Headway and Strava

More fitness and a bit of delivery apps

Two of my favorites themes this week: fitness and mental health.  But first: I can’t ever pass up a chance to talk about delivery companies, Zoom or Slack/Teams.

Instacart and Best Buy

Best Buy and Instacart announced a partnership for same day delivery on select items.  Instacart will be expanding the pilot to other retailers in the coming months. This is a no-brainer move.  For a certain specific type of product – in-store, fairly homogenous , known, need-it now, and ideally expensive to offset the delivery – this makes complete sense.  A great example right now is the newly available PlayStation 5.

Best Buy will certainly gain some momentum by being a first mover, though I expect others to follow.  Amazon is building out Post Office-like locations to expand same-day delivery as well.  Instacart obviously benefits from increased customers, increased opportunity for drivers, and increased route efficiency potential.  DoorDash will follow here as well, as they are strong in the suburbs that house these malls and strip malls.

I used a loaded term in the first paragraph “in-store”.  Two types of sales will be unavailable on this service – most likely ever.  The first is the long-tail, where Amazon dominates.  A book that sells 20 copies a year in the US will not be in stores near you.  The second is D2C brands.  A few like Casper and Harry’s have made the jump into physical retail.  Many more will remain predominantly internet native.

Strava

I have been running a fair bit to keep sane during quarantine.  Strava is THE app for die-hard cardio fans.  Part social network, part global leaderboard, the community is quite die-hard. They are raising a bunch of money, and I’m struggling to see this one.  I’m biased, as I didn’t use the app enough to really see the social components.

Obviously, fitness is up for grabs with COVID, and health+wellness is a long-running trend for a segment of the population.  I see two big challenges here.  As of a 2019 article I found, they had not yet turned a profit.  This is a Series F fundraising.  We aren’t talking about a capital-intensive business model like Uber here.  The other challenge is the classic social network dilemma.  The optimal price for growing users is $0.00, implying advertising.  Segmenting the best features for paying users implies a sub-optimal experience for the majority of your fans.  When I see they’ve dabbled in multiple lines of business (ads, selling data to city planners for bike lanes, subscriptions), it comes across like none of them have found enough traction.

The devotion of the Strava community is quite impressive.  Something just isn’t adding up for me here.

Headway

I did a larger blog post on mental health businesses.  I initially rolled my eyes when I saw this company was raising money.  It appeared to be a Psychology Today reboot.  I again rolled my eyes when they mentioned how few therapists accept insurance.  This company is far from a sure thing, but if I am reading the tea leaves right it may be the most audacious bet in mental health right now.

Headway is a two-sided marketplace.  Members of a select few insurers can quickly be matched with a therapist or psychiatrist who accepts insurance.  In this respect, Two Chairs, Psychology Today and the matching service of Coa are loosely comparable.  If this were the extent of the business, it would be a derivative snoozer.

Full disclosure – everything that follows is directly coming from the company or my speculation.  First, they have 1800 therapists (ok for a growing company) solely in NYC (wow).  Something is solving a chicken and egg marketplace problem for that penetration.  It appears a majority of NYC therapists are on this platform and accepting insurance.  Second, most were not accepting insurance prior.  This was my logical area of cynicism – a therapist who can charge $250/hour has little incentive to take the Aetna capped fee.  Third, they are free to the provider as well.

My initial assumption may have been terribly wrong.  Their data suggests they can swing providers to accept insurance.  The true product here is therefore for therapists – software to deal with insurance companies.  If the typical therapist truly will accept insurance when the hassle is removed, the game has changed.  

One transformative end-state for this company is that Headway replaces Psychology Today and insurance directories.  Mental health professionals are eventually forced by the marketplace to accept insurance at rates previously unimagined.  The cost of mental health care for patients is substantially lower.  Premier therapists would maintain above-market cash rates but become the exception rather than the rule.  A more measured outcome might be that most therapists accept some number of insurance patients and reserve the rest of their time for cash clients.

One lingering concern (I’ll be following these folks moving forward) is the insurance companies.  The “for insurers” page listed some loose benefits – expanding your mental health network, one centralized point for interacting with thousands of providers.  Headway would shift a cost from out-of-network to in-network, but also potentially drive up therapy costs from making it more accessible. Perhaps the out-of-network max rate exceeds the in-network negotiated rate.

The other obvious concern is supply. NYC is the highest therapist per capita density in the US. Perhaps some slack in the system does exist there. What happens in a different market where the limited mental health capacity is already sold through at above-reimbursement cash rates?