As the youth mental health crisis escalates, money has been flocking to providers offering to address the booming need.

Venture capital investment in the youth wellness and mental health space spiked by 1,376 percent in just four years, ballooning to $871 million in 2021, up from $59 million in 2018. That's according to a new report from the Redwood City, California-based Telosity, a fund from the investment services consulting firm Vinaj Ventures that focuses on mental health startups.

Despite the uptick in investments, there remain shortages in youth mental health professionals and overall services. The conditions point to added opportunity for entrepreneurs angling to build businesses that can help young people.

The report cites that  clinical depression in 12- to 17-year-olds grew by 52 percent between 2005 and 2017. More so, one in six young people between the ages of 6 and 17 experience some type of mental health illness. There's been a need for adolescent mental health services for years, says Telosity founder and CEO Anish Srivastava, but "the pandemic definitely exacerbated this issue."

The pandemic has also helped spur an evolution in mental wellness treatments. A lot of growth opportunities dwell in thinking about individuals more holistically, along with sleep, nutrition, fitness, and wellness as a whole, Srivastava adds.

To wit, the youth mental health market is projected to hit $26 billion by 2027, according to the report, which tracks more than 850 mental health startups. 

Two sectors garnering the most investments over the past two years were clinician access and better online experiences, according to Telosity's data. Meanwhile, nonlicensed support services along with wellness and self-care are less crowded markets.

Of course, startups in the space face a number of challenges--from insurance reimbursement to patient retention and the high costs associated with customer acquisition. And there are a number of legal and regulatory considerations to juggle as well. When working with minors, for instance, entrepreneurs need to be cognizant of the Children's Online Privacy Protection Act, which is a law aiming to protect the privacy of children under age 13. 

Srivastava adds that the most successful startups in the youth mental health industry are those that can demonstrate the efficacy of their product or service to make a strong case for their solution. In other words, have the data to back up your claim. "One of the things that we're trying to filter through is which [companies] have very clear outcomes and can either show clinical efficacy or can provide proof points that their solution actually works as opposed to being theoretical and putting a solution that they think will work," he says.