Young companies attempting to address our crippling mental health epidemic face a barrage of hurdles businesses with more traditional pursuits don’t—namely mass stigmatization and a serious lack of education around the core pain point they’re solving for: mental health issues.
But where there’s white space, there are founders seeking to fill it. And investors seeking to arm them with the most tools possible. Mental health and addiction recovery are no exception.
Today on Business Casual, get a better understanding of mental health as both an industry and a journey from Stephen Hays, founder of What If Ventures (a fund focused on investing in early stage mental health and addiction recovery startups).
If you or someone you love is struggling with mental health, we encourage you to seek out professional help or find resources from the National Alliance on Mental Illness.
Kinsey Grant, Morning Brew business editor and podcast host [00:00:08] Hi, everybody, and welcome to Business Casual. It's me, Kinsey Grant, and I am so glad we're having this conversation today. So, without further ado, let's get into it. [sound of a ding]
Kinsey [00:00:17] I've got good news and I've got bad news. Let's start with the bad news—get it out of the way. This year has been a lot of things, but good for our collective mental health is not one of them. In fact, anxiety and depression have ravaged populations all over the world. If you pair a contentious election and a second wave of this pandemic and the pressure of a recession, you get a recipe for mental health distress.
Kinsey [00:00:39] It's worsening a problem that's already pretty terrible. For a little context, the National Institute for Mental Health says mental illnesses affect tens of millions of people in the U.S. alone each year, but only half of those people receive treatment. So, that's the bad news.
Kinsey [00:00:54] But, there is good news. Startups all over the world are trying to do something about it, whether that something is increasing access to treatment or reducing stigma or utilizing tech-focused therapies to help people who have long been overlooked. And with those startups, fresh focus on mental health treatment for anyone, anywhere. They really can affect change. For the smart investors backing them, that change could mean a hearty payout.
Kinsey [00:01:18] So today, we are going to go through the world of mental health as a business—how it's changed, and what it's changed, and who's making bank. To help us do just that, we are welcoming Stephen Hays to the show. Stephen is the founder of What If Ventures, which is a fund focused on investing in early stage mental health and addiction recovery startups.
Kinsey [00:01:38] Now, an important note before you hear my conversation with Stephen. Stephen has suffered from type one bipolar disorder as well as addiction for much of his life. He started his investing career in the e-sports and B2B enterprise spaces. And in 2017 and 2018, during a time Stephen describes as the darkest years of his life, he was arrested twice. The first for attempted assault and extortion, where he took a plea deal but maintained his innocence. And the second, for domestic assault.
Kinsey [00:02:04] He went into rehabilitation soon thereafter, and he harmed a lot of his personal and professional relationships. But, after Stephen took the time to recognize his disease and emerge from rehab, he's worked on rebuilding his life with his friends and his family. He's launched a podcast on mental health, and he's taken his personal learnings to restart his career as an investor who's focused on mental health and addiction startups.
Kinsey [00:02:28] During this episode, you're going to hear about the mental health investing space, but you're also going to hear about Stephen's personal story of addiction, type one bipolar disorder, and other mental health challenges. Stephen tells me about how bad things were, but he also tells me how he's tried to turn his life and his career around.
Kinsey [00:02:45] I learned a lot from this conversation with Stephen, and I believe you will as well. So, thank you very much for listening. Welcome to Business Casual, Stephen.
Stephen Hays, founder of What If Ventures [00:02:53] Thank you for having me. Exciting to be here.
Kinsey [00:02:55] Yes. We are so glad to have you on the show today. I am really excited to have this conversation in general. This is a topic that I think we cannot talk too much about. It is always important to talk about our mental health. And I think being able to take this sort of business lens to look at mental health as an industry—and a growing industry at that—is something I'm really, really jazzed to do, and something we've been wanting to do for a long time.
Kinsey [00:03:18] And I just want to make a note before we dive in here, Stephen, that I know talking about mental health can be really tough for some people—for a lot of us, frankly. And we'll have some resources available for anybody who is looking for help or thinking about looking for help. This can be a really tough time of year for everybody. You're not alone.
Kinsey [00:03:35] And I'm excited to have this conversation and learn more because that's the first step, right? It's learning more about this space and understanding what makes it tick. So, Stephen, shall we dig right in?
Stephen [00:03:45] Yeah, let's get to it.
Kinsey [00:03:46] All right. So, I want to start by getting a better understanding of what's at stake when we talk about mental health as an industry. Can you offer a little context as to why it matters so much that we give the mental health space the consideration it's due. How big of a problem is this in the United States?
Stephen [00:04:03] Yeah, I mean, look, there's 8 billion people on this planet, and they all have mental health. Every American, everybody who lives in this country, has mental health. And most of us figured out sometime in the 20th century that we should take care of our physical health. I mean, it became a thing in the mid-20th century to exercise, to have three gym memberships, and have 15 pairs of jogging shoes, and to take care of our physical fitness. And maybe even try to eat a little bit better.
