Over the past decade, the incidence of Tier 1 and Tier 2¹ mental health disorders, including depression, anxiety, and eating disorders, have been on the rise both in India and globally. With this growing incidence, the awareness and acceptance of these conditions and their treatments has also increased. The number of patients taking psychiatric drugs worldwide has been expanding at a 5% CAGR YoY. In India, the National Mental Health Survey conducted from 2015 to 2016 revealed that 150 million people needed medical interventions for mental health issues. However, currently, less than 30 million of these individuals are actively seeking treatment.

Both in India and globally, there has been a significant shift towards accepting mental health disorders, leading to the emergence of various solutions beyond pharmaceuticals. Most of these solutions focus on two main pillars: preventive mental well-being and curative therapy. While preventive mental well-being startups like Calm and Headspace have become large globally, startups in this space have mostly not been able to monetize as successfully in India. On the curative side, therapy for Tier 1 mental health is evolving rapidly in the West - from insurance reimbursement to outcome measurement to an increasing discussion around therapy’s iatrogenic effects², the journey is fully traversed.

Cognitive Behavior Therapy (CBT) is now a recognized term in India as well but there is no method to the madness when it comes to delivering CBT. A part of the problem is the shortage of trained professionals, namely clinical psychologists and psychiatrists. Untrained non-clinical psychologists are aplenty but quality varies widely. One crucial missing element in curative therapy is the expectation setting and outcome measurement. Often, there is no conversation about discontinuation, goals, or other critical aspects related to treatment with a therapist. What distinguishes a good therapist from a bad one is the subjective experience an individual has had with them. It is difficult for someone suffering from mental health issues to objectively judge a therapist. To add to the confusion, therapy for Tier 1 issues is available in many forms, including therapy/ conversations over smartphones, video calls, and phone calls. Interestingly, the very smartphones that may have contributed to mental health issues are also being used as part of the solution, sometimes confusing the person further. There is a new line of treatment emerging, involving wearable devices specially designed to address Tier 1 mental health issues (sometimes preventive mental health as well). However, its long-term clinical outcomes are yet to be proven. 

The regulators are not actively monitoring or overseeing the Tier 1 mental health treatment and the preventive mental well-being space, leading to deep concerns about iatrogenesis. In contrast, the other spectrum of mental health - Tier 2 and Tier 3 mental health disorders, such as substance abuse and personality disorders, fall under a highly regulated space where diagnosis, treatment, and drug administration are all strictly monitored. This is also a space where taboos are still not broken. The challenge here is that these mental health issues are often seen as a moral failing of the individual suffering from the disease, and sometimes even of their family. However, in reality, these can arise from a combination of the genetic makeup of the individual and the environment in which the individual operates—not just their family, but also the society and the broader geopolitical and political climate³. 
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” Addiction is a genetically transmitted trait of the brain which lasts for a person's whole life. Expression of that trait may be triggered by some adverse childhood experiences. Addiction is not confined to drugs. It is a tendency to pursue an activity which gives a person pleasure at the cost of the exclusion of everything else.Although a genetic trait, it is not normatively distributed like height or intelligence which everybody has, less or more. It is a non-normative trait—only some people have it and others do not have it at all” - Dr. A.K. Kala⁴ .

This is at the heart of all issues—mental health issues, whether Tier 1, Tier 2, or Tier 3, are not just individual concerns but something that families, friends, and co-workers have to work collectively on. Achieving outcomes in this space has been challenging due to a lack of quality therapists, poor patient adherence, and insufficient commitment from the various stakeholders involved. Hence, the mental health space continues to remain a “hard to solve” problem. Given the combination of part taboo, part failing, and part lack of clarity on what a good solution looks like, therapy plays in India have scaled slowly. On average, a person switches therapists twice before sticking with one and typically attends about three sessions. Most therapy businesses charge between Rs. 800 and Rs. 2000 per session, each lasting about 45 minutes. After compensating the therapists, companies often just manage to cover their customer acquisition costs, hence finding it difficult to scale up rapidly.

