Mental Health Startup Two Chairs Secures $72 Million Growth Investment
The equity and debt infusion will fuel the company’s national expansion plans.
Mental health startup Two Chairs, which focuses on finding the right match between patients and therapists, secured a $72 million growth investment to ramp up hiring and build a national network.
Boston-based Fifth Down Capital backed the company alongside existing investors, including venture-capital firm Amplo, which led the debt and equity round. Bridge Bank, a division of Western Alliance Bank that offers financing for emerging technology businesses, provided the debt financing.
A person familiar with the transaction said equity represented $52 million of the $72 million. The company said in a statement that the latest funding brings the total amount it has raised so far to $103 million.
Two Chairs founder and Chief Executive Alex Katz declined to comment on financial details, but said that the bulk of the money raised was equity at a higher valuation than the company’s last financing round.
Two Chairs uses technology to match patients and therapists, drawing on information about patient needs, preferences, availability, and location. Routine feedback, what is known as measurement-based care, helps track progress and tailor treatment to patients’ needs.
“When it comes to therapy, it’s not just about getting to a therapist. Generally, it’s about getting to the right therapist, with the right expertise, who’s well matched to your preferences,” Katz said, adding research shows the therapist-patient relationship “is by far the best predictor of outcomes and care.”
An estimated 59.3 million, or roughly 23.1%, of Americans aged 18 or older lived with depression, post-traumatic stress or other mental illnesses in 2022, according to an annual national survey on drug use and health conducted by a division of the U.S. Department of Health and Human Services. Slightly more than half received treatment, according to the government data.
The coronavirus pandemic exacerbated the strains and access-to-treatment inequities of the U.S. mental health system, forcing many to wait months for appointments or seek treatment at the nearest emergency room. A proliferation of digital mental-health companies raced to fill the void, attracting billions of dollars in private capital, but many failed to live up to their promises.
“There were a lot of companies that had a growth-at-all-cost mindset,” Katz said. “In hindsight, a lot of patients got harmed in the course of doing that.”
Katz started Two Chairs in 2017 after seeing close friends and relatives, including his girlfriend, struggle to find a therapist. The company offers outpatient treatments to adults and aims to take on two of the main barriers when it comes to therapy: finding the right therapist and paying for the services.
Two Chairs offers in-person and virtual therapy in California, Florida and Washington state, and its services are currently covered in-network with CVS Health’s Aetna national insurance network and Kaiser Permanente’s insurance networks in Washington state and Northern California. Being in-network limits patients’ out-of-pocket expense.
The company has more than 500 therapists on staff that collectively speak more than a dozen languages, Katz said.
“That really matters because for some patients, they’re going to feel most comfortable opening up about their mental health and their personal journey in their native language,” Katz said.
Katz said the company has roughly doubled business annually for the past three years in terms of number of patients, number of therapists and annual revenue.
“We’re growing quickly. We’re expanding access. We’re serving many more patients in a real time of need. But we’re not growing so fast that the care model is coming off the rails,” he said.
Mental health continued to attract significant investor interest in 2023 among digital health startups, with about $1.1 billion across 57 deals, albeit at much lower levels than the 2021 peak, when investors poured in some $4.9 billion, according to Rock Health, a venture investor and advisory firm.
Amplo founder and Chief Executive Sheel Tyle that Two Chairs’ ability to grow without compromising its focus on quality care attracted his firm to the company, which represents his firm’s first investment in the mental health sector. Amplo so far has invested $40 million in Two Chairs, according to Tyle who was a classmate of Katz’s at Stanford University.
“At the end of the day, the business will only succeed if you maintain a very high bar and quality” of care, Tyle said.