Stephen [00:04:29] And what got left behind in that fitness revolution was our mind. We haven't really done a lot about our minds. And people are starting to wake up to the idea that maybe everything starts with my mind. Maybe if I take care of my mind, a lot of my other problems will be resolved, or at least become less of a problem. And that awakening is driving a demand for services and for tools and techniques and for connectivity around mental health that's creating an opportunity for entrepreneurs to fill that need. And that's where we're focused.
Kinsey [00:05:03] Right. I love thinking of mental health as this cornerstone for health in every other aspect of our lives. We can't practice good physical health unless we think about our minds and address the ways that we go about the world around us.
Kinsey [00:05:14] And a lot of times on the show, we talk about success and what it means to be successful. But, it's hard to really achieve that success without feeling like you're in a good mental health space, that you can be your best self, that you can achieve what you want to achieve. It has to start here.
Kinsey [00:05:29] So the question for me is, whose responsibility is it to address these mental health concerns that we have, in the United States, certainly, but I guess on the global scale, who do we look to ask the question and to see how we can get an answer to the question?
Stephen [00:05:44] Listen, I'm an addict living in recovery. I'm two years sober. I believe that the responsibility to get well rests on each of us. I believe that we have a problem, though, where we don't have access to the tools that we need. We don't have access to the help that we need. The help that's available is oftentimes not effective. And I think there's also this heavy layer of stigma that rests over this industry that prevents people from getting help.
Stephen [00:06:08] I don't think that the answer falls on one person. I don't think it falls on the government, although the government can and will do things that will help here. And they've tried, successfully and unsuccessfully, for many decades to do so. I think that there is a place for private industry to build solutions that bring people together and maximize the resources that we do have, and make them maybe more effective and certainly make them less costly and more accessible.
Stephen [00:06:32] And I think there's also a place in the market for private enterprise to reduce stigma and create connectivity and vulnerability. I believe that peer-to-peer solutions will be a huge, huge opportunity in the space. And I think that peer-to-peer mental health solutions—my thesis is that they will replace social media as we know it today, and they will exist not to get likes and retweets, but to create connectivity and foster vulnerability between humans so that we can be well.
Kinsey [00:06:59] Before we get into this concept of peer to peer and what this future of mental health solutions looks like, I want to dive in a little with this public sector versus private sector part of the conversation. The government, as it exists, should, at least in theory, enrich the lives of people who live in that country. It should benefit us in some capacity. So how has the government either succeeded or failed in helping to reduce stigma or give people access to mental health resources who want it?
Stephen [00:07:27] I'm going to gloss over this in a quick answer, [Kinsey laughs] but I'm going to reference a resource. If you really want to go down this rabbit hole, there's a book called "American Psychosis," and this book details the history of how the federal government has weighed in on mental healthcare in America over the last 100 years, and basically how the federal government screwed it up.
Stephen [00:07:45] The blame doesn't fall to one party; it doesn't fall to one politician. It falls to every single politician that has tried to touch this topic since JFK enacted the Community Mental Health Care Act—the last bill that he signed before he was assassinated. And the government has tried to build institutions where people can get treatment.
Stephen [00:08:04] Then they disbanded those institutions. Then those people were let out onto the streets. They became the homeless population. We have tried to criminalize drugs and tried to criminalize certain behaviors. And we've filled the jails in this country with people who should probably be getting mental health treatment. For the most part, the government has really struggled here.
Stephen [00:08:24] And I just don't—I think the government has a role to play in opening up a free market where people can build solutions for profit. They can be sustainable by the users who use them so that everyone can have access. I just don't think the government alone can do this.
Kinsey [00:08:39] So what should the role of the private sector be? What should the role of industry be?
Stephen [00:08:43] I think the role of industry is to build sustainable solutions, which said differently, is to build profitable businesses that don't take advantage of people. There's a fine line to tread here, but build sustainable, profitable businesses that don't require the government supporting them, that can be around to help people get from where they are to where they need to be with their mental health.
Kinsey [00:09:05] Do you think that that need is being met right now? Are there companies out there that are actively doing that?
Stephen [00:09:09] There are companies that are attempting to do that. The need is far greater than the supply of help. And one of the ways I think about this is we talk a lot about what causes the mental health issue, or the lack of care or the lack of wellness, and the three main reasons people highlight are stigma, cost of care, and access to care.
Stephen [00:09:30] It's really hard to find a therapist. And when you do find one, it's really expensive and it's kind of embarrassing. Sometimes when you go to see your therapist, you have to go down this long, dark hallway in this old, shabby building and it hasn't got any windows, and it's not cool. It's not like going to Soul Cycle. It's, you know, there's a little bit of a stigma [chuckles] associated with walking into your therapist's office.
Stephen [00:09:50] And, when you go on Twitter at the end of the day, I see some of my friends bragging about what they did on their run today or in the gym today. But I don't see anybody bragging about walking out of their therapy session crying. I don't see anybody celebrating that. And so, there's been this heavy stigma, and that stigma has really kept a lot of people from asking for help.
