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The company makes most of its money from selling subscriptions through health plans
While there are a large number of companies offering virtual mental health services right now, the space is still relatively new; even the most mature companies are only around a decade old now. Take Talkspace for example: it's one of the earliest companies to offer these services and it was only founded in 2011.
The company, originally called Talktala, was started Israeli husband and wife Oren and Roni Frank after their marriage was saved by couple's therapy. It began as a video platform for group therapy sessions before changing to revolve around individual therapy sessions with a focus on messaging and asynchronous chat.
The company allow users to send unlimited text, video, picture and audio messages to providers, who engage with them five days a week. Talkspace also provides psychiatry services and prescription fulfillment, adolescent therapy and couples counseling.
"The behavioral health market has traditionally been underserved for a number of reasons, including as a result of inadequate access, a limited universe of qualified providers, high cost and social stigma. We believe virtual is the ideal modality for mental health treatment because it removes or reduces these burdens associated with traditional face-to-face mental health services by improving convenience through 24/7 access to our platform, providing more accessible entry level price points, and reducing associated stigmas by promoting transparency, increasing ease of access and preserving privacy," the company wrote in its S-4 filing with the SEC.
"Our platform connects consumers in need, including many of whom have never had an opportunity to benefit from high-quality behavioral healthcare, with experienced providers across all 50 U.S. states."
The majority of company's revenue comes from the sale of monthly memberships, one to three month subscriptions to its therapy platform that come either directly from the consumer, or through their insurance. In the first nine months of 2020, Talkspace made $50.5 million, an 85.8% increase from the $27.2 million made in the same period in 2019. Of that, $42.2 million, or 83.6%, came from subscriptions.
From March 2019 to September 2020, Talkspace grew the number of people covered by health plans from 2 million to 39 million, a 1,850% increase. The number of member who pay the company directly is roughly 30,000.
The company also makes money from platform access fees paid by its enterprise clients for the delivery of therapy services to their members or employees. Those are generally one year contracts.
In the first nine months of 2019, $8.3 million, or 16.4%, of revenue came from enterprise, yet that side of Talkspace's business is growing as well: in 2019, consumer revenue made up 94% of revenue, and enterprise was just $1.8 million, 6.4%. From the first nine months of 2019 to 2020, the number of Enterprise client contracts grew from 19 to 52, a 174% increase.
In January, Talkspace announced that it would be going public in a special-purpose acquisition companies (SPAC) merger with Hudson Executive Investment Corp., which values the company at $1.4 billion. The deal also provides the company with $250 million of cash, which it will use as growth capital.
SPACs act as an alternative way for companies to enter the public market without needing to go through a traditional IPO. Basically, a shell company is formed which goes through an IPO; it then acquires an established company so it can take over the stock. This allows companies to go public faster, bypassing the need for a months-long roadshow.
These vehicles have become especially popular with healthtech companies, including Hims & Hers, Ambulnz, Clover Health, Science 37, Sharecare, and 23&Me.
(Image source: talkspace.com)
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