TalkSpace, an online therapy app founded by Israelis and based in New York, is readying to go public: TheMarker has learned that the company is preparing for an initial public offering (IPO) and is hoping for a valuation of about $1 billion.
The teletherapy company's management has selected underwriters, and the IPO is set to happen sometime in the next six months, sources say.
TalkSpace runs an app platform that provides psychological treatments. It connects its clients to a network of 5,000 certified psychologists, at a cost of about $200-$260 a month. Patients can send messages, recordings or videos to their therapists, who are available five days a week. For a higher rate - up to $396 a month - patients can also make video calls with their therapist. TalkSpace keeps more than 50 percent of the sum after the therapist is paid. The company currently has 120 employees in the United States and states it has about one million users.
According to the company's SEC fillings, it raised about $108 million since it launched in 2012 by the Israeli couple Roni and Oren Frank. Among its investors: Israeli VC's Qumra Capital and Firstime, Revolution Growth, Norwest Venture Partners, Spark Capital, Compound Ventures, and Softbank
The company's last funding round, in May 2019, was estimated at a $300 million pre-money valuation, and its annual recurring revenue (ARR) was estimated at $30 million. Sources told TheMarker that it's current ARR figure is close to $80 million.
The company has seen a massive influx of new users due to the coronavirus, as millions are confined to their homes, and are more prone to anxiety, fear, sadness, and loneliness - but can not go out to meet their therapists.
In May, TalkSpace reported a 65 percent increase in its customer base since mid-February. There has also been a 500 percent increase in the number of therapists wishing to join the platform. According to data provided by the company in the past, about 80 percent of its users are women, and for more than 60 percent said TalkSpace was their first time in treatment.
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TalkSpace's most prominent competitor is BetterHelp, an American company owned by Teladoc and founded by Israeli Alon Matas. It is estimated that the two control about 90 percent of the online therapy market in the U.S. By 2019, BetterHelp made $100 million in revenue, with an annual growth of 50 percent.
Fake positive reviews?
The period of the coronavirus pandemic has been great for TalkSpace business-wise, and the company has made headlines more than once during the past six months - but not always in a positive context.
In August, the company was at the center of an investigation by the New York Times criticizing its corporate culture. According to the paper, a TalkSpace employee who later sued the company had his therapy logs read aloud at an all-hands meeting "anonymously", though he claimed all those in the room knew it was him.
Former employees told reporters they were also asked to write fake positive reviews for TalkSpace in app stores, and that the company offered disposable so-called burner phones for workers for that end. Also, the New York Times found that though Roni Frank's LinkedIn page claimed she held a master’s degree in psychoanalysis and psychotherapy from the New York Graduate School of Psychoanalysis, she had never actually completed the program. Frank is the company’s head of clinical services.
The couple claimed in response that these were false allegations, and noted that Roni created her LinkedIn profile while she was studying, and the inadvertent error was corrected as soon as it was brought to their attention.
In June, after Facebook refused to remove factually false posts made by U.S. President Donald Trump, Oren Frank came out publicly against the social network, saying he would not support a platform which promotes violence, racism and lies. He even announced that he had canceled a contract worth hundreds of thousands of dollars with Facebook - as part of which the social network was to use TalkSpace to offer free emotional support to its users.
Oren and Roni Frank founded TalkSpace in 2012. Oren was co-CEO of McCann-Erickson Israel, and Roni was a software developer at Amdocs who left her job to study psychology. In an interview with TheMarker In 2017, the two shared that they founded the company after participating in personal and couples’ therapy. "I appreciate therapy, it helps a lot of people," Oren Frank said, noting at the time that he believed that the company could be large, "even public."
The Franks shared how they came up with the company's business model: "We made many mistakes and failed at first. We thought the solution to lowering the price was virtual group therapy with video or audio for seven people. But no one came. We burned through lots of money on this and it was a big crisis for us.
"However, after tests and focus groups, we saw that the most successful product on our site at the time was one born from a mistake we made in English: we wrote ‘Customer Support’ instead of ‘Customer Service’. People started sending us 700 words with this form, so we just said - 'let's try doing written treatment.’ We called it Messaging Therapy."