Stephen [00:10:09] But there's a flip side of that coin. That stigma has artificially suppressed demand for mental healthcare. When that stigma is lifted, it's actually going to cause a huge problem because all of that artificially depressed demand is going to be looking for very limited supply. So the cost issue that I mentioned is only going to get worse unless we build supply.
Stephen [00:10:30] One good side of that is that the reduction of stigma has encouraged entrepreneurs who generally build businesses around problems they've personally experienced. It's encouraged entrepreneurs who've experienced mental health differences to step up and say, you know what, I can go build something around the thing that matters to me most. Not around a CRM, not around SaaS, not around social media, not around, you know, something that I also know.
Stephen [00:10:53] But this core issue that I've experienced in my life, it's now OK for me to step up and say I'm going to be an entrepreneur in the mental health space. And that is bringing a lot of solutions to market and that will ultimately allow the stigma reduction to not drive cost even further up in my opinion. That was a very long-winded sort of answer. [laughs]
Kinsey [00:11:12] I love it. It covers so much. The idea of stigma being reduced right now and experiencing this sort of rollback in terms of how we talk about mental health and who talks about mental health, I think part of it is certainly generational. My generation is open about talking about going to therapy, and that is not necessarily the case with our parents or grandparents. And I think that that, on the whole, is a good thing.
Kinsey [00:11:33] But to your point, this is going to breed some problems as the market tries to adjust to a new sort of total addressable population entering into this picture here. So as an investor, where do you see the brightest spots here? I mean, there are people who are following their passions and who are trying to solve problems that they've experienced themselves. But where do you see the biggest source of possibility as somebody who's investing in this space?
Stephen [00:11:58] I think about where the opportunity is in a few different buckets. The first two buckets, that are kind of related to each other, is number one, is a solution increasing the capacity of care in the system. And what I mean by that is, you look out there, you see a lot of these platforms that take a therapist and they put them on text message or they can deliver them over the phone or over Alexa, or they just deliver the same capacity in a little bit different way over a different medium.
Stephen [00:12:24] That's not increasing the capacity of care in the system, and if it is, it's not increasing it by much. There's not enough therapists, there's not enough psychiatrists, and there probably won't be for a very long time. The rate at which we produce them is very slow, and actually they're declining in numbers in the U.S. So, adding psychiatrists and adding therapists isn't going to be the long-term solution.
Stephen [00:12:43] Finding a way to provide more care to more people with the same amount of resources that we have—that is interesting to me. Delivering care in a new way. And I don't just mean taking a therapist who used to see you in the office and delivering them to you over text message. While that's fine, it's not the solution that's going to really lead to mass scalability of getting access to people.
Stephen [00:13:03] So how do we deliver more care? How do we deliver care in a different way? And then what are really unique tech interventions or tech solutions that we can bring to bear? And when I say tech, I don't just mean zeros and ones. I mean what drugs can we develop? What can we do with psychedelic drugs? What can we do with measurement and testing?
Stephen [00:13:20] You know, we've never measured or tested mental health. We've been on this planet for a really, really long time. And I went and looked and I found an article somewhere that said that the earliest mirror was found about 6,000 years ago, or it was dated back to about 6,000 years ago. We've been looking in the mirror and judging our physical self for 6,000 years.
Stephen [00:13:40] We've never stopped and measured our mental self. So measurement and testing tools for determining does this drug work, am I better or do I just think I feel better? Do I really need help? Am I addicted or am I not? What's going on with dopamine levels in my brain? Does a therapist, does a psychiatrist need to reach out to me right now? Am I in need of help? Would it prevent me from going to the emergency room?
Stephen [00:14:02] If someone reached out to me right now, would I maybe take my medication for my heart disease and then not have a massive comorbidity issue tomorrow and have to go to the emergency room? Those are the kind of questions, those are the kind of thoughts. That's what I'm thinking about. I think that's where the big solutions are going to be in this space in the near term.
Kinsey [00:14:19] Do you think that we have failed to measure our mental health because it's difficult and because we are prone to lying about it? You can see someone's physical appearance. You can measure the circumference of your head. [chuckles] But it's difficult to get a real idea of what's going on inside of it.
Stephen [00:14:36] There's a guy named Dr. Kevin McCauley. He's on the board of directors at the rehab center I went to. And he gives a speech about what's going on with mental health and what's going on with addiction in the brain. And when he gives the speech—and I'll give you a link to a YouTube video of him doing the speech—he puts up a page and he says, you know, if I was going to design the perfect disease, if I wanted to kill as many humans as I could, I would design addiction.
Stephen [00:14:58] I would design mental illness because it's invisible, and the people who have it deny that they have it. And the people around you—the person that has it—denies that they have it and don't want them to have it. And people who need help don't even go get it. If I break my ankle, I'm probably going to go to the emergency room. But if I break my mind, where do I go? Will I go anywhere?
Kinsey [00:15:19] Right.
Stephen [00:15:19] And so there's this lack of desire for help among the population of people that need help. There's a stat—the NAMI website has a bunch of stats for mental health and for addiction. And they say that about half the people who've identified themselves as needing help, get help. And I think you've alluded to that in the introduction.
