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Telosity invests in mental health startups, with a particular focus on adolescents and young people
Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed! While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Srivastava is passionate about investing in concrete, commercially viable solutions that can have a positive impact on society and providing support to entrepreneurs who are looking to make a meaningful difference. A proof point is Telosity by Vinaj Ventures, the fund he founded in 2019 that invests in early-stage companies that provide affordable and scalable solutions to improve mental well-being in young people – especially in underserved communities.
He is a member of the Alliance of Chief Executives. Srivastava serves as a board member and in advisory roles to a number of organizations. Prior to Vinaj Ventures, Anish led Citi Ventures' Global Lab Network & Accelerators and was a key leader in JP Morgan Chase's Digital Customer Experience & Innovation organization. He also held various senior and executive positions at startups such as Egreetings, Geodesic and Lexy, where he pioneered new consumer-facing mobile services. He spent six years at Orange, building the mobile innovation practice in Silicon Valley, followed by driving strategic partnerships in London as Director of Business Development. Early in his career, he was part of the development team that built Bank of America's first online banking website, along with its first credit card website.
Srivastava graduated from Carnegie Mellon University with a Bachelor’s of Science in Computer Science and French. His interests include soccer, cooking, running and traveling with his family.
VatorNews: Tell me about the philosophy and methodology of your firm, what you're all about, and maybe give me a little bit of the story behind the firm and why you decided to found it.
Anish Srivastava: We launched the brand Telosity four years ago, with a focus specifically on adolescent mental health. In 2018, when we looked at the startup ecosystem and the venture capital ecosystem, we were seeing upwards of 90% of funding going towards startups that were focused on adult mental health, yet, all of the statistics, and a lot of the challenges that were happening with youth, were growing and there were still lots of gaps in the market. So, my business partner, Faye Sahai, and I jumped into the space, doing landscaping, doing a lot of market analysis, and really diving in to understand some of the challenges in the space and how we could help. Having kids that are adolescents, and my business partner as well, this was an area that we were seeing directly in our friends and family circle, and we were getting exposed to a lot of mental health challenges with Gen Z. And so, it became an area that we were really interested in seeing how we can make a difference and positively impact folks.
VN: We've definitely seen a rise in mental health issues among youth, adolescents, teens, over the last few years. Would you say that there's a rising prevalence of mental health issues? Or is it just that the conversation has changed, and that there's more openness toward discussing these issues than there was before?
AS: It's a combination. From 2005 to 2017, we saw a lot of statistics that showed rise in anxiety, stress, depression, loneliness, suicide rates amongst teens. And so, this was a problem that was growing to begin with. The pandemic just accelerated this and just exacerbated the issues and it helped bring to the forefront more of the conversation around this topic, to your point. We have a long way to go towards destigmatizing the topic, and we see stigma as a big challenge. But, as you mentioned, there is progress: there's more athletes or celebrities that are openly speaking about it in the last few years, which you saw a lot less of in the past, and that's another thing that helped open some of the conversations up. It's a great step towards helping to stigmatize this topic.
VN: The event that I always feel like really changed the conversation with Robin Williams; when that happened, there seemed to be a shift in the way that the culture talked about it, because you had somebody who was known to be so happy and a comedian, all of a sudden he killed himself. And then people were like, “Oh, this is something that we really need to discuss and talk about,” in a way that hadn't happened before.
AS: I think you're absolutely right; there was a series of cases in Palo Alto in the Bay Area where high school kids were committing suicide at the train tracks and got a lot of attention. Scary for parents, as you can imagine. You have stars, athletes like Kevin Love, Naomi Osaka, and others that have come forward and openly spoken about it, which fell on the heels of some of the things that had preceded that, with Robin Williams and others, as you mentioned.
VN: So, you mentioned the pandemic and, obviously, that's a very big thing in terms of youth and mental health. How did that change the way you invest? Did you start seeing more companies in the last couple of years and more startups in this space? What changed for you as a firm because of the pandemic?
