Online therapy platform Talkspace will merge with Hudson Executive Investment Corporation in a $1.4 billion SPAC deal. Talkspace Co-Founders Roni Frank and Oren Frank join Yahoo Finance Live to break down why the pair have decided to go public with and the importance of taking care of your mental health amid pandemic
- Online therapy provider, Talkspace said this week it will go public in a $1.4 billion SPAC deal. Now the deal is being backed by a blank-check company started by JP Morgan's former CFO Jeff Braunstein. Joining us now, the founders of Talkspace, Roni and Oren Frank. Good morning to you both. Certainly, I'm sure, a very exciting week for you two and the company. Oren, let me start with you. What is the pitch here to investors?
OREN FRANK: I think-- first of all, good morning, and thanks for having us. And his name is actually Doug Braunstein, our new partner. The pitch for investors here is very simple. Behavioral health is an industry that has been under prioritized almost to a level of neglect for many, many years. And we are going to be the first publicly-traded company that focuses on, I would say, access and quality of care in behavioral health, mostly through virtual or remote care, which is a perfect fit for behavioral health. And we think there is room in the market for a pure play platform that focuses on that line of health care, which, as I mentioned before, has been underserved for many, many decades.
MYLES UDLAND: And so then thinking, Roni, a bit about the changes that have happened just this year, in many ways, it seems like the market maybe came to you. All or most all of mental health counseling now has to be remote or virtual, something you guys had been working on already. How much did it change, maybe, the trajectory of where you saw the industry headed given, unfortunately, the pandemic we find ourselves in?
RONI FRANK: So while COVID-19 pandemic, economic recession, and social unrest heightened depression, heightened anxiety, loneliness, relationships, it's important to understand that the crisis of mental health was before this unprecedented year. In the US alone, 70 million people suffered from some level of mental health issue, and only half of them received care.
Why? Because it's too expensive, it's not convenient, it's not accessible, and people are just struggling without the ability to receive professional help. So we built a technology platform to address this huge unmet need with the mission to democratize mental health care, improving clinical outcomes and reducing costs.
- And Roni, I want to follow up on that and talk about the Talkspace platform a little bit more. Because a lot of the interaction between therapists and users of the platform is by text. I know you have video as well. And some in the more traditional psychotherapy community have questioned the effectiveness of those texts as a way to conduct therapy and have said that in person or, at the very least, video sessions in a constrained manner or with boundaries might be a more effective way. So how are you thinking about that, and what is the research to show on that front?
OREN FRANK: So providers are setting the expectation with their clients. So, of course, they can put boundaries, and they are explaining how many times a day they're going to respond, what times, how it's working. And it's about the relationship and the engagement between client and the therapist. Some clients prefer messaging, some clients prefer a live video chat. It's all about meeting the client's needs.
OREN FRANK: I would add that, in terms of research, we have a huge body of research that shows that the multimedia modality that we practice, it performs equal and sometimes actually a little better than what is expected from the traditional settings of face-to-face therapy, which is great. I've used face-to-face therapy for years. We have nothing against it.
But the truth is, is that delivery modality failed to satisfy the demand in the market. By going to virtual, we can expand the number of people that have access. And as I mentioned before, we have over 10 peer-reviewed studies. We have just received a grant of almost $7 million to do a very large scale RCT on exactly your question. So we are very confident that this works at least as good as the traditional care model does.
RONI FRANK: It's also important to mention that providers love the messaging because they love the flexibility and the convenience of the platform, that basically they can provide services anytime and anywhere. So they love this modality.
- Oren, why did you both choose this SPAC route?
OREN FRANK: So I think you know, a SPAC is a platform. And I listened carefully to your previous segment, and I'm not sure that SPAC is a category. For us, it is the quality of the company, the quality of the sponsor, and more above everything else, it's the relationship between two. We are a relationship company. We deal with behavioral health. So the chemistry and-- to be honest, we hit it off with with Hudson and with Doug Braunstein from the very first moment.
We were given a mandate by our board to look at all possibilities, including going the traditional way to become a publicly traded company. And we found that their level of expertise, and know-how about health care, and their network of investors, and CEOs in health care, and who they are were a really good fit for us. So it was personal, to be honest.
RONI FRANK: And I'd like to add that mental health is such a huge part of our overall health and well-being, and this merger with Doug and the Hudson thing is so exciting for us because it allows us to grow very, very quickly and offer our services to many, many more people and give them the opportunity to live better, happier, healthier lives. And that's the real mission, and that's what I'm so excited about.
- Lastly here, just on the numbers, so you're projecting a $12 million adjusted operating loss this year, but you do expect $42 million in adjusted operating profits by 2023. How do you go from a loss this year to making those types of profits?
OREN FRANK: So this is a fastly growing market and, of course, there are very clear advantages to scale. And we strongly believe that-- and we've seen this trajectory in the past. It's not something that we are not trending towards already. And we strongly believe that once we reach a run rate which is about twice of what we are today, we will go with our positives.
So it's in the plan. I think, actually, the plan that we released as part of the merger discussion is pretty conservative. As you mentioned in the previous segment, we want to deliver on our goals, on our budgets, and our earnings report. And we are confident that we can do that.
- All right. Well, we'll leave it there. Good luck on the road ahead as a public company. Talkspace founders, Roni and Oren Frank. Have a good weekend.
RONI FRANK: Thank you so much for having us.
OREN FRANK: Thank you.