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Pro basketball player Giannis Antetokounmpo told GQ magazine last month that he and most of his Milwaukee Bucks teammates were seeing a sports psychologist. Antetokounmpo, a two-time regular season MVP and a finals MVP, revealed that he meets with the sports psychologist “almost every day.”

His comfort speaking about his mental health speaks to what may be the waning reduction in stigma associated with mental illness, and awareness of it, among Americans. In 2012, when asked to select the most important health issue in their lives, 3% of those surveyed answered “mental health;” in 2020, that number had risen to 13%. A number of factors are responsible for the shift, not least of which is the rise in the reported levels of mental distress: in a survey conducted in 2020, the Census Bureau said that 33% of Americans reported struggling with clinical anxiety or depression.

In the absence of federal or state mandates to solve this problem, the country has largely relied on market-based interventions. Thousands of companies promising solutions to addiction, anxiety, depression, or emotional well-being have emerged. Venture capitalists, who provided a total of $35.2 million for mental health startups in 2011, upped their ante in 2020, providing nearly $2.4 billion in funding.


By nature, venture-capital-backed startups operate on an accelerated timeline. They’re encouraged to find an exit, typically measured as going public or getting acquired, within a very short window of time — ideally between five to seven years.

To better understand this business sphere, we interviewed academics, psychologists, founders, and C-suite executives. These in-depth conversations indicate that companies that are growing explosively — a common term for this is blitzscaling — in the mental health arena face three key blind spots:


  • a shortage of licensed clinical mental health therapists
  • challenges in building a high-gross margin company
  • the possibility of doing more harm than good.

Being attentive to these blind spots might inform entrepreneurs or investors who are in the arena or hope to enter it soon.

A dearth of therapists

Stephen Hays, a venture capitalist who invests exclusively in mental health start-ups, thinks the supply—demand imbalance is the key issue plaguing companies in this space. The demand for mental health therapy has increased, due to the reduction in stigma, with a bevy of tele-behavioral health companies promising to match people with providers. “But supply has stayed the same,” Hays notes. Who will these people get care from?

To compound the supply problem, many providers have been encouraged to set up their own practices — aided by companies such as Simple Practice, Alma, and Grow Therapy that promise to reduce their paperwork, provide technology-enabled tools, and credential them with insurance companies.

There are two interesting work-arounds here. One is to employ providers as full-time employees (W2s). The other is to build a culture that would motivate part-time providers (1099s) to join.

Kooth, a tele-behavioral health company focused on serving teenagers in the United Kingdom, is a big proponent of W2s. Tim Barker, the company’s CEO, told us why this made sense to him. “We employ providers. We give them stock incentive plans. We turn them into workplace professionals, and that means investing in their development too.” Kooth, having grown organically over the course of 20 years, bootstrapped its way into going public in the fall of 2020 and has seen a 50% increase in its share price since then. The company is now valued at approximately $160 million.

David Mou, the chief medical officer of Cerebral, agrees that full-time employees can be effective. But he thinks there’s too much variability in demand from state to state for it to be a universal rule, making it necessary to blend 1099s and W2s. Mou also insists that companies should show “providers that they are joining an organization that is committed to delivering quality care.” Cerebral ensures that providers have peers and clinical supervisors they can consult with; the company provides monthly reports with data on client improvements; and employs an electronic medical record that streamlines the time providers spend on paperwork. This month, Cerebral closed a funding round that placed the company at a $4 billion valuation.

Build a scalable mental health business model

Most VC-backed startups have investors who want to see high gross margins. According to venture firm TwoSigma, companies with lucrative exits had gross margins at or above 70%. Translated into the world of behavioral health, that would mean for every $100 of therapy, $30 would go to the provider — assuming, of course, that the revenue model was centered around providers. The answer, then, is to either avoid blitzscaling altogether or focus on providing scalable services like clinically helpful content and coaching.

LifeSpeak is in the content business. It produces high-quality videos on behavioral health care for corporate partners who then encourage employees to use any of the available resources. To date, LifeSpeak has made approximately 2,300 videos and reached more than 4 million employees. Producing videos can involve an upfront expense, but every additional customer who watches them costs the company nothing. This focus on a high-margin business explains the company’s equity-value-to-revenue multiple of 12.3x, meaningfully above telehealth companies like Teladoc (8.5x), American Well (3.5x) or Talkspace (.6x). But this singular focus on videos also explains a much lower valuation — approximately $260 million — than any of those three companies.