Stephen [00:15:37] But about half the people who actually need help identify themselves. So it's a very, very small fraction of people who need help that actually seek it. And of those who seek it, a very small fraction even get it. So it's just getting people into the system and getting them, encouraging them to want to get help is really one of the things we need to work on. And I feel like there's going to be some really cool solutions built around user interface that gets people engaging their mental health when it doesn't feel like it.
Kinsey [00:16:04] Right.
Stephen [00:16:04] It doesn't feel like going to the therapist's office or the psychiatrist's office. It feels like playing a video game or it feels like doing something else. But it's actually making you mentally healthier.
Kinsey [00:16:15] When we think about the people who are not accessing care for their mental health—the populations who probably need help but are not reaching out to find out—how much of that do you think is because of the cost of accessing that care?
Stephen [00:16:27] I think it depends on where you fall on an acuity spectrum. So, if you're pretty well off, the cost of you getting a little bit better is really low. So if you're pretty well and the cost of you downloading Headspace or Calm is really cheap. If you're really in a bad place, I mean, if you're where I was right before I went to rehab, the cost to get you care is just astronomical. It's absurd.
Stephen [00:16:49] And the insurance companies won't cover it. And you got to come out of pocket to pay for it—for the most part. So it depends on where you are on the acuity spectrum. The further down towards "I need help really badly, I might die from this"—the closer you are to that, the more costly it gets.
Stephen [00:17:04] So there becomes this point of no return, where if you don't take care of your mind, you will get to a point where you can't afford to. And you can't afford not to, and you're stuck. And that's what the system needs to address. That's what a lot of the solutions that we're investing in, they address that population—the population of people that are kind of in no man's land. They can't afford it and they can't afford not to.
Kinsey [00:17:26] I have to imagine from an investing perspective that that shrinks the total addressable market. Of course, there are 8 billion people. We all have minds that need care, but there are so few people who are actually accessing it. That has to meaningfully shrink the number of people who can use your service or participate in your study or what have you.
Stephen [00:17:43] Yeah, it's an interesting concept, right? Like if we build businesses that are successful in this space, there is an argument to be made that they ultimately cannibalize their own market, because if we make everyone well, then no one needs what we have. Right? So you do have to think about that.
Stephen [00:17:57] But at the end of the day, according to the stats that you even read out at the beginning of this conversation, we're a long, long way from getting to the point where we've exhausted the market of people who need help. And even once people get help, we are still humans. We still need to be proactive about our mental health. There's things we still need to do to take care of ourselves.
Stephen [00:18:14] But I believe as an economist, I believe that if you provide that help and people get well, maybe there'll be less need for that help, but there'll also be less cost in other parts of the system. And the broader society, the broader healthcare system will benefit from the reduction in comorbid healthcare costs and spending, and there'll be benefits to everyone in society for that.
Stephen [00:18:36] I firmly believe that if we solve our mental health challenges, we solve most of our societal problems. I think that most of our societal problems are tied back to not being connected and not being vulnerable with each other, not being mentally well.
Kinsey [00:18:49] Yeah, the almost network effects of participating in care and seeking care and talking to people about it could be huge. It just brings up what is the next frontier here, where you bring up the peer-to-peer idea. Right now, it seems that so many of the resources at our disposal when we talk about mental health startups are decently similar. It's talk to somebody, talk to a therapist, what have you. How do those companies differentiate themselves from one another when their core product is kind of similar?
Stephen [00:19:18] Yeah, it's interesting because there's not a lot of IP in this space. So how do you differentiate yourself as a mental health startup? Well, there are some that have IP. It could be tech, it could be a measurement tool. It could be a digital phenotyping technology. It could be a patent around how you take information about the mind and relay it back to someone using technology.
Stephen [00:19:36] It could be a drug. A lot of the psychedelic drug development companies have IP. So, I think really there's some tech and there's some drug IP that you can find in the space. But really, in this space, it's so undeveloped that a phenomenal founder and incredible team can build a moat around their business by just being an incredible team that comes into the space and tackles a really low-hanging fruit problem.
Stephen [00:20:00] So, the white space is far greater than the areas in this space that have been filled in by solutions. And so, tough to build a moat, I agree. But for the right team, right founding team, the right man, the right woman, I think it's actually there's a lot of low-hanging fruit. And just being a badass founder, you can really [laughs] do great things in this space.
Kinsey [00:20:21] Absolutely. That story is so important. How important do you think it is that that team or that founder or that badass has a license in—is it they're like a licensed physician or a licensed therapist or what have you?
Stephen [00:20:34] I don't know that the CEO or the founder themselves has to be a clinician, but they certainly need clinical advice and help on their team. There's no doubt about it. If you look, I think there's something like 20,000 apps in the App Store that have something to do with mental health.
