Digital behavioural health unicorn, Headspace Health, has reportedly laid off an additional 180 employees, marking a 15% reduction in its workforce. This follows the company's announcement six months ago when it cut 50 positions, equivalent to about 4% of its staff.
Headspace is among several virtual behavioural health providers that have downsized due to various factors, including rising interest rates, high labour costs, and geopolitical tensions. In a memo obtained by the Los Angeles Times, Russell Glass, the CEO of Headspace, acknowledged underestimating the impact of these economic factors on consumer behaviour. Glass expressed the company's aim to achieve positive cash flow by next year.
A spokesperson for Headspace stated that the recent organisational changes, including the reduction in workforce, are part of the company's strategic adjustments to position itself for future profitability. The company remains committed to supporting the affected employees during this transition.
Headspace Health was formed in 2011 through the merger of behavioural health app Headspace and virtual mental health provider Ginger. In November, the company launched its unified enterprise mental health and well-being offering, combining Ginger's on-demand coaching, therapy, and psychiatric services with Headspace's meditation and mindfulness app.
Prior to the merger, both Ginger and Headspace had secured significant funding from investors. Ginger had raised over $220 million in venture funding, while Headspace, which initially focused on the direct-to-consumer market, raised $215 million.
Calm, a competitor of Headspace Health in the mental wellness space, has also announced workforce reductions in the past year. In August, Calm cut its workforce by 20%, affecting around 90 employees. Calm, like Headspace, was valued at over $1 billion.
The digital mental health sector has faced challenges in recent times, with companies such as Talkspace, Cerebral, Eleanor, and Foresight announcing layoffs. Mindstrong, a behavioural health tech company, also ceased operations earlier this year.
Investment in virtual behavioural health companies has experienced a decline as well. According to a report by digital health venture capital and advisory firm Rock Health, funding for behavioural health decreased by 56% from 2021 to 2022.
Despite these challenges, there have been positive developments in the industry. Hybrid care provider Octave raised $52 million in Series C funding in June to support its expansion across all 50 states. Additionally, digital mental health platform Spring Health secured $71 million in funding in April.
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