Editor’s note: With Joyable announcing this week it raised $8 million in a Series A round, we’re re-posting a sector analysis story on the online therapy space that originally published in the August 2015 issue of VCJ.
A few companies are emerging in the online therapy space and they are attracting VC interest
Here’s a fact about healthcare. Most people with a toothache will immediately see a dentist. But the majority of mental health sufferers will never consult a therapist. Nearly 60 million Americans are beset by mental illness in any given year, although 85 percent never get treatment, according to the National Alliance on Mental Illness.
Several venture-backed startups are hoping to change that by making it easier, cheaper and more convenient for people to seek professional help online.
“There is a tremendous number of people who suffer from anxiety and depression who can’t seek treatment solely because of geography or financial circumstances or social stigma,” said Michael Dearing, founder of early-stage investment firm Harrison Metal. “So the idea that this kind of digital therapy can be helpful to them and can extend to a huge part of the unaddressed market, which was really appealing to me from a business perspective.”
Dearing recently led a $2 million seed investment in San Francisco-based Joyable, a startup that seeks to cure social anxiety by providing evidence-based, affordable, and convenient online mental health services to the millions who can’t access them today.
Joyable costs $99 per month or $239 for three months. Clients are assigned a personal coach who conducts a 30-minute telephone call with patients at the beginning of their treatment, and then reaches out once a week, typically via text or email. The coaches work directly for Joyable and are trained in cognitive behavioral therapy (CBT).
“The online platform is an important new way to approach this kind of therapy because it’s not tied to a specific time of day or place,” Dearing said. “You can do it whenever you want, in the privacy of your Internet connection. It doesn’t require an appointment.”
Dearing likens it to the daily routine of working out or taking care of pets, or any other daily activities of living. For online patients, being able to access and benefit from the core ideas of CBT and weave it into their schedule in 10 or 15 minutes increments is all they need.
“That’s a much better fit for how we live our lives,” he said.
Dearing added that the coaching is embedded in the app and that the software can do a lot of heavy lifting on its own. And even though there is a team of coaches who work for Joyable, most of the client care is self administered through a digital workbook.
“The founders wanted to take core CBT insights and put them in software so they can reach a larger population who needs this help,” Dearing said. “The ability of this product to increase the market is huge.”
“An on-demand approach can be very powerful. I’m not saying traditional therapy is bad, but I think Talkspace is changing how therapy is being conducted.”
Americans who do seek therapy spend somewhere between $50 billion to $100 billion annually on treatment. A 2009 report from the Agency for Healthcare Research and Quality pegged the number at $58 billion, though many believe it has increased since them.
The size of the market and the fact that it is still largely underpenetrated is now attracting a wave of innovative online therapy startups.
Breakthrough, which launched in 2009, raised a $5 million series A round led by Social+Capital Partnership to help bring, affordable video-based mental health therapy online. The company connects people with mental health providers for online counseling and psychiatric care. One of the company’s key differentiators is that it accepts insurance, having formed relationships with several larger insurance providers and corporate customers.
Other players include:
- eTherapi, which provides an online platform that makes it easy to find a qualified, trained and compassionate therapist for mental health counseling.
- iCouch, which operates an online therapy platform that also offers a software application to help mental health professionals manage their schedules, both for online therapy and traditional office visits.
- 7 Cups of Tea, which provides an on-demand emotional health and well-being service that anonymously and securely connects people to listeners—as opposed to trained therapists—in one-on-one chat sessions. Anyone who wants to talk about whatever is on their mind can quickly reach out to a trained, compassionate listener through the network.
- BlahTherapy, which provides a free platform that connects people with random strangers worldwide who are willing to talk to them about their problems and sharing their own. Blah Therapy says it has found that sharing and connecting with strangers who are going through similar struggles provides great consolation to anyone in need of healing. The company also offers a $25 pay-as-you-go service for connecting anonymously and confidentially with trained therapists.
Many of these companies have not received a formal venture round. But one startup that has scored financing is Talkspace, which raised $9.5 million in a Series A round led by Spark Capital and SoftBank. Talkspace offers therapy via its Web interface and a mobile app, taking a text messaging-based approach to delivering treatment in real-time, rather than a Skype-like video-based approach.
“I met the company when it was still a video model. But a year later, when I met with them again, they had moved to text and the usage improved dramatically,” said Alex Finkelstein, a general partner at Spark Capital, which led the Talkspace investment. “People are sometimes uneasy seeing another human face, but we embrace texting. Just look at the popularity of Whatsapp or Snapchat. The video option is still in play, but at least at the beginning of the relationship with a therapist, people prefer text.”
Talkspace offers different pricing packages for its service. The cost is $49 paid weekly for unlimited messaging therapy, or a single payment of $599 for the year.
When Finkelstein invested in Talkspace, he thought it was therapy light. But he soon realized it was therapy-on-demand. He points to marital dispute as one example in which a person can connect with a therapist right now, rather than wait for a scheduled meeting.
“An on-demand approach can be very powerful,” he said. “I’m not saying traditional therapy is bad, but I think Talkspace is changing how therapy is being conducted.”
Still, there are a number of challenges with the online therapy model. The first is attracting skilled therapists who believe in the new online models and are willing to be paid less than the $150 per hour they typically charge.
“There are some therapists who don’t like what we are doing,” Finklestein said. “It’s like when taxi drivers say that Uber is terrible for the economy. But look at how many people Uber is employing and look at the higher level of service they are offering compared to any other taxi company out there. So sometimes you like complaining because that means you are truly changing the industry.”
Another challenge is attracting patients, especially those who are new to therapy. Even before Dearing invested in Joyable, he wasn’t totally convinced that anyone would pay money for the service. But he said his fears were quickly dispelled.
“So far, I’m encouraged by the willingness and openness of people to pay for the service,” he said. “People don’t mind paying to make the quality of their life better. For some, that’s a music service, for others it is health and wellness, and Joyable falls squarely in that category.”
Finkelstein said that the limited exit path for an online therapy company could prove problematic. He admitted it’s not comparable to other VC sectors in which a company such as Google or Facebook or Twitter could be an acquirer for venture-backed startups.
Still, Finkelstein said he’s been surprised before, like last year when Facebook acquired virtual reality company Oculus VR, in which Spark was a series A investor.
“Our motto is just build a great product and good things will happen,” he said. “That’s exactly what Talkspace is doing. We’ve seen exits in our portfolio that we would never have dreamed of.”
Tom Stein is a Palo Alto, Calif.-based contributor. He can be reached at firstname.lastname@example.org.