Howdy Startupon crew! Good news is our newsletter fam grew 346% last week. Bad news is I still have a lot of emails to respond to from issue 001. \_(O,o)_/.
46 people replied to 001 with questions and feedback - all of which was incredibly helpful and encouraged. A lot of folks responded saying they applied to Retool or Ramp. Others proposed content ideas. One reader asked something particularly interesting:
Jon F asked, “How should I decide what stage of company is best for me? I’m in consulting and have offers from a seed stage startup and Series D scale-up. Any ideas?”
I’ll be diving into this question and will have a post for you all soon.
Until then, learn about Faire and Headway, two marketplaces at different stages of growth. Remember, I’ll be posting every company to this airtable link.
As always, If you have any feedback or just want to say hi, you can reply to this email or message me @danielchesley on Twitter.
Hello, Healthcare: Headway
Company Snapshot:
Founded: 2019
Employees: 200
Funding: $100M
Valuation: $750M
Stage: Series B
Locations: New York
Company Overview
Headway is a mental healthcare platform that helps patients connect with therapists and submit insurance claims online. Headway’s platform increases access to care by automating administrative tasks like looking up benefits, credentialing, and appointment booking, creating a network of therapists that accept insurance.
So why should you care?
Johns Hopkins estimates that 1 in 4 people in the US have a diagnosable mental health condition, but over half of adults with a mental illness do not receive treatment. Currently, 11.1% of Americans with a mental illness are uninsured and the majority of therapists do not accept insurance, meaning paying for therapy is prohibitively expensive for both current and prospective patients.
The key difference between Headway and a horizontal healthcare scheduling marketplace like ZocDoc is that Headway helps decrease the overall cost of behavioral health services since the cost is paid by Payors, not by patients nor therapy providers.
Additionally, the company is building tools for therapists to help run their business. Around 70% of therapists do not accept insurance because it’s too complicated for them to integrate into their current solo-practitioner business, and since about 85% of all therapists happen to be solo practitioners, a business in a box solution will help grow independent therapy practices while providing more access to care for those who need it.
Market Opportunity
Mental health underpins each pillar of the World Health Organization’s Social Determinants of Health, directly impacting quality of life and overall wellbeing. This means that people with serious mental health conditions are at higher risk of experiencing chronic physical conditions over the long term. From a quantitative view, a 2019 Acumen Research and Consulting report estimates the global behavioral health market will reach $240 billion by 2026, growing at 2.5% annual CAGR.
But honestly, after the past few years, doesn’t it feel like everyone could use a therapist?
Why I like the company
Headway seeks to help change a structural problem within healthcare that Payors have neglected for too long. Payors can no longer turn a blind eye to mental health’s impact on long-term wellbeing. Since mental health diagnoses increase the risk of long-lasting conditions like diabetes, the potential cost paid to downstream healthcare providers over a lifetime of diabetes could be greater than the cost paid to therapists to treat mental health today. Ipso facto, Headway’s first mover advantage to catalyze an engaged network of therapists, patients, and Payors could create network effects where more therapists are covered by insurance, more patients get seen, and Payors pay less in negotiated contracts to healthcare systems.
Additionally, an exciting facet of Headway’s product strategy is that the company is building a business in a box for therapists, starting with back-end systems to help therapists grow their business, making it easier for them to accept insurance coverage, and more. In the future, I could see them building payments integration, cross-platform advertising SEO, operating tools for physical office visits, etc.
Lastly, Headway’s go-to-market strategy is working:
Headway currently works with Aetna, Cigna, United Healthcare, Oscar, Oxford and more
The platform helps patients get an appointment within five days, versus the 30-day average you typically face when using an insurance directory
Between November ‘21 to May ‘21 the number of therapists on Headway’s platform increased from 1,800 to 3,000+ with its network covering New York, New Jersey, Florida, North Carolina, Texas, Georgia, Michigan, Virginia, Washington, Illinois and Colorado.
Revenue grew 9x in the past year
Headway’s Hiring Corner
Similar Companies
Retail Rec’s: Faire
Company Snapshot:
Founded: 2017
Employees: 700
Funding: $1B
Valuation: $12B
Stage: Series G
Locations: San Francisco, Global
Company Overview
Faire provides mom-and-pop stores with an Amazon-like marketplace for artisan wholesale items.