AS: I like to think of it as pre-pandemic and post-pandemic, because there's definitely shifts that happened, but one thing that I'd like to emphasize is for people to be aware that the growth and the rise in mental health challenges happened before the pandemic; it just got worse during the pandemic. The other thing that was really interesting is that, in 2018, when we started looking at the space, there weren't as many startups; there were less than 200 that we had landscaped in the mental health space. In 2019 and 2020 and 2021, we just saw it consistently rise, so now we track close to 900 startups in the mental health space.
The other thing that we saw, which is really interesting, is that the digital health space grew by 3.4x in terms of venture funding into startups from 2018 to 2021, while funding to adolescent mental health startups grew 15x in that same period of time. So, what we're seeing is a lot more dollars going into investments and to startups. Also, when we were looking at the space in 2018, the size of checks were smaller, and most of the investments were in earlier stage companies. Now, we're seeing later stage companies, like Series A, B, C, D, E, and we're seeing much bigger size checks; north of $50 million checks are something that you didn't see four years ago, and now you do in this space in this specific subsector. So, that's super exciting for us.
VN: When it comes to the companies that you invest in, are they typically B2B or B2C? Or is it a combination of both?
AS: We're looking at both B2C and B2B. We haven't made any investments that were focused on hardware space yet; it’s something that we're interested in, but we've been mostly focused on software and app based solutions because that's what we see the demand in for Gen Z.
To your earlier question, one of the things that we saw that was really interesting during the pandemic is, because a lot of the regulations got eased or relaxed for telehealth, that enabled a lot of growth. So, some of the types of companies that we've invested in have been teletherapy companies focused on youth or adolescents. Other companies that we've been involved in working with have been focused on assessment space; there's not much that's changed in the GAD-7 and PHQ-9 over the last few decades, and now there's a big opportunity because people are carrying their phones, they're wearing wearables, there's a lot of data that we can collect that provides input towards thinking about the individual and the impact to their mental health.
The topics that we look at include mental health, sleep, nutrition, fitness, and wellness, whether they're B2B or B2C. Sometimes startups want to be B2B, that's their long term strategy, but they're too early to be able to make the deals with the larger customers that they'd like to, so an initial proof point in the market is being able to sell directly to consumers, showcase the outcomes, and do clinical trials, if they can, so they can show efficacy and some of the proof points that are going to be required by the bigger companies.
VN: You mentioned the GAD-7 and PHQ-9, and one of the things that’s very interesting about the use of technology in mental health care is the assessment. Until recently, the only way to assess a patient was to have them fill out a questionnaire and hope that they tell the truth or hope that they are good at self assessment, and now you have a lot of technologies, including using things like listening to their voice over teletherapy, to actually be able to diagnose them or track their progress. Is that some of the technology you’re investing in?
AS: Yeah, absolutely, because there's a wealth of data. If we look at our own usage, we're glued to our screens, whether it's laptops and cell phones, and wearables; just imagine Gen Z, that's what they were born with. They're taking this everywhere they go, that's their primary channel. My philosophy was always thinking about, how do we get the kids off the screens and off the phone? What we realized, and part of our thesis in this space, has been thinking more about what's the channel that they're spending their time on and how do we make that be part of the solution, as opposed to fighting it? They're much more used to interacting and comfortable communicating with these devices, whether it's texting or their social media channels, in ways that might be different than previous generations. And so, there's a lot of opportunities that tech-enabled solutions bring to reach all of these folks.
While our focus has been adolescent mental health, historically, as we look at the future, we actually want to look at age agnostic because what we've realized is the impact of the parents' mental health, or meaningful adults in the lives of adolescents, has a significant impact on them as well. So, how can we think about holistically helping an individual? Helping them fully involves not just their family and adults, but then the different aspects that impact their mental health, which is why we've expanded scope and started thinking about sleep, nutrition, fitness, and activity.
