#7 From meditation to medicine: What's been happening at Headspace?
plus... a new CBT app for teens, treating panic attacks through breath stabilisation and all the latest news in mental health
Hi friends, The year was 2017 and I was climbing into the backseat of a London cab.
I was on my way to the McKinsey office. The sixteen hour days were taking a toll and there was one guy who I needed to hear from. I popped in my earphones and heard his calming voice.
The guy’s name was Andy Puddicombe and for four hundred and thirty seven straight days, he had been guiding me through a morning meditation.
Have you guessed what I’m talking about yet?
If not, here’s a hint… it’s one of the largest meditation apps in the world.
And it’s orange.
And it’s in the title of this article…
Yeah, I’m talking about Headspace.
Headspace are one of the most interesting brands in mental health.
And today, I dive into what’s been happening at the company over the last few years.
I analyse their 2021 merger with Ginger, dissect their strategy to become a healthcare provider and see what we can learn from this company who’s been trying to build a unified mental health solution.
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This week in The Hemingway Report;
- From meditation to medicine: What's been happening at Headspace?
- A new CBT app for teens: Black Dog Institute launches ClearlyMe®, an app aimed at improving teenagers’ mental health and wellbeing
- Flow state: Recent NHS trial on Flow Neuroscience’s headset shows positive results as a treatment for depression
- Company spotlight on Freespira: The organisation attempting to treat PTSD and panic attacks through the regulation of breathing patterns
- Plus all the latest news in mental health innovation
From meditation to medicine: What's been happening at Headspace?
I was a Headspace superuser.
I listened to it every morning in those cab rides to work and I learned so much about meditation and mindfulness. I loved it. I developed new tools for managing my own stress and it definitely helped me to be more present.
I started to think a lot about Headspace during those cab rides.
And as I did, I began to consider Headspace as one of the most interesting companies in the broader mental health space.
Not because of the product they were building, but because of the traction they were getting with consumers and the brand they had created.
Tens of millions of people were using their app to meditate each day. They were normalising something that was once reserved for hippies and monks. They had teamed up with stars like John Legend and the LA Lakers and were the first ever large-scale consumer brand in mental health.
I thought they had potential to create real impact for the mental health of millions of people, whilst also being a hugely successful business.
But I was also worried about them…
At their core, they were a meditation app run by a monk. They had a brand built around compassion and empathy and as a user, I felt that.
But I was starting to see cracks in their orange armour.
They were testing out some random products and business models that didn’t feel right to me as user or seem like good choices to me as a strategist.
I was concerned they would deviate from their path and that their potential would go up in plume of orange smoke.
And then in 2021, they did something I didn’t foresee.
They merged with Ginger, a virtual provider of mental health services to businesses.
It was huge news in the mental health industry at the time. Headspace, a brand with a strength in consumer and wellness products, was joining forces with Ginger, an actual B2B provider of mental health care.
Together, they planned to create a unified mental health solution.
The combined entity was valued at $3 billion and the possibilities were limitless.
But then….
Silence…
Deathly silence…
By this time, my Headspace streak was over - apparently once I left McKinsey I didn’t need it as much. I was still a fan of Headspace, but I wasn’t hearing anything about them.
They had gone quiet.
And then last week, I thought about them. The way you think of that guy from high school and wonder, what are they up to now?
So I got digging.
I wanted to know exactly what happened to Headspace since their merger with Ginger.
What have they done?
How has their strategy changed?
Have they been successful?
And what can we learn from their experience?
As always, a bit of context setting…
Headspace was founded in 2010 by Andy Puddicombe, a Buddhist monk, and a marketing guy called Richard Pierson. They actually started as a meditation events company but then remembered it wasn’t 1992 anymore and turned it into a meditation app. It was a wild success, getting downloaded tens of millions of times.
As for Ginger, they were founded in 2011 and for five years, they were actually a behavioural health analytics company, selling data to providers. They switched gears in 2016 and with $71 million in fresh cash, they developed a virtual behavioural health care system that delivered coaching, therapy, and psychiatry services to businesses.
Both businesses were performing well, just in adjacent worlds.
Then in 2021 they merged.