So why should you care?
Faire might be the next big thing in wholesale. Historically, wholesale merchandising has been governed by in-person trade shows and showroom floors - not the best business model as it’s expensive and inefficient for both suppliers and purchasers.
Looking back, marketplaces have been around for a long, long time. Historians estimate that the first form of a bazaar (OG Middle Eastern in-person marketplace with many stands or shops) first developed around 3,000 BCE. Early bazaars occupied a series of alleys along the length of the city, typically stretching from one end to another within the city walls. Then, many years later, during the dot com bubble, eBay emerged with its online marketplace model. Through eBay’s platform, individual sellers could transact with buyers without having to be in the same location. The online marketplace was genius because it allowed eBay to hold no products, have no costs of goods sold, have no procurement, have no carrying or shipping costs, and most importantly, have no inventory risk. The simplicity of eBay’s service ultimately made it wildly profitable, with gross margins of ~90% and positive net income at IPO in 1998!.
Faire is taking a page out of eBay’s playbook and applying similar principles to wholesale merchandising. The company unlocked marketplace liquidity by offering free returns and net 60-day payment terms on new purchases for small business retailers. Small businesses often have limited working capital, so purchasing a new item is risky - who knows if the new item will sell or flop? Faire’a removes new product risk by providing retailers with the ability to experiment with new brands that better serve their customers through its machine learning-powered recommendation engine.
Market Opportunity
Faire helps Bob and Sally’s Fictitious General Store based in Main Street, USA stock the shelves with the products that their customers love. Faire generates tons of data points and recommends products based on the store’s purchasing patterns. Independent retail (<10 stores) like Bob and Sally’s is a massive segment of the American consumer economy, generating $900B in annual sales - roughly three times greater than Walmart’s annual domestic retail volume.
Alex Taussig, Partner at Lightspeed Venture Partners writes,
“These stores are everywhere. 95% of all U.S. retailers have only a single location, and over 600,000 retailers earn <$1 million in revenue each year. This segment of retail is surprisingly resilient in the face of macroeconomic headwinds. During the recovery period of the Great Recession (2008–2014), retailers with 1–4 employees were the only segment of the market to have added employees every year:
Customers love shopping at independent retailers because they provide an outsized level of service. They are hubs of the communities they serve. A recent survey found that local stores now account for half of U.S. consumers’ shopping trips, and another study found that specialty retail is the fastest growing category of offline commerce. Even independent bookstores have grown 35% annually since the bottom of the Great Recession.”
Why I like the company
Coincidence or not, Faire’s business model is quickly applying Keith Rabois’ (Partner at Founders Fund, OG at Square, Paypal, etc.) formula for startup success.
Unlike early marketplaces like eBay and Craigslist, Faire leans into the credit risk (e.g., small businesses with low cash reserves) by leveraging data generated from its marketplace transactions as well as point of sale data extracted from external sources. Like how Square built the operating system for small businesses through point of sale technology and capital lending, Faire gains a similar advantage through its recommendation engine by leveraging point-of-sale data to match its supply of products to specific retailers. At scale, Faire could become one of the world’s one of the most powerful machine learning models for underwriting inventory purchases.
Additionally, the company is making itself easy to do business with on all ends of the marketplace, providing brand suppliers with greater reach and wholesale purchasers with fair prices that incentivize customers to do repeat business through the platform: Faire takes a 25% commission on orders made by new customers, 15% on repeat orders, and no commission on orders from retailers with whom wholesalers did business before using Faire’s marketplace.
From a market penetration perspective, Faire is creating a lucrative engine for B2B wholesale. In 2012, Spark Capital took a look at the marketplace startups carving out niches from CraigsList:
Many of the logos below targeted a single “verticalized” line item. Faire is targeting the entire middle section for B2B and is making more than just dents:
Faire reported more than 3x year-over-year growth, reaching more than $1 billion in annual volume in less than five years (Note: Taking a conservative 7-12.5% take rate, annual revenue could fall between $70M-$125M)
Faire is connecting more than 300,000 retailers with 40,000 brands around the world
Six months after Faire launched across 15 markets in Europe and the United Kingdom, annualized sales volume in the region exceeded more than $150 million — a scale that took nearly three years to achieve in North America.