VN: There’s so many different avenues you could go down when it comes to this topic, but let's talk about your fund. What's the size of your current fund? And how many investments do you make in a typical year?
AS: We're raising our venture fund currently, as we speak, and so we plan to start investing in the Fall, in six to eight startups per year.
VN: What stage is that?
AS: Pre-seed and seed.
VN: So you're investing early.
AS: Really early, because this is a nascent market with a lot of opportunities. We see pre-seed and seed stage companies will follow on into their rounds.
VN: What does the check look like? What's an initial check and how much are you investing over the life of the company?
AS: $100,000 to $300,000 would be the range for pre-seed and seed stage companies; we’ll do higher amounts for the follow-on rounds and Series A. For the life of the company, we're looking at about $1 million.
VN: What does traction look like at that point for those companies? Do they have to have some amount of ARR, do they have to have a minimum number of customers? Is there a minimum amount of anything that you want to see from those companies to want to invest?
AS: When we look at pre-seed and seed stage, there's quite a range of types of companies and different types of teams. We look at a number of factors, so there's no single number or concrete, tangible number that we've looked at, but there needs to be a product. So, we want to invest in a company that at least has a product, that has a team in place, and, ideally, has a pilot. In terms of ARR revenues, we don't look at that for pre-seed stage companies; if they have that, that's great, we obviously like that. For seed stage companies, we start looking at what their revenues are and signs for traction from a revenue perspective.
VN: So, for those seed stage companies, is there a minimum for them?
AS: We don't have a cut off or a minimum. What we tend to look at is to say, do we think, in the next 12 to 18 months, or by the time they get to Series A, that they have the potential to get to an ARR of about $2 million?
VN: Since you're not investing pre-product, how do you vet that? If it's a B2C company, you could probably just use it yourself, you can just go on the app and see what the experience is like. If it’s B2B, I'm sure that's a little bit more complicated. So, walk me through that process.
AS: It's multifaceted: we spend a lot of time doing market trends analysis, and we're constantly speaking to hospital systems, providers, payers, health insurance companies, also folks in the educational sector because, as you can imagine, this also ties very closely with that set of institutions as well. And so, we're constantly looking at trends in the market, we're looking at the pain points that a lot of these folks have that are looking for solutions from startups. So, when we meet a startup, and let's say they have a B2B solution, our filters and lenses are, how closely are they meeting the demands of what we're hearing the market and the customers are asking for? That's one. We will obviously look at their demos and analyze their tech stack. And then, if we get into deeper diligence because we feel like there's a there there, we get into deeper conversations with reference pilot customers, and then also engage trusted folks in our network to help us in our assessment of those solutions.
VN: What does the vetting process look like for the founder? That entrepreneur sits across from you, what do you want to see from them? What are the intangibles of that person, of that team, that make you want to invest in them?
AS: It's a combination of passion, understanding, and curiosity of the space, as well as openness to really getting feedback from future customers. How closely has this founding team really vetted the opportunity, analyzed it, and actually gotten signals that make sense for them to pursue the path that they're pursuing? How likely are they to be able to pivot or adapt, depending on market conditions, like the reset we're seeing today? How well do we interact? What value can we bring to the table for those entrepreneurs? What experience or expertise do they have in this specific sector? What do they bring to the table? How is the team composition complementary to each other and how do they work well together? Those are just some of the aspects that get surfaced in the process of our vetting.
VN: It's a bit of a niche space: obviously mental health is a subset of healthcare, and then talking specifically about teens and adolescents, so that’s a subset of that. What experience are you looking for from those founders? What experience in that field do you want to see from them?
AS: Historically, we focused on only adolescent mental health, but now we're age agnostic, so we have the breadth of the space. There's a few things that have happened over the last four years: there's a lot more people that have had expertise in the broader mental health space than in 2018. So, fast forward to 2022, we look for folks that have either worked at startups or have worked in a capacity that gives them that expertise, or have worked with customers that have given that expertise to them. How do they navigate the regulatory environment? What do they have in terms of their team composition, advisory board, etc.? That's important there. Those are some of the things that we've been looking at.