The theory was this…
They were both tackling the same broad problem (mental health) but from different angles.
Headspace was providing meditative and mindfulness tools (general wellness solutions) through a D2C business model.
And Ginger was offering more clinical care through a telehealth solution, sold to employers.
By fitting these two jigsaw pieces together, they wanted to become a holistic offering for managing mental health.
As current Headspace CEO, Russell Glass said, the goal was to;
“create a comprehensive, unified and scalable approach to address the mental health of millions”
They wanted to fill the grid, offering everything from wellness meditations to psychiatry services and reaching as many people as possible by selling this service to consumers, employers and insurers.
On paper, this makes a lot of sense.
Most mergers do.
But how did this actually play out?
Well, after the merger, the Ginger founders took over the main leadership roles in the new entity. Russel Glass (Ginger CEO) was appointed as CEO and Karan Singh (the other Ginger Co-Founder) was appointed as COO.
We said bye-bye to CeCe Morken (old Headspace CEO) and in May 2022, just seven months after the merger, Andy Puddicombe and Rich Pearson (the two Headspace Co-Founders) left the Headspace board.
They collapsed Ginger under the Headspace brand, but while the organisation looked like Headspace on the outside, it was definitely more Ginger on the inside.
The Headspace strategy post-merger had two pillars, deepen their offering as a healthcare provider and shift to B2B.
Deepening their offering as a healthcare provider
After the merger, Headspace (from now on, I’ll refer to the post-merger entity as Headspace) stated that their new mission was to
“provide every person access to lifelong mental health support”
Now if you’re actually going to do that, provide lifelong mental health support, that means being an actual healthcare provider.
Remember, Headspace was originally a meditation app. That is very different to being a company that actually delivers mental health care. But to deliver on their mission they saw this as a necessary step.
Yes, this is why they merged with Ginger, but the new organisation still needed to find its feet as a combined entity that wants to be both a healthcare provider and a meditation app.
Most importantly, if they wanted to actually succeed as a healthcare provider, they knew they needed someone who would pay them to deliver services. And they knew consumers wouldn’t do this.
Shifting to B2B
There were signs of this even before the merger. Headspace did have a business offering (I actually pitched it to McKinsey when I was there) and their CEO, CeCe Morken was a B2B focused CEO, with a background at Intuit.
Headspace needed a customer willing to pay for mental health care. And they saw businesses as the best option.
There was another obvious reason supporting the shift.
In short, the market of businesses paying for EAP / mental health support is much bigger than that of individual consumers.
This strategic shift facilitated expansion into healthcare and opened up a larger market. And merging with Ginger was a way to accelerate this shift.
So to pursue this strategy of being a B2B provider of unified mental health services, they combined the Headspace and Ginger products under one single enterprise offering, the Headspace EAP.
It encompasses the original Headspace features (meditation, mindfulness, sleep and movement) combined with Ginger’s healthcare offerings (mental health coaching, therapy and psychiatry) wrapped up in an EAP blanket (management support, consultations, critical incident support etc.).
They focused on expanding their footprint with employers using this offering, launching it in the UK and continuing to add more features that businesses expect from an EAP.
They’ve kept the D2C side of their business running of course, and in April 2024 they even announced that they would be offering their text-based coaching (previously only available to business customers) to consumers, through a paid plan of $99 per month.
Now the question on my mind is, has this been working?
They definitely haven’t “filled the grid” yet.
They’ve made progress for sure, expanding their product offering, selling to some insurers and expanding their employer customer base. But there’s a difference between being technically able to offer a solution to a certain customer segment and actually having deep penetration in that segment.
Are businesses actually buying this Headspace EAP solution and are their employees using it to improve their mental health?
From all my research, the answer is… kinda…
Unfortunately, Headspace is a private company so we have to be a bit creative in finding ways to analyse their performance.
The TLDR? They’ve underperformed on their B2B commercial targets, D2C growth has slowed significantly and they’ve bumped up against the harsh realities of being a healthcare provider.
1. Underperformance in B2B:
There are a few signs that financial performance has not been great. Before the merger, Headspace’s B2B offering, though small, had been going OK. It grew by 90% in 2020 and then 50% in 2021.
