Deteriorating mental health has become one of the secondary themes of the pandemic. Treating those who don’t want to leave the house to deal with their anxiety and depression is developing into a sub-industry of its own. Dozens of startups have set up websites offering access to counsellors and resources, hoping to turn a profit by filling the gaps in public health in an accessible way.
Here are five things about the happiness industry.
1 - MindBeacon’s public meltdown
MindBeacon Holdings (MBCN) is a Toronto-based online therapy company that took its shares public late last year amid surging demand for its services. It hasn’t exactly taken Bay Street by storm - its shares are down 25 per cent from where they started. That’s despite a multi-million-dollar deal with the Ontario government to provide anyone in the province with free mental health services via its online therapy system.
“With over 50 per cent of MindBeacon users accessing support outside of regular office hours and many saying they have never accessed therapy before, we are improving health equity by reaching individuals who either couldn’t or wouldn’t access traditional therapy because of barriers like stigma, affordability, and accessibility,” chief executive officer Sam Duboc said.
The deal with Ontario didn’t provide much of a bounce - the lightly traded shares gained a few cents before continuing their move downward.
2 - Formerly depressed CEO knows investment
Duboc has said his battle with depression encouraged him to found the company, starting with the purchase of a Toronto-area psychotherapy clinic. Once its technology was developed, the company started working with large insurers to offer its mental health services.
He had plenty of Bay Street punch to offer. He’s the chief executive officer of a family-owned investment fund called Elkland Capital Partners and co-founded Edgestone Capital Partners. He was also a managing director at CIBC Capital Partners and co-founder of LoyaltyOne.
The company’s IPO filing said he left all of that behind after his brother’s death led to a mental health tailspin and the realization that it was difficult to access services that could help him cope.
“What I experienced after Chris died started me on this journey in mental health,” he said. “It wasn’t long before I found myself deeply depressed. And notwithstanding I’d been on the board of a mental health hospital foundation and was open to seeking support, it was hard to get therapy to help me recover.”
3 - Profit not on the menu
The company lost $3.6-million in the last quarter, its first report as a public company, but is sitting on a $65-million cushion after its IPO.
A check of the books underscores the challenges facing any company that offers services directly to consumers, with advertising and marketing taking a $1.2-million bite out of the balance sheet. The company also sunk $1.5-million into “general and administrative fees” as it looked to sort out life as a public company.
Still, its core services of asynchronous cognitive behavioural therapy (in which a counsellor helps out, but not in real time) came with a 50 per cent profit margin. Its service that offers real-time counselling had a 35 per cent profit margin, but accounted for less revenue.
That’s enough for the five analysts who follow the company - each has a “buy” rating on MindBeacon shares.
4 - Buckle up for the ride
There’s no shortage of companies looking to service those in distress.
Few of them are publicly traded, although BetterHelp is owned by massive healthcare provide Teladoc, which trades on the New York Stock Exchange. It doesn’t break out the division’s numbers in its results, but estimates a potential market of 65 million Americans for all of its online medical services (on top of the 73-million Americans it already reaches with its digital platform).
Meanwhile, TalkSpace announced a deal in January to go public in a $1.4-billion deal. It has offered services since 2012 and provides online access to therapists directly to consumers (it also has some corporate clients). The company told a conference it was working with 2,600 therapists working with almost 46,000 people.
More competitors will likely step up - industry analysts Rock Health said investors put $6.7-billion into digital health companies in the first quarter of 2021.
"We expect a continuation of Q1 across the remainder of the year—an entrepreneur's market that rewards fast growth with unprecedented capital and exit opportunities," wrote Rock Health chief operating officer Megan Zweig. "But this will not slow the vital transformation offered by winning solutions. Our advice? Buckle up for the ride.”
Mental health startups received the bulk of funding: Lyra Health raised $187-million, BetterHelp pulled in $125-million and Ginger received $100-million.
5 - There are other challenges
That slew of well-funded investors turning to competitors is just one of the challenges facing Toronto’s MindBeacon. Rock Health said the pandemic is driving the troubled and worried toward online offerings, but any return to normality could see the depressed hordes wandering back to the comfort of a therapist’s office.
The analysts also worry that regulation may not keep up with the pace of innovation in the industry, something that could make investors wary, as companies are forced to spend money on managing regulatory problems instead of potential clients.
If this is causing MindBeacon any anxiety, it’s not letting on.
“The pandemic has completely changed our world,” the company said in its annual report. “It's time that mental health care embraces those changes and provides the support that patients need, when, where and how they need it. We are proud of our performance in 2020 across all aspects of our business and we are well positioned to keep the momentum going in 2021 and beyond.”