Digital mental health care provider Koa Health has spun off from Alpha, the moonshot factory run by Spanish telecommunications company Telefónica.
Koa Health became independent on Oct. 26, according to Oliver Harrison, the company’s CEO. Its path to independence follows a similar journey as companies that spin out of X, Alphabet’s moonshot factory, he told Fierce Healthcare.
The startup announced Thursday that it launched in the U.S. boosted by a series A investment of $16.5 million from Ancora Finance Group and Wellington Partners.
Harrison wanted to partner with Ancora because he found a common strategy with the company’s CEO, Thomas Putter, on how to bring products to market. He was also impressed with Wellington’s experience with venture capital in healthcare and its understanding of the cost and return on investment of digital health.
“With [Wellington] and with Ancora, we have patient capital, but also the support to help us to be growing as quickly as we can in this commercialization phase,” Harrison said.
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Digital therapeutics for mental health
The World Health Organization reported that close to 1 billion people worldwide live with a mental disorder, and these conditions have created a demand for digital solutions to address mental health problems. Koa Health’s mission is to “deliver mental well-being for all,” Harrison said. “It shouldn't anymore be something that's buried by stigma, buried by access challenges or affordability.”
The news comes as the COVID-19 pandemic has created a growing need for digital mental health services.
“The impact of COVID has been to create a fourfold increase in the prevalence of symptoms of depression and anxiety, which would meet criteria for a clinical diagnosis,” Harrison said.
Teletherapy providers have seen record uptake since March, and the need for mental health support appears to be growing as patients confront the stress of the pandemic and social crises.
With increased demand, there also was a significant upswing in behavioral health investment in the past six months. In the first half of 2020, digital behavioral health startups scored $588 million, roughly the annual funding for this segment in any previous year, Rock Health reported.
Rainer Strohmenger, managing partner for Wellington Partners, suggested that Koa Health can play a key role during the pandemic. “We see a clear opportunity for Koa Health to capitalize on this momentum and significantly improve access to high-quality care for individuals as it builds a comprehensive portfolio of evidence-based and personalized mental health products,” he said in a statement.
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Technology increases the productivity capabilities of clinicians as they help people with mental illnesses, according to Harrison. In fact, he said, technology combined with clinician care can boost the capacity of clinicians by 10 times.
Koa Health has debuted an app called Koa Foundations, which lets companies support their employees’ mental well-being. It features evidence-based activities to allow people to reduce stress, improve sleep, help relaxation, instill positive thinking, and boost self-confidence.
In addition to Koa Foundations, the company has developed Koa Mindset, an on-demand support system that helps clinicians triage care and provide chat support. Koa is awaiting the U.S. Food and Drug Administration (FDA) to approve its Koa Perspectives app next year. Perspectives is an app that will provide digital cognitive behavioral therapy to help address body dysmorphic disorder.
Koa Health maintains its headquarters in the Netherlands but also operates in Barcelona, the U.S. and the U.K. The company has formed an academic partnership with Massachusetts General Hospital, with which it developed the Perspectives app. It will also build mental health care solutions with Solihull Mental Health NHS Foundation Trust in the U.K.
“We've been able to work with leading academics and clinicians, and patients to do the right thing in terms of building the products and prototyping them, then taking them through high-quality randomized control trials,” Harrison said.
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Acquiring new capital and expertise in mental health
Spinning off from Telefónica will allow Koa Health to scale and grow globally, noted David del Val, director of core innovation at Telefónica.
“The time is right for Koa Health to become independent, so it can continue to scale and grow to meet the increasing demand for digital mental health care,” del Val said in a statement.
Attracting new investors brings new capital as well as a different type of expertise as far as digital health and entrepreneurship, according to Harrison.
“I think Telefónica had been a great incubator up until now, and they know how to run a phone company very well,” Harrison said. “But digital health and entrepreneurship requires a different type of expertise. And we now have a board that themselves and also through their connections bring a lot of knowledge and do's and don'ts to help us to navigate that next chapter of our journey.”