New technologies for kids on the autism spectrum are promising
I'm intrigued about the potential to invest here - but with a few caveats
Over the past decade, we’ve seen more investment firms back companies in the autism treatment space. That’s unsurprising, given it’s a huge and growing market, projected to reach $4 billion by 2032. There’s also a growing prevalence of the disease, for reasons that are likely to be multifactorial, and it’s now reached about 1 in 36 children.
As I’ve looked at the opportunity, I’ve seen lots of potential to get involved. But I’m also approaching with caution. Not because there’s no need for new tools and treatment options for parents and children. There certainly is. But because I see a lot of money flowing in, sometimes without the right attention to quality of care. We know that payers are willing to shell out tens of thousands of dollars for treatment, particularly in the form of Applied Behavioral Analysis (ABA). But that doesn’t mean that ABA is right for every child, or that the provider quality is up to par.
In my research, it’s become clear to me that there is still a lot to learn about autism spectrum disorder (ASD). We know that it stays with an individual for life. We know that there is actually no medicine or cure directly for it, although there’s a lot of research going into it as we speak. And we know that certain behavioral therapies combined with other modalities, like speech therapy, are extremely effective for many individuals on the spectrum. And that it is a spectrum. Given that autism is definitionally a spectrum, there is no one-size-fits all, which presents a unique set of challenges.
Finally, there is debate as to the percent of people who are on different parts of the spectrum, whether it’s lower, with minimal support needed or what the CDC recently dubbed profound autism, where a child could be intellectually disabled, nonverbal, and in need of intensive, lifelong therapies.
I’m still learning and evolving my thesis here, but I wanted to drop a few thoughts and see if it aligns with what you’re thinking. I’m actively looking to meet founders in this space, so please do reach out. And I’d love to hear from parents, and caregivers in the space. What’s your experience been? What needs to happen to support you?
And with that, I’ll dig in deeper on some of the challenges and opportunities I’ve seen:
The perceived ABA goldmine: In talking to companies, it’s clear that there’s a reliance in the model on ABA, because payers are willing to foot the bill for it. It’s possible that it will continue in perpetuity, because there’s clearly a fear amongst health plans that in stepping back from ABA, autism advocacy groups will react with ire. But I’m also seeing a growing skepticism about ABA quality - and a need for more monitoring here. There’s increasing calls for quality measures. And then there’s the potential for an alternative to ABA. If that happens, then what’s the outcome for all the companies where the business model is totally reliant on payers reimbursing at the level of $50,000 to 60,000 per child? I’m not saying that I’m anti-ABA, to be clear. I’ve heard from parents who’ve said it’s absolutely essential. But I’ve also talked to parents who’ve expressed that they’d like to see more alternative options available at home, at facilities, and at school. Every child is different.
What’s the true potential for virtual treatment? Overall, I’m seeing a lot of potential around telemedicine as a way to diagnose and treat autism. Some patients may need intensive, residential treatment. But for others, it’s a potential option at a time when there’s a real shortage of health professionals to treat the growing patient population. And that’s particularly true in rural areas. Studies have found that when there’s a gap in resources to treat these patients, then early intervention becomes less of an option. And when it comes to treatment: The sooner, the better. There’s also the fact that kids on the spectrum may feel more comfortable at home. What particularly excites me here isn’t just the option to treat patients virtually with ABA. But also other therapeutic modalities like speech therapy, CBT, and telepsychiatry. But there’s another side of me that wonders whether virtual treatment is suited for everyone. Some kids may struggle to engage or get distracted.
The supply/demand challenge is very real: Relatedly, there are shortages of health professionals that can provide ABA treatment in literally every state. I’ve seen companies in this space take it upon themselves to find people who could do this work and train them. But I’ve also seen most companies struggle with churn, because this can be a very tough population to manage without adequate supervision. That supervision piece and the quality control/monitoring piece is huge. As we create more supply, which is critical, we need to ensure that we’re also supporting the providers because this is not an easy job.
Margin expansion challenges: Because this supply is so hard to recruit, train and then maintain, I believe that this could impact the companies’ in the space and their ability to improve their margin over time. I’ve yet to see many examples of where these companies have looked as attractive as the growth stages, as they might seem at the seed and A.
So what does a venture play in this space look like?
Investors should be very thoughtful and take their time before they make any moves here. There’s a lot to like about these companies when you take them at face value, but if you probe beneath the surface there are many unanswered questions and potential issues. I believe there’s opportunity in a few areas, however:
Telemedicine approaches that are proven: We need to reach more underserved patients in rural areas. It is not okay that wealthier parents in urban environments are able to access early intervention treatment and get diagnosed younger. And some of these lower-income kids are falling more and more behind. Early intervention is critical, so I do see a potential here for telemedicine.
Smart models that involve training therapists but with proper supervisory care: If there isn’t supervision and real support, I see a big burnout problem developing. That will manifest in huge churn. None of that is healthy for the patients and their families, who value consistency, or the providers themselves.
All in all, we need to be very thoughtful about how we value these companies. These are not high growth software businesses. There’s probably going to have to be some mix of modalities (home visits, telemedicine, brick and mortar) so that needs to be factored into the model. And quality and outcomes need to be the North Star for these companies, versus growth at all costs.
Reach out at anarghya@maveron.com. I’d love to hear from you!