MENTAL HEALTH STARTUP RAISES $14 MILLION SERIES A TO SCALE TELETHERAPY SERVICES FOR UNDERSERVED YOUTH
ELKRIDGE, Md., January 15, 2025 – Backpack Healthcare, a leading online pediatric mental health provider, today announced the completion of a $14 million Series A funding round to accelerate expansion of its teletherapy services and AI-driven care platform for children and adolescents. The investment, led by PACE Healthcare Capital with participation from ECMC, Techstars, and multiple impact-focused venture firms, positions the company to scale operations nationwide and address the escalating youth mental health crisis affecting millions of families.
The funding comes as the U.S. faces unprecedented demand for accessible mental health services for young people. According to the Centers for Disease Control and Prevention, 40% of high school students reported persistent feelings of sadness or hopelessness in 2023, while 20% seriously considered attempting suicide. Despite this crisis, more than half (54%) of youth ages 12 to 17 experience difficulty accessing needed mental health care, with barriers including provider shortages, geographic limitations, and insurance coverage gaps. The problem is particularly acute for Medicaid-enrolled families; while over 40 million children rely on Medicaid or CHIP for healthcare coverage, only 14% of mental health clinicians accept Medicaid, creating a severe access disparity.
Backpack Healthcare’s integrated platform directly addresses these challenges by combining evidence-based teletherapy with proprietary AI technology that monitors user emotions and matches patients with specialized therapists. The system provides continuous support between sessions through interactive tools and clinically validated exercises, ensuring care extends beyond traditional weekly appointments. The company’s services include individual pediatric therapy, family counseling, medication management, and live parent training sessions on critical topics such as cyberbullying and substance abuse. By actively partnering with Medicaid-accepting insurance providers, Backpack Healthcare has established a sustainable model for delivering culturally competent care to historically underserved communities.
The telehealth market’s rapid expansion underscores the timeliness of this investment. The U.S. telehealth sector reached $42.61 billion in 2024, with the mental health and behavioral therapy segment projected to grow at the fastest rate through 2034. Mental health startups attracted $2.7 billion in venture capital during 2024, a 38% increase year-over-year, as investors increasingly prioritize proven solutions with established clinical outcomes. Backpack Healthcare’s data demonstrates strong engagement metrics and positive patient outcomes, positioning it favorably within this competitive landscape.
“This funding underscores the healthcare system’s urgent need for inclusive, tech-enabled solutions to tackle the pediatric mental health crisis,” said Hafeezah Muhammad, Founder and CEO of Backpack Healthcare. “Our mission is to break down systemic barriers and ensure equitable access to high-quality mental health support for all children, regardless of socioeconomic status. With this capital, we can expand our reach, enhance our AI capabilities, and forge partnerships with schools, health systems, and government agencies to serve families who have been historically overlooked.”
The Series A proceeds will fund strategic priorities including technology platform enhancement, geographic expansion beyond current Maryland and Virginia operations, and development of additional state partnerships. The company will also invest in clinical research to validate its AI algorithms and expand its therapist network to maintain quality standards during rapid scaling. Robert Johnson, Chief Equity Officer at Bezos Academy and former YWCA Metropolitan Chicago executive, has joined the company’s advisory board to guide initiatives toward greater inclusivity.
About Backpack Healthcare
Founded in 2020, Backpack Healthcare (formerly Youme Healthcare) is a digital health company transforming pediatric mental health care through AI-powered teletherapy services. The platform serves children ages 0-17 and their families, specializing in anxiety, depression, ADHD, and behavioral disorders. The company is accredited by the Joint Commission and maintains partnerships with leading insurers, Medicaid programs, and school districts nationwide. For more information,
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