HelloBetter, the German digital therapeutics startup for tackling mental health issues, has announced a €7m extension to its Series A led by the Singapore-based global VC MassMutual Ventures.
The new capital will be used to increase the commercialisation of HelloBetter’s digital therapeutics (DTx) products in Germany, as well as for further expanding in Europe and the United States.
Digital therapeutics on prescription
The nearly three-year-old German Healthcare Act — which allows digital therapeutics startups to apply for prescription-based reimbursements — is at last leading to an upswing in business for some local companies.
The legislation allows 73m people in Germany to get a free subscription to a digital healthcare app (DiGA) prescribed by a doctor — HelloBetter has six of its eleven cognitive behavioural therapy (CBT) programmes available on prescription and recently hit the milestone of 10k patients.
Last year it expanded to the US too, but because of how competitive the market is it's targeting a niche with its “vaginismus plus” programme — which treats people who find sex painful — rather than lead with its most popular programme in Germany, which is for “stress and burnout”.
It's since obtained the US Food and Drug Administration’s (FDA) “breakthrough device designation”, which is the first step for full FDA approval — only after which it can be prescribed in the US — for its online therapy programme on “panic”. The startup now has five years to submit all the relevant data and information required for approval.
And while DTx companies in the US received a lot of funding in 2021, most of which was spent on growth, that wasn't the case for German DiGA startups, according to HelloBetter’s CEO Hannes Klöpper.
“DiGA companies didn't raise a lot of money [in 2021], which really was challenging for us at the time, but now I think European companies look a lot more palatable to investors,” Klöpper says.
“Suddenly, investors look at different things — not who's raised the most money, but who actually has revenue, how much they spend to generate that revenue and the ROI [return on investment].”
The lack of capital has also made HelloBetter more disciplined when it comes to spending, says Klöpper.
“Other DTx companies have really taken a beating lately. In the US, they spent way too much money and were really inefficient. While many of them had a burn rate of 10x the revenue, in comparison our burn rate was one-to-one last quarter.”
The extension of the Series A round was led by MassMutual Ventures, bringing the total round size to €20m. The other backers of this round include existing shareholders:
- Swiss-Swedish healthtech VC HealthCap
- Swiss growth equity investor Sparrow Ventures
- German early-stage VC Hevella Capital
- Luxembourg-based VC Expon Capital
A large market with big potential
The German reimbursement system for DiGA startups is expected to accelerate the digitisation of healthcare in the country. So far, however, it accounts for a tiny fraction of the overall market. In 2022, digital takeup of overall health prescriptions in Germany was 0.03%, according to a GKV-SV report — mainly because clinicians had extremely low adoption rates.
“We have to keep in mind this is an entirely new category of treatments. It's a modality that doctors and patients are not familiar with. As the company is growing, we are able to invest more in sales and marketing, and as the doctors begin to see patients benefitting from this, I think it will pick up for us," Klöpper says. “We're already generating the bulk of our revenue from this channel and seeing a quite steady growth rate.”
Following the introduction of DiGA, Belgium launched its mHealth reimbursement pathway and now France, with the second-largest healthcare market in the EU (worth an estimated €281bn), launched a fast-track reimbursement pathway for digital health solutions — PECAN — last month.
This makes France the next market HelloBetter has its sights on. To launch in a new geography, however, it will need more capital.
“We really want to go but it's a financing question at this point,” Klöpper says.