Stephen [00:20:47] And from what I can tell about—this is not my number, I got this number from One Mind, from PsyberGuide—about 3% of those have any kind of just directional clinical validation to them, or even reference a clinical research report on why they're doing it the way they're doing it. So it's very, very important to have clinical validation around what you're doing, even if it's just research to support you. Or maybe the research is part of the startup. I don't know. But the clinical component is very important.
Stephen [00:21:17] One of the dynamics that comes up here, though, as an investor in this space, is there's this war. There's this war between the move-fast-and-break-things entrepreneur who just wants to, you know, we'll just try, and if we're wrong, that's fine. We'll find out and we'll pivot and we'll try again till we get it right. Which is fine, and that works in SaaS and social media and some other markets.
Stephen [00:21:38] But in this space, if you're wrong, you hurt people. And there's a fine balance between moving fast and breaking things and do no harm, which is sort of the motto of the doctors, of the clinicians in our space. And so the perfect teams in this space really have the right balance of I'm going to make sure I don't hurt anybody, but I'm going to move fast and break things. I'm going to challenge the system and I'm going to try to upend and disrupt the system. At the same time, I refuse to hurt anyone and I'm cognizant of that.
Kinsey [00:22:06] That sounds like a very difficult balance to strike while also keeping in mind that you have investors who expect you to make money at the end of the day.
Stephen [00:22:14] Yeah. It's really hard. It's really hard, and that's why there's no venture capital fund out there that says I'm only going to invest in mental health. That's why the large tier one Sandhill Road funds don't have a $100 and $200 million sidecar funds for mental health. That's why you don't see dedicated capital to the space, because it's very, very hard. It's still very stigmatized. Founders are just now coming to the space to build. It's not easy. If it was easy, everybody would be doing it.
Kinsey [00:22:41] So why did you do it?
Stephen [00:22:43] They almost killed me. [laughs] I don't have another option, really. I mean, addiction and bipolar disorder almost took my life. When I got out of rehab, I thought I was a freak. I mean, I thought, what am I going to do with my life? I'm never going to be able to do anything. And I found some founders.
Stephen [00:23:02] I actually went to rehab with a founder who is now an investor of mine, and he said, hey, I know some founders building mental health startups that you should go check it out. And so I went out to the Bay Area, spent a couple of weeks crashing on people's sofas, and met a bunch of founders and realized, wow, there's a lot of people building in this space, but who's funding it?
Stephen [00:23:18] And I found that there was nobody dedicated to it. There are people who have invested in the space, lots of them. I found almost a thousand investors that have invested in a mental health startup, but most of them have done it once or twice. They've dipped their toe, or they're not really dedicated to it.
Stephen [00:23:31] And so I went out in 2019 and tried to raise a venture fund. I said, I'm going to raise a fund. I'm going to go and invest in mental health startups. And pretty quickly, in early 2019, I got laughed out of a lot of meetings because people sat me down and said, hey, let me get this right. So you want me to give you 20 million bucks, and you're going to hang on to it for 10 years. You've been sober for like, four months? Like, how do I know you're not just going to go to Vegas with it?
Stephen [00:23:53] And as an addict living in recovery, you mean it's a one-day-at-a-time program, and that's my answer. I mean, I'm not going to drink today. And that's not a good enough answer for an LP in a fund. And so I had, [laughs] rightfully so, had a hard time putting a fund together. And one of my investors said to me, hey, why don't you go put a syndicate together? Put together a syndicate, go find deals, bring them to investors, let investors decide on a deal-by-deal basis.
Stephen [00:24:18] And if you're able to do that, you can build a track record, and people can feel safe that their investment's not in some guy that's just going to take their money and run off to Vegas. And so that's how it started. You know, it's really grown from there. But my why is because the 12 steps of Alcoholics Anonymous is all about going and helping other people.
Stephen [00:24:36] And going and trying to fund these companies and help these founders grow them is part of me trying to help. It's part of me trying to do my part. And yeah, I hope it's profitable. I need to make money. I have two little kids and a house and a mortgage, so I gotta [laughs] pay the bills. But I mean, I'm not in this to get rich. I mean, I'm doing this because this is part of my own recovery.
Stephen [00:24:54] And I think that's another reason why you don't see a lot of VCs in the space, because, you know, VCs are a narcissistic bunch of people. And they're very, very slow to admit fault and very slow to admit needing help. And I think the only way you can invest successfully in the space is to not only have lived it or experienced it, but you have to be willing to admit your weaknesses.
Stephen [00:25:12] You have to be vulnerable. You have to own what you've done wrong. And you have to say, hey, I'm not perfect and I'm going to build in the space with these founders because these solutions are needed for people like me.
Kinsey [00:25:21] Right. And what more meaningful way of trying to help people than to bring these resources to scale, to try to address as many problems as you can with one smart investment and one smart founder and one smart team, right? All right. So we're going to take a short break. When we come back, have one major pressing question about the whole concept of making money in this space. But before we do that, a short break to hear from our sponsor. —
Kinsey [00:25:46] And now back to the conversation with Stephen Hays. So, Stephen, we were talking before about why you got into this space in the first place, why you feel this need to help people and to help these startups and to offer young companies the resources that they need to succeed or to attempt to succeed. But also, you have to keep a roof over your head and support your family and provide for yourself.