But lately, it looks like things have slowed. Commentary from employees on Glassdoor stated that they significantly missed financial targets in 2022 and 2023.
They’ve also been conducting layoffs over the last 18 months, including a 15% reduction in staff in June 2023.
Their Chief Commercial Officer left the business in December 2023 and their Chief Clinical Officer departed earlier this year.
To top it off, in March 2024, Russell Glass announced he would be departing as CEO later this year.
Of course, these signals aren’t definitive evidence that they have been underperforming (gee I’d love to actually see their P&L) but would these things be happening if they were smashing their targets each quarter?
Likely not.
Also, when we analyse the EAP market, we can see that they still aren’t a major player. The space is dominated by legacy providers like ComPsych and Cigna with lots of competition from younger, more tech focused EAPs like Modern Health.
The challenge here is that Headspace does not have B2B in it’s DNA.
When I’m working with a new business in mental health, we speak about what we want the DNA of the organisation to be. Yeah, it’s kinda fluffy, but it’s actually important. Is this a product led organisation? A scientifically led one? Or is it a B2B sales machine?
Headspace was incredible at DTC. Truly world class.
Along with Calm, they built an entirely new category and acquired tens of millions of users. They built muscles around consumer branding, user acquisition and lifecycle marketing. All the things needed for a successful D2C company. This is an incredible achievement and a reflection of their core competencies.
But all of these things that are largely useless for a B2B EAP provider.
Winning in enterprise B2B is all about being a killer sales organisation. Yes, there are things you have to get right from the product side, but I would always bet on the team with the killer sales org over the one with the sexy product..
And this was just not part of Headspace’s DNA. Yeah, maybe they got a bit of a transfusion from Ginger during the merger, but it doesn’t seem like enough.
I mean, just look at their leadership team on their website right now.
Where is the Chief Revenue Officer? Or Chief Commercial Officer? Or the SVP of Sales? Who here is owning revenue?
2. Slowing Growth in D2C:
Headspace’s DTC business is still large - in 2022, it accounted for 60% of all revenue, but growth has been slowing significantly.
Annual growth in Headspace app downloads has slowed from 26% in 2020 to just 6.8% in 2023. Yes, there has been a real slowdown in the growth of the meditation and mindfulness app market, but they’ve still grown slower than Calm (their main competitor) each year.
Results reflect priorities.
If the business made the strategic decision to prioritise B2B over D2C, it’s unsurprising to see that growth has slowed as a result.
3. Bumping against the harsh realities of healthcare:
Headspace learned something many of us already know. Healthcare is hard. I can see evidence of them bumping up against this reality.
From a product and brand perspective, they’ve done OK.
They combined all their services into one single app and united their offering under the Headspace brand.
From January of this year, if you have access to their full service offering, you have a single destination for end-to-end mental health support, including mindfulness resources, 1:1 mental health coaching as well as therapy and psychiatry services.
However, they have had trouble managing their healthcare staff, with therapists citing issues with high case loads, poor benefits and frustration with company policies (especially with how therapists and clients were treated during layoffs).
As they’ve shifted to providing even more healthcare services, their margins would have compressed - employing actual mental health professionals around the world has higher variable costs than delivering a meditation app.
They’ve tried to use features like mental health coaching to get past this.
The generous interpretation of these text-based, mental health coaching sessions is that they offer “problem solving” support for users with non-clinical needs, supporting prevention and allowing therapists and psychiatrists to focus on patients who actually need support.
The less generous interpretation is that it’s a way to bump margins by providing a cheaper and less effective type of care.
I haven’t looked too deeply into the efficacy of this offering (if you have, I’d love to hear your thoughts) but I’ve read quite a few reviews from users who are frustrated with their experience using this coaching service.
Finally, to be a legitimate healthcare provider, you also need to show evidence you can deliver clinical outcomes. I’ve read a lot of the research Headspace has published in the last few years and while there are some promising signs, I didn’t see much evidence that they are delivering the kinds of outcomes that would allow them to significantly expand their offering, especially within the insurer space where the bar is even higher than for employers.
The final word
So without being able to see their books, I would say Headspace is hanging on right now.
