How autism became the latest target for disruption

When Christopher Male’s son, Duke, was diagnosed with autism at age three, the long-time investor quickly discovered a fragmented and polarized marketplace. 

“The services seemed antiquated, solutions were expensive, there were long wait lines, just a very broken system,” said Male, who in 2020 co-founded the Autism Impact Fund, which invests in autism-focused startups. “As we surveyed the landscape, there were plenty of foundations and nonprofits that all play a critical role, but I was quite surprised to see that there was this gap in the market where there was no venture arm for the community.”

As more children are diagnosed with autism spectrum disorder, venture capital has poured into startups aiming to disrupt this space. In 2021, the Centers for Disease Control and Prevention reported that one in 44 children were diagnosed with autism spectrum disorder, an increase from the early 2010s when it was one in 68. Experts say diagnosis of autism has become more accurate, whereas in the past children were incorrectly labeled as having an intellectual disability.

Startups have emerged to offer everything from virtual therapy services to creating platforms that aid job hunting for autistic adults. Applied behavioral analysis, a treatment method for autistic children, has become increasingly digitized through telehealth assessments. But with the rise of technology and funding, questions have arisen about companies stressing revenue growth over clinical care.

“If you’re a tech company like Airbnb and you have venture capital, your mentality is typically, ‘grow, grow, grow,’” said Sarah Trautman, CEO of defy community, a company focused on preventing burnout among clinicians. “They don’t care if you’re running a huge deficit, they just want to get to scale and add in profit later…The issue that I think people are failing to consider is this requires human capital, and it really requires a ton of human capital.”

Autism investments 

The money flowing into autism care has been plentiful. According to Digital Health Business & Technology’s funding database, more than $700 million in venture money has gone into autism-focused digital health startups since 2017. There have been 28 deals, including 17 in the last two years. That includes a $219 million round for Elemy in October 2021, a $105 million round for Brightline in March and a $60 million round for Cortica in June 2021. While most of these startups companies are singularly focused on autism, others like Brightline and Cortica aim to reach multiple patient populations.
 

Autism Impact Fund has funded 11 companies. Seven are tech-focused and four are in life sciences. Male said it’s not surprising to see an interest in autism from the venture world. 

“It’s a massive societal issue in which government funding and other sources haven’t really moved the needle as much as we want it to,” Male said. 

Private equity also has demonstrated its interest. According to an analysis from the Private Equity Stakeholder Project, a nonprofit private equity watchdog, private equity firms have invested billions  of dollars into applied behavioral analysis firms over the last few years. Citing data from financial database Pitchbook, the report said there were 30 deals in 2021 and 24 this year. 

One key reason for investor interest in the space is that every state has enacted a mandate requiring insurance carriers to cover services for autism spectrum disorder.  Jonathan Mueller, CEO of Element RCM, a revenue cycle management company for autism service companies, said the funding trends follows what’s happened in other areas of medicine, such as home health and hospice care, after they were made reimbursable through insurance. 

“As in any of those verticals, and certainly what’s happened with ABA, there’s an opportunity that an investor sees to provide services and make a profit,” Mueller said. “So there’s been a flood of money into our field.” 

Investors also see an opportunity in technology to help solve autism’s supply and demand issue. Researchers at the Rollins School of Public Health at Emory University found in 2019 there was an insufficient supply of ABA providers in nearly every state. Experts say the COVID-19 pandemic only exacerbated the need as in-person services closed, including at schools where many children receive ABA.  

Solace Pediatric Healthcare, a Denver-based provider of various therapy services for children with autism and other kids, has seen a huge spike in demand, said CEO Darcie Peacock. “In every market that we're in, there are more children waiting for care than ever before,” Peacock said. “And there are just not enough clinicians, and I don't see that gap closing anytime soon.”

Virtual ABA sparks interest, criticism

COVID also spiked usage of telehealth, which clinics have used to increase access to ABA and autism care services. Solace used telehealth during the early days of the pandemic and found it effective, Peacock said. She advocates for a hybrid approach and said telehealth will increase access to rural communities where they don’t have services available.