Kinsey [00:26:07] This brings up a sort of back and forth I find really interesting, and one I want to parse through a little bit here. How do we justify making money off of more people needing help? These startups are going to be more successful when they bring more people into or onto their platform.
Kinsey [00:26:23] When more people access the help that they need to address their mental health concerns, the companies make more money. The investors make more money. So can we reconcile more people accessing mental health help and treatment with actually turning a profit as an investor or as an entrepreneur?
Stephen [00:26:40] Yeah, I think so. I mean, for me, we talked about this earlier, but I don't think government is the solution. I think government needs to pave the way for these solutions, or get out of the way of the solutions. But I don't think in the long run you can get help to billions of people if the government funds it. There's like an Econ 101 concept there, where there's just not enough money in the system [chuckles] to do that.
Stephen [00:27:03] So I think there has to be a sustainable solution built for people. And I think the only way to do that is to build for-profit businesses that can sustain themselves on helping people. I believe that the for-profit sector is the only way to build the level of care, the amount of care, the cost, and the access that we need in order to get people help.
Stephen [00:27:22] At the same time, profiting off of someone's pain is hard. That's unsettling. That doesn't sit right. That feels funny to me. So it has to come from a place of genuinely caring and wanting to help. So how do you decide that? Who gets to do it? It's tough, because the people can take advantage and you see it. You see it in addiction treatment centers. There are addiction treatment center companies out there that are trash. I mean, they're awful.
Stephen [00:27:47] There are addiction treatment center companies out there that are awesome. They save a lot of lives. They're incredible. And some of them barely operate at a profit or maybe they even are non-profits. So I think there's a really, really heavy burden that falls on the investors to not fund the wrong people in the space. And I think that's another reason—going back to what we said before the break—I think that's another reason why who the investors are in this space matters a lot.
Stephen [00:28:14] Because I do feel like it's really on us to make sure that we are thinking about that when we make our investments. It just can't be we're backing you because you've said your TAM is bigger than the next founder doing the same thing. I feel a strong compulsion to back founders that the problem resonates with them because we've lived the same stuff.
Stephen [00:28:36] And I think if I stick to that, I hope that I will avoid backing something that's purely a monetary gain that may end up hurting people and not take into consideration that there's a time and a place for the solution, and it might not be forever.
Kinsey [00:28:50] I keep thinking about how we see reports all the time that big corporations that practice good standards and morals and values, and, you know, keep in mind the racial equity and gender equity and the mental health of their employees, do better. They have better returns. But I can't quite reconcile that with this idea that altruism and capitalism don't often go hand in hand.
Kinsey [00:29:13] It's difficult to find a founder who is doing it for the right reasons and also has a really great viable product that has this huge market it can address and this huge pain point to solve for. It sounds like there are just so many variables coming together here that makes actually profiting in this industry difficult.
Kinsey [00:29:29] Do you think that those necessities, that perfect sort of Goldilocks point where everything comes together the right way, limits the profitability of investing in the mental health space?
Stephen [00:29:40] I think what it does is it creates a marketplace where, because stigma's reducing, there's a lot of people wanting to invest in this space, whether it's individuals or family offices, there's a lot of capital rushing in. I think a lot of capital will back bad ideas. They'll back some of these founders that probably shouldn't be funded. That may not have the right motives. I don't know if there's any way to stop that.
Stephen [00:30:00] But that dynamic that you describe is what makes this hard, and what makes this hard is what makes this attractive for an early-stage investor. Early-stage investing is really hard. I mean, you talk to any VC. VCs invest in about 1% or so, maybe 2, 3% of the deals they see. So, you're going to see a lot of crap. You're going to see a lot of stuff that just isn't worth investing in, isn't worth backing.
Stephen [00:30:22] And some of those founders are gonna end up raising money. And you're going to wonder why. You're going to scratch your head. And then all of a sudden, you're going to see a New York Times article 10 years later that these people weren't doing the right thing. And so it's very hard. It's very, very hard. There's nothing about it that's easy.
Stephen [00:30:38] But what overcomes how hard it is for me here is that even when I meet a founder that I'm not going to invest in, or when I put someone through our fellowship program that isn't going to end up raising money or isn't going to be successful, there are a lot of motivated people out there that want to be in the space. And rationalizing some of those away from starting a company and bringing them to other founders and plugging them in in places where they can be helpful in the space—that's another one of my jobs.
Stephen [00:31:02] I don't get paid for that. It's not something that we do for money. It's just part of our job, as trafficking in the space is helping to rationalize the space. So I take it upon myself to do that. And I think other investors in our space do that too. But all that to say, it's super-hard. And it's not going to be easy. And that's why only a few of us are really focused on it.
