Hi friends,

I recently read a quote from Naomi Allen that got me thinking…

Naomi is the CEO of Brightline and the quote was part of her recent blog post outlining their shift in strategy. 

She followed up by saying that Brightline would be;

“moving back to hybrid care, and adding physical brick-and-mortar clinics in key markets”

What’s interesting about this is that it’s coming from the leader of a mental health tech-startup that has been fully committed to virtual care deliver for many years.

When everyone else seems to be shifting increasingly towards telehealth, Brightline are now going in a different direction.

They are pivoting away from virtual-only services, embracing hybrid care and creating real-world, physical clinics in communities. What is Naomi seeing that justifies this strategy?

It got me thinking…

What is the role of in-person locations in mental healthcare in 2024?

What benefits do they offer to patients, providers and businesses?

What approaches are different business taking towards in-person clinics?

And what interesting opportunities might real world spaces hold for organisations as they think about their long term strategy?

To get some interesting opinions, I also spoke with a few founders to learn how they are thinking about these questions.

Below, I share my own thoughts and analysis as well as the perspectives of these founders.

We’ll cover;

• State of play: How the major players have approached their physical location strategy so far

• Founder insights: How the founders of companies like Resilience Labs, Brightline and SelfSpace are thinking about the role of physical locations in their business.

• The Big Opportunities: My thoughts on the opportunities physical locations hold for mental health businesses

Back in 2018, I was an avid Headspace user. It helped me through many stressful days at McKinsey. But I often wished it could give me more. It felt like there was a limit to the benefit I could get from a daily meditation on my phone.

I started to think, “what would be my dream Headspace product?”

I landed on the idea of a physical space.

A location on the high street that I could pop into after work and just chill out for half an hour. I wanted it to feel like the orangey glow of Headspace, dimly lit, lots of plants and with the buttery voice of Andy Puddicombe welcoming me as I entered. Kinda like a yoga studio (but without the yoga). There was something so attractive to me about the idea of such a space. 

Each night, as I sat in the back of a cab, I could see it so clearly in my mind.

Or perhaps I was just hallucinating from sleep deprivation…

Either way, there was something so compelling about that idea, about a brand venturing from the virtual to the physical world and the potential experiences it could deliver to its customers as a result. I actually wrote an essay about Headspace and this idea at the time.

I’ll spare you having to read the whole post but here’s an extract;

Unfortunately, Headspace never built something like this. 

But others have. 

One of those business is Self-Space and they’ve opened four high street locations across London. I was chatting with their Co-Founder Chance Marshall and here’s how he described them;

“A front door. A place. A refuge for busy humans across the globe. A little shelter from the storm”.

Well, that just sounds wonderful. A refuge. A shelter. Isn’t that what so many of us need right now?

Yes, jumping on to a zoom call is convenient. But I would not describe it as a refuge. Oh no. 

Not convinced, check out this tour of one of their spaces. 

It’s beautiful right? 

Here’s a review from a Self Space customer;

“Had my session today - a beautiful experience in a beautiful location.”

Again, I’ve never called a Zoom meeting beautiful. There is value in beauty and in aesthetics, in the experience it can deliver for customers and the associations it creates with your brand. But more on that later. 

Two chairs are another company that have built unique physical locations and now have seven real-world clinics.

Two Chairs and Self Space follow a similar strategy.

One that I have un-creatively named the “Clinics as Flagships” strategy. With this strategy, business are creating unique, welcoming, physical places that serve as both a place of care, but often, as much more as well.

I’m fascinated by this approach, the benefits it brings customers as well the value it creates for businesses. But while it is certainly the most instagramable physical location strategy, it is not the most common.

I wanted to get my head around the different approaches business are taking to their physical footprint, and like any good ex McKinsey consultant, decided to come up with a framework.

I see businesses largely following one of three strategies;

• Clinics as Flagships: Companies create new, chic and inviting looking clinics. They innovate around how care is provided in these clinics and often use them as a brand and marketing tool as well. They almost always provide a hybrid care model with tele-health services.

• Clinics as a Footprint: These are the more traditional mental health businesses (often PE backed) like LifeStance and Acadia who own a significant amount of clinics. They use their clinic footprint to acquire patients, payers and providers. It’s a much more common strategy for older businesses or those treating SMIs where in-person care is needed more often. The often offer some form of tele-health alongside their services.

• Virtual Only: The name says it all, they have no physical locations and operate purely through tele-health. Think Spring, Lyra, Talkspace etc.

I also wanted to get a sense of what the state of play is today. Who is virtual only, who is hybrid and how many real world locations are they operating?

State of play

We analysed 19 of the top mental health businesses and here’s what we found.

Caveat: this analysis focused largely on a set of companies we’d loosely define as “mental health startups”. There are many more traditional mental health organisations and community mental health services that are more likely to have in-person locations.

Most mental health tech-startups are virtual only providers. While this trend was expected, I was surprised to see just how few of them have any physical locations.

Those using a “Clinics as a Footprint” strategy are the big PE roll-up folks, or those focused on Severe Mental Illness and addiction. Finally, we have a small few business who have invested in flagship clinics.

For those mental health businesses that do have physical clinics, I wanted to know how many locations they are actually running?

Unsurprisingly, big “Clinics as a Footprint” players have the most locations by far. Large incumbents like LifeStance and Acadia have a massive network here, with 575 and 253 clinics respectively. The strategies of Amae Health and Eleanor Health will probably require them to significantly expand their footprint over time, but for now, they are still super small compared to these giants.

The flagship folks only run a few locations.