To your point about a niche: it felt a lot more like a niche four years ago and now it's becoming one of the more important subsectors within healthcare. So, there's so much more interest today that we see, even from the employer side; when we spoke to employers four years ago, it's really interesting, many of them would say, “we're only interested in the employee.” Now, every single employer that we speak to that's looking for benefits for their employees are looking for things that will impact their families and their spouse and their children. That wasn't the case four years ago.
VN: School closings during the pandemic caused people to have to quit the workforce because they had to go and stay home with the kids, particularly women. A child who has a problem or mental health needs cascades through the family, so if you tackle those problems, it helps everybody.
AS: You're absolutely right, you hit the nail on the head. And yeah, I'm glad people are now going back to school (laughs). I have a high school and a middle school kid and I could tell the difference. When they came back to school in person last fall, you could tell their social interactions were awkward, they're a little uncomfortable going back to school; that one year really significantly impacted their social behaviors and their norms. After a few months, we could tell that they're happier, more comfortable interacting with people, and they were going back to the norm. But that year, year and a half, that they didn't go to school had a significant impact.
VN: Let’s talk about valuations. During the last couple of years, digital health saw a huge rise as a result of the pandemic, including telemedicine and virtual care companies. Over the last six months, that really popped, especially for companies that went public over the last couple of years. That seems to be now hitting the later stages of venture capital, and probably the earlier stages as well. What have you seen in terms of valuations? Are they starting to come down in the earlier stages as well? How is that changing the way you invest?
AS: Absolutely, the markets have been hit. I've been asking myself for the last several years, when is these consistently growing valuations going to get a reset? These are cyclical: I've seen the cycle in the early 90s; then 2000, with the dot com bust; 2008, with the mortgage backed securities recession that we experienced; and then now, with this reset. From my perspective, it was a matter of time, I just couldn't predict when the time was going to happen. So, we've foreseen this.
One of the things that we find really interesting in this valuation reset is that it brings a lot of opportunities, especially from an investor lens, but even from an entrepreneurial perspective, because there's more talent that's coming out into the market. From an investor perspective, you can get into deals at a more reasonable valuation, which makes it more likely to see good ROI and returns on the investments that you make. We're obviously excited about the future for this for the stage that we're in right now, because this is a great time to be starting a fund.
VN: It sounds like it's a good time to be an early investor but what about for the companies themselves, particularly for those that have already raised that round at a higher valuation? They’ve got to raise their Series A or Series B and it’s probably not so great for them because they're going to probably have to take a down round.
AS: The two big buckets that I see are the ones that raised money at a higher valuation, and now have to take a down round, and then there's a second bucket of companies that have knocked it out of the park when it came to their milestones and their revenue traction and had raised at what might have seemed like high valuation last year, but were still able to maintain. They didn't necessarily have to do a down round, but they may not have gotten the up round that they would have expected a year or two ago. So, for the second bucket, it's easier for them, because they're not getting diluted and they're not getting hit as bad as the ones that fall in the first bucket, which clearly get hit hard from a dilution perspective.
Now, in this first bucket, where they take a down round, there's a couple of classes of companies. Some of them are just not going to survive, just because they got hit too hard, or they're not able to raise the money because the math just doesn't work out for them and they've got other challenges. For the ones that do take a down round, it really depends on the stage they're in and how much of a down round they're taking. For some of the earlier stage companies, it could be something where they just have to reset their expectations, the cap table gets reset a bit, readjusted so that there's still incentive for the founders, and for the founding team, and the employees, for the future and some of the existing investors take a bit of a hit and look at the bigger picture so that it's a compromise for both sides, the founders and the investors, in this mix. So, we're seeing a lot of conversations like that going on in these different buckets. For the ones that get hit really hard, it just means resetting expectations depending on where their exit outlook is. If it's in the near future, they get hit hard, or if it's in the long term, both investors and the founders can make decent returns.