They’ve pushed hard to develop a unified mental healthcare offering, the original vision of the merger, but so far it’s likely they have underperformed commercially.
I still believe they have a huge amount of potential. I mean, they are one of the largest consumer brands in mental healthcare right now, which is an incredibly valuable asset.
I think they have two options.
I’ll start with the more drastic one.
Pull the handbrake and do a U-turn.
Go back to their roots as a D2C business and forget about being a healthcare provider.
There is a huge need in the population for non-clinical support with their mental health and wellbeing. A big business can be built in this space. And the potential to deliver impact is real.
They could focus on the epidemic of loneliness that Vivek Murphy (US Surgeon General) continues to highlight as a massive problem.
Or, as bold as this may sound, they could try to fill the meaning-making gap that is growing in people’s lives. When I was a superuser, that was one of the things they were doing for me.
I’ll be honest, I don’t know what this actually looks like, but it’s more aligned with their DNA and core competencies. And frankly, it’s more exciting than another EAP…
Their other option is what I call the Dory option.
Just. Keep. Swimming.
While a bit boring, I actually like their strategy of becoming a unified mental health provider. They just need to execute better. They should;
- Hire a killer CEO to replace Glass when he leaves - I sincerely hope they already have one selected.
- Hire Enterprise sales leadership - for the love of God, get a Chief Commercial Officer on your exec team.
- Transition the company DNA to one that actually supports their business strategy (i.e., selling to large businesses and health plans.) - Yes, that might mean having sales people ringing gongs for closing deals instead of for sound therapy. Sidenote; I noticed that Headspace is currently a remote-first business. I may be wrong, but I’ve never seen a successful remote-first, enterprise healthcare organisation. If you have, I’d like to see them.
It’s a tricky time for Headspace.
They’ve had transitions in leadership, have underperformed commercially and are bumping up against the challenges of healthcare.
But if you look at any truly successful business, the ones who’ve been around for decades, you’ll see they all had some rough patches. Periods when they had to struggle through tough problems. When the drumbeat of progress slowed down to a barely perceptible march.
Times when things went a bit silent.
But the question for Headspace is, is the music stopping?
Or are they just in between dances?
Mental Health News
Here’s your roundup of the top news in mental health this week;
- Black Dog Institute launches ClearlyMe®, an app that helps 12-17 year olds better manage their mental health and wellbeing (LinkedIn)
- Recent NHS trial on Flow Neuroscience’s headset shows positive results as a treatment for depression (Sky News)
- Teladoc Health (BetterHelp’s parent company) appoint Charles “Chuck” Divita III (wow, what a name!) as their new CEO (BHBusiness)
- Australian children’s mental health advocate Emerging Minds releases two-minute animation as part of their evidence-based suite of resources
- Disability tech accelerator Remarkable looking to invest in startups building in disability, ageing and health (Startup Daily)
- Antler Australia backs Australian startup Huddled, which aims to reduce loneliness and foster community among University students (Startup Daily)
Company Spotlight: Freespira
- What they do: Medication-free treatment for PTSD and panic attacks through breath stabilisation training
- Headquarters: Washington, United States
- Founders: Beth Siegelman and Russell Siegelman
- Founded: 2013
Freespira has been around a while and pitch themselves as “the only FDA-cleared treatment that can reduce or stop panic attacks and PTSD symptoms at home in just 28'“. How do they do this? Through a digital therapeutic that trains people to stabilise their breathing.
We know that people who suffer from PTSD and panic attacks often experience dysfunctional breathing. Dysfunctional breathing like this is linked to carbon dioxide hypersensitivity, a condition where people are hypersensitive to the carbon dioxide they breathe in. And when coupled with triggers of anxiety or PTSD, those with CO2 hypersensitivity can experience panic attacks.
Freespira aims to prevent panic attacks by through a twice-daily, seventeen minute sessions, delivered for 28 days. During these sessions, patients use Freespira’s physical breathing device and tablet to practise guided breathing exercises, getting real-time feedback on how they are doing.
They’ve raised venture capital from top investors like Lightspeed Ventures and their product is currently available to in the US, with some population segments able to access it through their health insurance or employer.
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Keep fighting the good fight!
Steve Duke
Founder of The Hemingway Group
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