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Virtual Care Drives Rise In Addiction Treatment Startup Funding

Illustration of man with mental issues looking at smartphone.

When Hollywood takes on addiction recovery, the script typically conjures up dingy rooms where the down-on-their-luck gather to share their struggles and fears.

The prevailing venture-funded model, in contrast, offers little cinematic eye candy. Rather, the focus is mostly on startups where people in treatment message and video chat with care providers and use apps to track prescriptions.

Visual appeal aside, there’s plentiful funding to bolster this smartphone-driven vision. Addiction-focused virtual care startups have pulled in hundreds of millions for business models largely based on building offerings scalable enough to meet the massive demand for treatment.

Much of the funding activity is quite recent.

Just last Tuesday, Portland, Oregon-based Boulder Care, a provider of long-term, virtual care offerings for people with substance abuse disorders, pulled in $35 million in its latest venture round. The 7-year-old startup offers prescription meds and an online support infrastructure to help recovering opioid users and alcoholics.

The same day, Nashville-based Wayspring, a provider of clinical and peer support to people with substance use disorder, announced it had secured a minority investment led by CVS Health Ventures. Previously, 12-year-old Wayspring had raised more than $116 million in known venture funding.

Recent funding recipients

For a bigger-picture view of where investment is going, we used Crunchbase data to aggregate a list of 14 addiction treatment-focused companies funded in the past few quarters.

Altogether, companies on our list have raised $810 million in reported funding to date. That includes CVS’ recent investment in Wayspring, reported to total $45 million.

Demand-wise, it’s not hard to see why startups pitching scalable addiction treatment would find a receptive investor audience. Among Americans who need substance abuse treatment, it’s estimated that more than 40% do not receive care, per a survey from the National Council for Mental Wellbeing.

Commonly, people forgo care because they don’t have access. Per the survey, more than 80% of adults who did receive substance use care had trouble obtaining it. Cost is a major factor, along with a lack of treatment facilities, in particular for rural areas and metros with high substance abuse rates.

Funded startups are taking on both the cost issue and, with virtual care, addressing the shortage of local treatment facilities.

Among them is the largest disclosed funding recipient on our list, Pelago. The New York-based company, which operates a digital clinic focused on substance abuse, closed on a $58 million Series C in March, bringing total funding to date to $137 million.

Pelago is founded on the premise that substance use is a treatable chronic condition. It markets itself to employers as a potentially lower-cost treatment option for tobacco, alcohol, cannabis and opioid use disorders.

Medication-based treatment

Medication is also a core part of the business model for many funded virtual clinics.

Boulder is a particularly strong proponent, positing that although medication-based treatment works for addiction, only about 10% of those who could benefit have access to it. The startup says it most often prescribes buprenorphine medications, used to treat opioid addictions, as well as drugs to treat alcohol abuse.

One advantage of the digital clinic approach in this regard is that patients don’t fall out of touch with care providers when they relocate. Since treatment is digital, one only needs a smartphone to video, chat and message with providers.

That said, none of us lives entirely in the digital world. Even among virtual care providers, it’s common to connect patients overcoming addiction with in-person support groups.

So, it looks like those basement gathering spots with their tepid coffee and heated conversations will still have a place in the recovery process after all.

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Illustration: Dom Guzman

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