VN: It's probably also good for the market, because it separates out the companies that should get funded from the ones that shouldn't. It's really going to be the good companies that get funded, so that's probably better for the market overall.
AS: Yes, I 100% agree with that. We’re seeing 900 startups in this space; I mean, you can't have 900 successful startups in an industry.
VN: What is your differentiation as a firm? A lot of firms probably go after the same limited partners, so when you go and meet those LPs, what do you tell them? How do you pitch them?
AS: Our strength lies in our area of focus, our expertise in space, and our reputation. With our focus on mental health and well being and wellness, we've been focused on this space for four years so we've been connected to a lot of partners, we've developed an ecosystem. And so, a lot of the large payers and providers know of us. Before they engage with a lot of the startups in this space, they'll come to us for advice. Same thing with investors; we've worked with a lot of other investors in the healthcare space and the broader ecosystem. One of the things my business partner and I did is establish a strong luminary network, so these are folks are either from payers, providers, educational institutions, successful entrepreneurs that have sold companies in the healthcare space, successful investors that have invested in the healthcare space for the last 20 years. We've just surrounded ourselves with really smart folks that have this industry focus. We also have the ex-CMO of Medicaid on our luminary network. These folks help us with our own strategy, with our own thinking, with our own evaluation of the companies that we want to invest in. But then, when we invest in the startups, they also are very helpful in supporting our portfolio companies. That's how we differentiate ourselves. And so, a lot of the LPs that are really interested in, and are coming into our fund, really value that. We're not a firm that's big enough that can do everything, and we certainly can't differentiate there, there's plenty of firms that can do that, but with our hyper focus in an area that's relatively nascent, and has huge growth over the next couple of decades, we're really well positioned with our history in this space.
VN: What about entrepreneurs? They sit across from you, and you evaluate them, but they also evaluate you, and the best companies and take funding from a lot of different places, they have a lot of options. So, what's your pitch to them?
AS: We were operators ourselves and that's one piece of it. Our hyperfocus; we have heard time and again from a lot of entrepreneurs that have wanted us to come into deals. Some of the portfolio companies that we invested in wanted us to come in over others when they were oversubscribed, so they chose us because of our background, our expertise, the ecosystem that we've established, and the reputation that we built in the market. We get a lot of strong inbound interest and even startups or founders that we might have passed on in the first round come back to us in the second round and say, “we would really love for you to be part of our next round.” So, our philosophy is to lean into the entrepreneurs and really help them with what they need, not with what we want to help them with or what we want to push them to do, but where we interact with them on a very frequent basis. Sometimes they're talking about maybe challenges with the executives, sometimes they're talking about pivoting business models, regulatory things, whatever it might be, that they're challenged with, we like to be side by side with them and be part of the solution, as opposed to just just sitting there and judging the companies and how they're performing. So, we really like to be part of their journey towards finding a path to grow.
VN: Obviously, there are a lot of healthcare focused firms, and they might do mental health, but are there other firms that you've seen that specifically only invest in mental health startups?
AS: A lot of VCs will do one or two investments in the mental health space, so a lot of the ones that do the broader healthcare space, they do it as one or two one-offs. Not many that we know of that are focused on this. There are some firms that are focused on brain health and psychedelics and emerging interests in this area but, in 2018, when we were looking at the space, we didn't see anyone with this hyperfocus.
VN: Talk about one or two of the companies that you have invested in. What was it about those companies that excited you? What was it about those companies that when you sat across from you, what was it about them that made you want to become a partner with them?
AS: Daybreak Health is one that we've been super excited about from the get go. We met them a couple of years ago when they were raising their pre-seed round and we decided to invest in them. They subsequently went to Y Combinator, raised a seed round, and just about six months ago raised their Series A, so they've been growing really well. What set them apart was that they were very analytical as a team, and the founders really dug their heels into the space, really were interested in trying to be very objective about really being an Advil for this space around teletherapy, as opposed to being a vitamin, or something that would be nice to have. They really went for pain points and it's shown over the last couple of years with how they've grown.