“We get these kids when they’re 8, 9 and 10 and they’ve never had services,” Peacock said. 

Most children start ABA between 2 and 6 years old, according to data from the Children's Hospital of Philadelphia.

Emerging tech-enabled companies see opportunities. One of the most well-funded startups in autism is Elemy, a company that offers in-person and virtual ABA services in California, Texas and Florida. 

In July, it came under scrutiny for reportedly shutting down services in Georgia and Illinois without giving patients three months to transition to a new provider, which is the standard within the industry. CEO Yury Yakubchyk said the company sent out cancelation notices to families in those states by accident and rectified the situation a few days later. He said the families in states where services were canceled will receive ABA services until the end of the year.  

Elemy has faced scrutiny from media reports regarding its financial situation, which Yakubchyk disputes. The company has undergone four rounds of layoffs this year, including Friday. Yakubchyk did not specify the number of layoffs but said the positions didn’t align with its software-as-a-service driven model. He said the company is shifting certain positions into automation and moving most of its clinicians into independent contractor arrangements to save money.

A controversial element of Elemy’s business is the fact it almost exclusively uses board-certified behavioral analysts over telehealth. While using them virtually is unconventional approach, it comes at time when there is a dearth of behavioral analysts. According to a study from researchers at the University of Florida, there is one behavioral analyst for every 604 individuals with autism. Most board-certified behavioral analysts can have six to 16 children on their caseload. The shortage has led to Elemy virtualizing the position, Yakubchyk said. 

Yakubchyk also said the economics of the reimbursement rates for ABA don’t scale if behavioral analysts are having to travel physically into homes. Elemy will provide the service in person if requested, he said.

Aaron Blocher-Rubin, founder and CEO of Arizona Autism United, a community-based nonprofit that provides ABA and other services to families, and other critics have concerns over the virtualized board-certified behavioral analyst model. “Autism is way too complex. Therapists are way too underqualified to be expected to [only receive virtual support]. There’s no research on a model like this,” he said.   

The search for evidence 

The investor led, tech-fueled disruption of autism care has critics wondering if the rush for revenue growth will come at a price for ABA, which is controversial even without the telehealth and funding components. 

“It took many years [before] insurance would pay for ABA and it was recognized as a mainstream evidence-based therapy,” Blocher-Rubin said. “[Companies] taking advantage of it in ways it not intended to be done is not necessarily good for the children and the outcomes. It’s a threat we’ll lose that access to care.”

While the increased use of technology in autism care has benefits, providers must back it with evidence-based data, said Mandy Ralston, CEO of NonBinary Solutions, a tech firm that designs clinical decision support systems for autism service providers. 

“Companies should explain what drove the decision to provide care via telehealth,” Ralston said. “I’m not saying it's not right in some circumstances, but I'm guessing that it wasn't a clinical decision.”

Those in defense of autism tech say current methods of diagnosis and treatments rarely use verified clinical data and evidence. SpectrumAI founder and CEO Ling Shao has four autistic children of her own. Through her own experience, she said ABA treatments have always been subjective.

“I was watching ABA happen all around my house with therapists scribbling down notes on a piece of paper. I thought, ‘This isn’t a great way to collect data,’” said Shao, who started SpectrumAI to bring AI-enabled clinical decision support into the point of care. 

SpectrumAI’s focus on evidence-driven insights is a big reason why Autism Impact Fund has invested in the company. Male said he vets potential companies based on the evidence their solutions can provide. He also appreciates founders like Shao, who have skin in the game. He said the venture is personal for him and others at the company, most of whom also have children on the autism spectrum. 

“It’s a good thing there is money flowing into this space,” Male said. “The VC focus is needed because there is such a massive problem and a massive opportunity. The supply-demand balance is so great. And digital health and the opportunities we're seeing, and the great founders we’re funding, we believe are really going to move the needle. We feel a tremendous responsibility to make this happen the right way.”