In crisis, some start-ups are surging — and saying ‘no thanks’ to hungry investors
- Start-ups in telehealth, fitness and remote work are seeing record growth now that millions of Americans across the country are stuck at home.
- They’re getting plenty of offers from venture investors, who have cash to put to work from large new funds.
- “The question becomes, is this a step function change or a peak that reverts back, and how far does it revert back,” said Jeff Crowe, a partner at Norwest Ventures.
Oren Frank’s business is exploding. But he’s not celebrating.
Frank is the CEO of Talkspace, a company he co-founded eight years ago with his wife, Roni, to provide therapy over the internet for people in remote areas and those who can’t afford traditional psychotherapy. Traffic has doubled since mid-March, and thousands of people are registering daily, Frank said, as isolation and economic stress cause increased anxiety and depression.
“It’s not just growing because people can’t access face-to-face therapy but because people are unbelievably anxious and stressed and are locked in their homes and having horrible relationship issues,” Frank said, in an interview late last week from his home in New Jersey.
“There’s a lot of pain.”
Talkspace is one of many mental health apps and services seeing a flood of new patients seeking help while social distancing. It’s also one of the companies potential investors are inundating with calls, as they look for rare growth opportunities in a suddenly contracting economy.
Telehealth providers, developers of remote work tools, app-based fitness services and on-demand delivery businesses are surging amid the Covid-19 crisis.
Now they face a dilemma: should they take cash from venture investors hungry for returns, or wait and see how the economy shakes out?
CEOs can’t meet investors in person, making it harder to know if they’ll get along personally — an important consideration if big backers are going to be involved, perhaps on the board, for years to come. They also have to gauge how much of the growth they’re seeing is temporary and how much reflects a more enduring change in the way we work and live, while also considering if capital will still be available in the future, and on what terms. And even if they take the money now, they might not be able to put it to work hiring and expanding right away, as they deal with unusual crisis situations with current customers and employees.
“The question becomes, is this a step function change or a peak that reverts back, and how far does it revert back?” said Jeff Crowe, a partner at Norwest Ventures, an early Talkspace backer. “How much do you expand capacity and do you raise more capital to take advantage of that? All those companies are thinking about those kinds of questions.”
Talkspace, which has 120 employees and works with thousands of therapists across the country on a contract basis, last raised money almost a year ago, a $50 million round led by Revolution Growth. But the company still isn’t profitable. Like most venture-backed start-ups, it will need additional capital for future expansion.