Hi friend,

Physical clinics are becoming increasingly important in mental health.

In August, Radial acquired Mindful Health Solutions, an outpatient mental health provider with 21 clinics. BrainsWay, a maker of TMS systems, has been actively investing in clinic operators across America in the last 12 months, including Radial itself. LifeStance, which operates more than 500 outpatient centres, is one of the best-performing mental health businesses right now. Quarterly revenue is growing by 26% year on year, and its adjusted EBITDA margin has reached 15.2%.

The picture looks rather different for some of mental health’s digital players. Headspace is reportedly being sold to Sword for $300M, a 90% haircut compared to its 2021 valuation. An article from Axios released yesterday reported that Cerebral, another tele-mental-health provider (that had previously bought Resilience Labs), is seeking a buyer. Several other digital mental health businesses have shut down, merged or been acquired at valuations far below their pandemic-era highs.

Is there something to be learned about the importance of physical clinics from these two tales? And what decisions does that create for digital mental health players?