Kinsey [00:31:23] Right. And I suppose part of it is just the risk you take. [chuckles] They call it venture for a reason. It's not always going to pan out. OK, Stephen, I want to take a minute to think about the size of these startups. One of the big things that they're lacking is scale. They can't reach everybody who might need their product, but for something like a huge healthcare company, they maybe could reach a lot more people but might lack the nuance that a startup would have. So what's the relationship like between large corporations and these smaller startups?
Stephen [00:31:53] I hope I don't get in trouble for saying this, [Kinsey laughs] but if you talk to somebody in a senior leadership position at a company like UHS, which is the largest owner of psychiatric inpatient hospitals in the U.S.—it's an $11 billion revenue public company. If we talk to someone in leadership there, what they would tell you is they're a hospital provider. And they have a very hard time innovating and adapting technology and changing with the market.
Stephen [00:32:17] And they see technology revolutionizing the way we provide mental healthcare. And they are terrified that they will be left behind. And so, if I'm a large corporation, I feel like the only way—if I'm one of these big hospital providers and I want to be in this space—I am keenly aware that I must be a part of digital solutions. I must be a part of scalable solutions, repeatable solutions. And it's not brick-and-mortar hospitals.
Stephen [00:32:43] And so I think that those companies know that they need to be involved in the space, and they're trying to figure out how they will do it so that they can be a part of the innovation, so that they don't get innovated out of the market. And I promise you, those large corporations are keenly aware that that's the dynamic that they are in right now.
Kinsey [00:32:59] Do you think that the fact that we are in a recession has any bearing on how and when people access mental health treatment? If we are, in your example, paying for it out of pocket, are people going to maybe access that treatment a little less in a recession if we have less disposable income?
Stephen [00:33:15] I think so. I also think that when we come out of the recession is when it gets worse. So I read a study—and I can't remember exactly where I found it—but basically they looked at all the recessions over the years and figured out when people—kind of the correlation of suicide or depression prescriptions. And they looked at a couple of different metrics.
Stephen [00:33:35] And what they found was in deep recessions or depressions, it's actually not as bad for mental health. In recovery periods or in light recessions, it's far worse because we compare ourselves to our neighbors and our friends. And when we feel like we're all in it together, it's not quite so bad. But when you feel different than your fellow, when you feel different than your neighbor, you feel like your neighbor is doing fine, but you're not, that's when people really have a hard time.
Stephen [00:33:59] So I think as we climb, as this vaccine gets distributed and as the world settles down politically, post-election hopefully, and as the recession improves, as the economy improves, people are going to start to realize their disparities to their fellows more than they had during the worst of it. And I think things are gonna get worse. I think that's where the real opportunity is—to be there in the market for those people and provide them care in a way that they can afford.
Stephen [00:34:27] And yeah, you know what? A lot of those people aren't going to be able to afford it. So we have to figure out how to provide it in a way that makes sense. Because at the end of the day, if I have comorbid healthcare problems and I'm not taking care of my mental health, I start going to the emergency room more often. I stop taking my heart medicine or my other medications, and I end up showing up on the P&L of the insurance company as a physical healthcare expense that could have been mitigated by taking care of mental health.
Stephen [00:34:54] So at the end of the day, there are people whose incentives are very aligned with taking care of our mental health who don't, I don't think, quite understand it yet.
Kinsey [00:35:03] Yeah. All right. We're going to take a quick break. When we come back, talk a little bit more about this specific moment in time and what it means for our mental health. But first, a short break from our partner. —
Kinsey [00:35:15] And now back to the conversation with Stephen Hays. So, Stephen, we were talking before this break about the impact of a recession on mental health. Comparison is the thief of joy is kind of the big takeaway that we got here, that when we compare ourselves to those around us, often our mental health suffers. We have to wonder what a pandemic—this global health crisis—is doing to mental health. How do you think that 20 20 has impacted the mental health space on the whole?
Stephen [00:35:41] I think it's shining a spotlight on it. I think there are certainly people—there are more people that need help than ever. I think the pandemic has had an impact on that. But I think a bigger issue here is that a lot of people already needed help. They were starting to talk about it. Celebrities are already coming out, starting to talk about bipolar disorder and addiction.
Stephen [00:35:58] And, you know, stigma was reducing before this. I think that the isolation we felt during this pandemic has forced us to talk about it, talk about its impact on us. And I think it's reduced stigma. I think it's forced people to talk about mental health in a way they've never talked about it before. And, I don't want to minimize how awful this has been on society in just the ridiculous number of people that have died from this pandemic, but it's shown a giant spotlight on a place that was dark before.
Stephen [00:36:27] I mean, it's gotten people talking about isolation and what the impact of that is on our health and our wellness. And I think it's actually boosting awareness for the solutions being built in our space. And so it's a double-edged sword in a way. And I don't want to be like rosy and positive about it, because I mean, people lost their lives here, but —
Kinsey [00:36:45] Right.
Stephen [00:36:46] I mean, this is a shift. There's a shift in how we talk about mental healthcare as a society. And I think there's some benefit from what we've been through as well.