The other one we've been excited about is Ksana Health. We've been working with them for a little over a year now and they're an example of a startup where the founder is a psychologist, he’s done a ton of research in psychology, has been a practitioner, and felt that there's been a lack of objectivity in assessments. That's what Ksana Health brings to the table. They’re based out of Oregon, the team is really interesting, they leverage the phone and wearables to collect data, which provides a ton of opportunities for insights and can supplement a lot of the traditional assessment tools that exist today. So, they're another one that we're super excited about.
VN: Talk to me about yourself, a little bit about your background, your career, what led you to become a venture capitalist and become a venture capitalist.
AS: I spent half of my career as an entrepreneur in startups, and alternated my experience with the other half in Fortune 500 and Fortune 50 corporate venture and innovation groups. I’ve been involved on both sides and, in the larger firms, involved with accelerator programs, early stage investments in startups, and corporate venture capital. So, this has been a passion and it's an actual evolution of my background. The last four years, especially, have been really digging into establishing ourselves to a point to raise a venture fund, and I'm really excited about the space, I’m passionate about it, I’m really excited about the early stage because I've been in a number of early stage startups as an entrepreneur. I know the challenges and the successes that can come with that and so that's really what's excited me about this evolution.
VN: What are some of those lessons that you've learned as a VC? Let's say that somebody came to you and said, “I want to be a venture capitalist? What should I know?” What would your advice be to them?
AS: There are two sides to the lessons learned: one is, being an entrepreneur and working with investors, you learn a lot. And then as an investor, on the other side, helping entrepreneurs, how you can be helpful, and what are some of the things that are worth it for the entrepreneurs, and what are the levers that you can pull to help them at different stages?
If I'm sitting in the founder’s shoes, who are the investors that you really want to work with? Which ones had that meaningful impact on you and were able to help you navigate those challenges? As opposed to either sitting at a distance, or, in some cases, being very disruptive for the company and the overall outcome of that potential startup. So, one of the lessons I've learned is to be that investor that will be helpful to the founders in the times that they most need it, and not just lip service. The second lesson comes from the other bucket, which is sitting as an investor: there's a lot of times when you see a ton of entrepreneurs that are really passionate, really interesting companies that they're building, it's really hard to always pick the right winners, you don't always know. There's so many factors that go in but one specific aspect that I look at is, how does a founder manage their cash? Frugality is one trait that can really be helpful and we're seeing that at this time, when people are going through a crunch right now. The founders that have been able to be conservative in their spend, and smart about where they invest their dollars, are much more comfortable in navigating this stage of market conditions than those that might manage it more generously than they need to at the times when they have the ability to do so.
VN: What's the part of being a VC that you like the most? When you go to work every day, what really motivates you?
AS: Focus on topics that positively impact people in society. Digital health is moving towards a phase where there's so much data out there, people want to take healthcare into their own hands, and there's this movement towards quantified self. In the digital health space, there's a lot of opportunities, there's a desire, there's a need, there's a there there for people, and I want to be part of that because it impacts my own life, my kids, and my parents as a caregiver. So, that's what excites me the most about this.
VN: Is there anything else that you want people to know?
AS: We've spent a lot of time over the last four years seeing a lot of analysis on the market trends and what's happening in the space and how it's evolved. We've just released a market guide focused towards our target audience of investors, entrepreneurs, and startups. The market guide is a way for people to learn from what we've learned, both startup entrepreneurs and investors that are looking into the space. Our goal is, ultimately, to nurture this space; we need more investors coming into the space, we need entrepreneurs to be more thoughtful in this space because it's evolving. The purpose of that guide is to share some of our learnings and bring in more folks into the mix and the conversations.
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