What clearly is scaling rapidly is spiritual mental well-being, such as astrology, and chat-based services, both addressing relationships, career and loneliness primarily. Other forms of mental well-being services gain traction in terms of users mostly, but rarely in terms of revenues
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Despite the challenges, we see some promising areas within the mental health space that hold significant potential. Pediatric mental and neurological health, and mental rehabilitation, are emerging, impactful fields that we believe offer substantial opportunities for growth. ‍

1. Mental rehabilitation centers for Tier 3 mental health issues

Many early players in this space focused on substance abuse. The quality of their centers varies widely, from confinement spaces to facilities that bring together highly skilled and trained multidisciplinary professionals offering individuals and families a better shot at life. These centers are generally located outside of cities. They have an average length of stay (ALOS) of 30 days and an average revenue per occupied bed (ARPOB) of approximately Rs.10,000. Most organized players are rapidly increasing their capacity. Few funded players exist in this space, though lately, some existing funded mental health startups primarily catering to Tier 1 issues have begun to enter this space as well.

We do not see much overlap between patients undergoing therapy for Tier 1 issues and those attending Tier 3 rehabilitation centers. These are largely separate patient funnels. Some of the top rehabilitation centers have an outpatient-to-inpatient (OPD to IPD) conversion rate of around 3%, which is notably lower than the general trend of 10-12% observed in other medical specialties. If a company can protocolize in-center rehabilitation treatment and solve for clinician availability and quality (psychiatrist and clinical psychologist), this space will generate decent returns. 
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2. Pediatric behaviour & development health

‍This is not necessarily under the domain of psychiatry as a new group of medical professionals, namely neurologists, enter the domain of diagnostics and treatment for pediatric development issues. However, the current solutions in this space suffer the same primary challenges - no outcomes measurement and a lack of trained therapists. While players focusing on therapy for Tier 1 mental health issues are venturing into this space, we think this space needs specialized focus. Different therapies are effective here, with parents focusing on specific goals such as name recall, speech development, etc.

More importantly, there is a limited time window between the ages of 2 and 5 years to start work with the child to get optimal clinical outcomes. The need graph for this space is also different. A child starts therapy between 2-5 years of age and the immediate need after the child sees improvement is integration into some form of academic advancement. Hence, the therapy centre’s ability to help the child integrate academically is a crucial parameter for success. 
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Looking ahead, we see both a need and a potential to build large businesses in this space. These businesses will need to adopt a more clinical-first approach, for both diagnosis and outcome measurement. They must also take a more inclusive approach to treatment to increase effectiveness. Ultimately, the goal is to reduce the incidence of mental health disorders, provide effective treatment when they occur, and minimise relapse and remission of problems once treated. 

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<sub>1.Tier 1: Mild to moderate depression, anxiety, stress-related disorders, adjustment disorders and post-traumatic stress disorder (PTSD); Tier 2: Mild to moderate psychotic discorders like schizophrenia, bipolar disorder, delusional disorder and eating disorder; Tier 3:Severe psychotic , personality and substance use disorder, suicidal ideation or psychosis, clinical depression
2.Shrier, A. Bad Therapy: Why the Kids Aren't Growing Up. Swift Press.
3.a. Pike, A., McGuire, S., Hetherington, E. M., Reiss, D., & Plomin, R. (1996). Family environment and adolescent depressive symptoms and antisocial behavior: A multivariate genetic analysis. Developmental Psychology, 32(4), 590–603. https://doi.org/10.1037/0012-1649.32.4.590
b. Longitudinal Effects on Mental Health of Moving to Greener and Less Green Urban Areas Ian Alcock, Mathew P. White, Benedict W. Wheeler, Lora E. Fleming, and Michael H. Depledge Environmental Science & Technology 2014 48 (2), 1247-1255 DOI: 10.1021/es403688w
4. Kala, A. Most of What You Know About Addiction is Wrong. Speaking Tiger Books

Disclosure: Enzia Ventures is an investor in Butterfly Learnings</sub>

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