Kinsey [00:36:53] And certainly we don't have a solution to the isolation that we're all feeling right now. But I think at least starting to consider the impacts of that isolation is step one. And by the time we figure it out, maybe we'll have a better understanding of what being isolated does to people and to their mental health.
Kinsey [00:37:08] But this is also a big part of the conversation in 2020, but in the mental health industry more broadly. We're all remote right now. You and I are having this conversation remotely. You are in Texas. I am in New York. The idea of accessing mental health treatment in person has, for a long time, been the norm. But we are experiencing the shift toward remote healthcare, this telemental health. What does that mean for the industry?
Stephen [00:37:36] Yeah, it's interesting. I am a big believer that a lot of our mental health problems are byproducts of dysregulation of our nervous system. I think a lot of the scientists would say that. A lot of the doctors that I've talked to and interviewed on my podcast would say that. One of the primary ways we learn to regulate our nervous system as humans, if we're dysfunctional with that, is we get into a room, we get physically close to someone who has a healthy nervous system. And we spend time with them. We sort of piggyback off of their ability to regulate themselves.
Stephen [00:38:07] That's why programs like AA, that's why some church communities, that's why community groups, that's why rehab centers, that's why some of these places put people together in groups and then see benefit from it. But one of the things we talked about earlier, we talked about how few people reach out and ask for help when they need it. And I think one of the big solutions to get people to ask for help or get to take help is removing friction to getting that first bit of help.
Stephen [00:38:34] And I think the increase of telehealth is breaking down that barrier to the first step to get help. There's people that are probably willing to sit at home and get help over Zoom that aren't willing to get in their car and drive to a therapist for the first time, or go to an AA meeting in person for the first time. And so I think it's going to drive more people to getting help.
Stephen [00:38:52] But I personally, for my own recovery, I'm not a scientist and I have not researched this—I feel like I need human connection, in person, with other people in recovery in order to maintain my recovery.
Kinsey [00:39:03] Right.
Stephen [00:39:03] And so I think that the remote option is a great entry point for people. I think texting with a therapist over your phone is better than having no interaction with a therapist. But I do think that there is no substitute for putting people in a room, being vulnerable with them.
Kinsey [00:39:19] Yeah. We often take this tech-minded approach to considering startups in any industry, and I would say the same rings true for mental health, especially if you can do it remotely, you can do it at scale. You can address everybody who needs help. You don't need to be physically in front of a person. It's low overhead cost. The capital costs are much smaller here.
Kinsey [00:39:37] But it's interesting to me to think about that as more of the entry point, not the end game for a lot of these startups. This is how you start to address the problem, but maybe not how you solve it at the end of the story.
Stephen [00:39:51] Yeah. I think it's, you know, we talked about how there's a lot of people that won't get help. They won't seek help. They don't want help even though they need it. I think that mental health has a user interface problem, and I think that there might even be a place in the market for solutions that, and this is just my layman's way of saying this, that kind of trick people into working on their mental health.
Stephen [00:40:10] And so I think a lot of those solutions will look very remote. They will look like telehealth. They will look like video games. They will look like social media. They will be mental healthcare masked as some more approachable front door that will ultimately get somebody plugged into a continuum of care that broadens for them as they start to embrace their own mental health.
Kinsey [00:40:33] I love rethinking the way that we conceptualize mental health. And it's not just laying on a couch and talking to a therapist in a dark, dingy office with a box of tissues, right? [laughs]
Stephen [00:40:43] Right.
Kinsey [00:40:43] There are so many different avenues for delivery in terms of mental health treatment. And I am excited to see where all of it goes. I think that it's certainly step one, talking about it. Step two, getting more people to start their own step one is so important. So thank you so much, Stephen, for coming on Business Casual and for being so candid and honest and insightful with all of this.
Kinsey [00:41:03] And this whole conversation has really been eye-opening for me and I hope for our audience as well. We talk a lot about the startups that are going to change the world on this show. And I think it's so important to take a step back and realize that before we can all change the world, we need to make sure we're in our best possible mental state and we focus on ourselves first. So, thank you so much, Stephen, and I really appreciate you taking the time.
Stephen [00:41:26] I really enjoyed it. Thank you so much for having me. And thank you for bringing this topic up and promoting it at a time in the year when people struggle. Holidays are hard. And I think the holidays this year are going to be even harder on people. So I would encourage people to get out there, you know, follow the rules, do what the CDC says, do what the government tells you to do as far as how you should handle yourself over the holidays.
Stephen [00:41:44] But connect with people. Call them on the phone. Text them. Reach out and [indistinct] knock on your neighbor's door. I mean, just reach out to people. Connect with other humans over the holidays. People need it.
Kinsey [00:41:53] Yeah. Might not be quite as great as hugging your relatives and your friends in person, but it certainly is a start.
Kinsey [00:42:05] Thank you so much for listening to this episode of Business Casual. Stephen mentioned it, but it bears repeating. This time of year can be tough, and you might not be able to hug your friends and family this holiday season. But that shouldn't stop you from giving them a call. So today, call someone you love. Thanks again for listening, and I'll see you next time. [sound of a ding]