The other way of navigating around clinical providers is to go upstream into coaching — a model that Ginger espouses. Ginger is an on-demand mental health company, connecting people to behavioral health coaches for 1:1 text-based conversations, as well as to therapists and psychiatrists for more acute care needs. Russ Glass, the company’s CEO and founder, offered a few insights on the value of behavioral health coaching.

“The vast majority of people — 80% in our case — don’t need clinical care; they want behavior change,” Glass told us. He believes that coaches also offer another gift: they unlock capacity. Unlike providers, who can work with patients only in the state in which they are licensed, coaches are free to help anyone. This allows Glass to hire part-time workers and not worry about spikes in demand coming from other states.

Cigna, in April of 2021, became one of the first insurance companies to subsidize coaching for their patients by bringing Ginger into its network. In August of 2021, Ginger merged with Headspace, bringing their collective valuation to $3 billion.

Avoid doing harm

Only 16% of the psychology workforce currently consists of people of color, contributing to a wide disparity in utilization: white adults are nearly twice as likely to use mental health services as Black adults, and more than three times as likely to use mental health services as Asian or Hispanic adults.

Underutilization is just one problem. Misdiagnosis is another.

“A lack of representation in the psychologist workforce can be deadly,” notes T.M. Robinson-Mosley, a counseling psychologist of color who consults with the NBA, the NFL, and the U.S. Air Force, among others. She attributes part of the high levels of incarceration to the criminalization of mentally ill populations. Approximately 15% of men and 30% of women who are incarcerated are experiencing clinically grave mental health issues, from major depression to schizophrenia to bipolar disorder. Those rates are nearly five times the average for non-incarcerated people.

Thomas Insel, the former director of the National Institute of Mental Health, told us that he sees mental health as a “social justice issue,” first and foremost.

One way mental health companies can begin to address systemic racism is to actively recruit a diverse provider base. Both Cerebral and Ginger boast networks that are far more diverse than the U.S. (49% and 50% respectively). This matters to patients who are looking for representation in their providers; to employers who want to make sure they are standing by their commitments towards diversity, equity, and inclusion; and to health system partners like Medicaid.

Another way to address systemic harm is to find business models in which the consumer is not the payer. Partnering with health plans is the natural consequence. Yet the challenge of working with American health plans is that every party is operating with a fee-for-service system. Providers (hospitals, behavioral health companies, therapists) are incentivized to worry about quantity and not quality; the more they bill, the more revenue they make. Health plans, meanwhile, want to keep costs low, so they are not trying to drive up utilization.

Enter Corbin Petro, the founder and CEO of Eleanor Health. Eleanor Health, which targets substance use disorder and partners with payers, including Medicaid, aims to bring a value-based-care approach to the space. Eleanor Health (the provider of care) partners with insurers (the payer of care) to deliver whole-person, evidence-based care for populations affected by substance use disorder and other mental health conditions, addressing all of patients’ needs. Eleanor Health is only paid if they improve targeted quality outcomes and reduce the costs for the patient population, which enables Eleanor to deliver the right interventions that lead to long term positive financial and clinical outcomes.

If companies like Eleanor Health can succeed, they could have massive social impacts on marginalized communities — especially for Native Americans, who are four times more likely to die from premature alcohol-induced liver deaths as the general population.

Blind spots, we must note, are not blockers. There is a deep need for private companies to address mental health. Insel, after having spent time in both the private and public sectors, reflects, “Think about how we’re solving the Covid-19 pandemic: a public mandate, in Operation Warp Speed, met private capital, in pharmaceutical companies.”

Having studied just a few of the risks of growing quickly in mental health tech, our takeaway is that scaling mental health businesses are necessary. But it requires an awareness and thoughtfulness about all of the stakeholders involved. Companies that do that can build sustainable businesses, and begin to meaningfully help people live better lives.

Tarun Galagali is the founder of Mandala, a well-being platform for people of color, and a second-year student at Harvard Business School. Leonard Schlesinger is a professor at Harvard Business School and the former vice chairman and chief operating officer of L. Brands. A longer version of this essay was published on Substack.

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