each other. At the same time if a studio concept fails to pass validation and is shut down, the teams are redistributed without losing their accumulated expertise and onboarding time.
The core team of the studio, all the way up to the Seed round acts as operations team distributed across the startups, not just advisors, mentors, or board members. This is one reason why studios today have higher project survival rates than funds or accelerators.
The Cornerstone of Positive Impact
As a venture studio with a strong focus on impact, we conducted a large-scale survey before launching the first batch to find the issue that most affects society today. The result was a focus on mental well-being.
According to WHO, 1 in 8 people in the world suffers from a mental disorder (970 million people), and 1 in 4 will face mental or neurological problems at some point in their lives. There are over 10,000 apps and tech solutions for preventing and treating mental disorders worldwide, but only a few significantly improve the situation.
While working with startups from the idea stage, we held a Grand Prix — a series of modified hackathons to gather insights and consider around 1,000 ideas on the topic. We concluded with 98 promising insights for solutions and managed to pre-validate 14 tech product concepts within the studio. Four turned into pilot products and have already entered test markets:
Bear Room: A mobile app for quick stress relief using therapeutic tools (vocal practices, affirmations, music games, breathing techniques, meditations).
CareCompanion: A personal assistant to support loved ones, offering ways to express sympathy and support in particular situations (developed in cooperation with psychologists).
Magic Mirror: AI-powered copilot for decision-making, from simple choices (what to have for dinner — spaghetti or stew?) to self-reflection.
Food for Mood: Recommends foods to improve your psycho-emotional state in the moment (relax, improve attentiveness, productivity, etc.).
Global Expertise and Unified Vision
Our team comprises 17 people living in 7 countries and 4 time zones. We have a core team covering HR, legal, marketing, expert scouting, and other areas. Another part — designers, developers — focuses solely on the products.
Our product owners don’t need to look for contractors or team members for product design, marketing, medical consultants, or enablers. These are all handled by the core team. This makes us the best option for those who dream of their own startup but realize they cannot manage solo-founding or work as a developer for a share on vesting for 4 years. Note that up to 60% of the share of startups is reserved for our co-founders.
Additionally, 10% of the value of future startups in the form of Grand Prix tokens is reserved for mentors and advisers. During Social Weekend, I observed many times when a mentor’s advice or recommendation had a tremendous impact on a project: founders found PMF, partnerships, investors, etc. Often, those who gave this useful advice received nothing but words of gratitude for their contribution.
Therefore, when launching the venture studio, we wanted to establish mechanics that would allow us to thank all those involved in our success. As a result, we reserved 10% of the value of future startups in the form of tokens. To implement this idea and guarantee fulfillment of this obligation, we have an agreement with KOOS.io.
Venture Studio Fundraising Dynamics
Studio fundraising has significant differences, and it is the task of studio co-founders rather than startup teams. Generally, it’s the same stages as a conventional startup: with investors’ pipelines, pitch decks, and lots of meetings. This work is ongoing: we raise about 200–250 thousand euros per quarter on a permanent basis, not from round to round.
At this stage, private investors have invested in our projects, and we have also attracted R&D grant money. Altogether, about 500 thousand euros.
Closer to the fall, all projects will become separate startups at the legal entity and team level. The studio will remain a shareholder. Further development (inside or outside the studio) will depend on the investor’s wishes and capabilities. At the same time, we plan to raise external funding for each of the startups.
Learn more about our latest event and our startups here: https://meet.dobra.world/