One thing I’m interested in is if the Flagship folks would ever be able to pursue a footprint strategy. Could they develop real-world clinics that are so differentiated, so successful and so powerful from a brand perspective that they could scale nationally? I mean, other businesses like gyms have managed to do it, often through franchise models. Would that be a legitimate option for these businesses?

Founder insights

So that’s how it’s playing out right now, but we know that changes are afoot. Brightline’s recent change in strategy is evidence of this. So how are founders thinking about the role of physical locations as part of their business and longer plans?

Marc Goldberg, from Resilience Lab told me that they are committed to a hybrid care model.

As I mentioned already, Brightline are pivoting hard towards hyrbid too, shifting away from virtual only services and investing in creating physical locations.

Chance Marshall, Co-Founder of Self Space has some of the most interesting takes here;

Three founders, all bullish on the role of physical locations in mental healthcare, with some pretty compelling reasons.

The Big Opportunities

To finish up, let’s look at some of the interesting opportunities real-world locations have to improve the lives of customers and to create more value for businesses.

1. Improve the care experience

My therapist is fantastic. But her physical clinic sucks.

When I arrive, I sit in this tiny waiting room that is also the team kitchen. It’s always an awkward moment sitting there listening to the whirrr of the microwave as a therapist heats up their lunch…

It feels so clinical. Even for someone like me, who doesn’t feel much stigma about mental health anymore, there is an element of shame and embarrassment that hands in that room whether I want it to be there or not.

When there’s someone else in the waiting room we avoid eye contact and wait desperately for our therapist to come out and whish us away. 

If you haven’t already, watch this Self Space video again. Imagine sitting in that “waiting room” - I hesitate to even call it that. How chill would it be? If I was sitting beside someone in that space, I’d feel totally comfortable having a chat with them - that has to be a good thing! 

Plus, no microwaves!

I’ve just focused on the design of the space, but there are so many opportunities for creative people to think about how to use their physical space to improve the experience of care for patients.

2. Stand out in a sea of sameness

The therapy market is getting pretty crowded. There are a lot of well-funded startups all vying for the same customers. And to be frank, when you go on their site, many of them look the same, with most of them hiring similarly trained therapists.

So how do you stand out in this sea of sameness?

One of the boldest strategy moves of this century has been Apple’s decision to open their own retail stores. In the early 2000s, when everyone was zigging to online retail, Apple zagged and opened their own flagship store.

Let’s be honest, iPhones are objectively pretty similar to the rest of the market in terms of performance. Apple diehards, please don’t hate me but it’s true.

However, we still want iPhones more than Samsungs and are willing to pay a premium to get them. Why? Because of the Apple brand. Apple is one of the most valuable brands in the world and it’s that brand that facilitates their high margins.

Yes, their stores sell products. But they have a much more important role than a sales channel, they are a marketing tool. They are temples to the brand that enhance their reputation as a premium product. They build positive associations and they build trust.

Naomi from Brightline understands this too.

With significant pressure on acquisition costs and activation of covered groups (see the Brightline post) standing out through physical locations is one way to be heard through the noise. Want proof? Samsung spend more on digital advertising than Apple every year.

Look at Two Chairs and Self-Space and try and tell me their locations don’t massively help their brand. I don’t have the data to back this up, but I’d be willing to bet they get significantly more press and consumer awareness compared to similar brands who are virtual only.

3. Help solve the provider problem

I’ve written extensively about the challenges mental health startups are facing with recruiting and retaining therapists. While many therapists want the freedom of remote work, many also want the community and camaraderie of a physical practice.

I’ve spoken to so many therapists who now work 100% through tele-health but tell me they really miss the break-room, having lunch with colleagues and chatting with them about cases.

In-person clinics with hybrid care options is likely the ideal working scenario for many clinicians.

4. Become more than a healthcare company

I’m going to indulge myself here. I am obsessed with the role of physical spaces in communities. I’ve been deep in the Third Place rabbit hole for some years, monitoring their decline with sadness.

As places of worship and local clubs have declined in many of our communities, we no longer have a place to hang out. A lot of us work from home now too, so don’t even get to see people in an office each day.

We are officially facing a loneliness epidemic, and yet we have nowhere to meet people.

I always wonder, who or what might be able to give us a new Third Space.

It would be a bold move for a business to think about this because it feels so different to a “healthcare” strategy. But considering how important connection, community, a sense of belonging and social interaction are to our mental health, would trying to solve this problem not be a natural fit for an ambitious organisation that cares about population mental health?

Self-Space give me inspiration here. They run book clubs, walk clubs and host lots of events in their spaces (including Sofar Sounds gigs which are one of my favourite things in the world).

Chance shares my belief in the power of physical spaces and thinks they will play a central role in Self Space’s future.

If you are building in this space, or interested in the role of Third Places and physical spaces in our community, please get in touch. I’m always looking to nerd out on this (my friends are kinda sick of listening to me talk about it…)

As we’ve shown earlier, virtual care is the dominant strategy of most mental health startups. And that’s fine. There’s a tonne of clear benefits to it.

There’s just one mistake that business could make however. And that is to not consider the benefits that physical locations may offer their strategy.

Two things can be true at the same time. (1) There is a huge opportunity to create value through digitally delivered products and services. (2) People are craving real world, in person experiences.

There is a quiet revolution starting against elements of our online world. Since covid, the demand for real world experiences has surged. People are going on more vacations, to more concerts and eating out more than ever.

We have an epidemic of loneliness and are craving human connection. We’re craving a sense of belonging and a sense of purpose.

And maybe, just maybe, physical spaces will play a role in solving some of those deep human needs.

That’s all for this week.

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Keep fighting the good fight!

Steve

Founder of The Hemingway Group

P.S. feel free to connect with me on LinkedIn

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