Talk therapy startup Two Chairs is the latest mental-health player to close on a fresh round of venture funding.
The company just raised $72 million in Series C equity and debt funding, led by existing investor Amplo, and including Fifth Down Capital and other unnamed investors. The startup secured the debt funding from Bridge Bank.
Two Chairs, founded in 2017, sets itself apart with its data-driven therapist-patient matching, which it says helps patients stay in therapy for longer and drives better outcomes. It offers teletherapy and in-person sessions at its seven clinics in the San Francisco Bay Area, Los Angeles, Seattle, and Miami.
It’s been over four years since Two Chairs last grabbed venture funding. The startup raised a $21 million Series B in August 2019, also led by Amplo.
Behavioral health investment has exploded in the intervening years, with startups offering mental-health services bringing in an eye-popping $5.1 billion in 2021, $3.3 billion more than any other clinical indication, according to Rock Health.
During the funding boom, the Two Chairs team wanted to ignore the hype pushing them to raise more money at inflated valuations and focus on steady growth instead — but it wasn’t always easy.
“There were a few years where we were the ones questioning, have we lost our minds?” founder and CEO Alex Katz told Business Insider. To the Two Chairs team, the “growth at all costs” mindset of Silicon Valley, when applied to mental health, “felt really off.”
That heads-down strategy turned out to be the right choice for the business, he said. In 2023, mental health still brought in more funding than other clinical indications through October, but the total cash deployed in those first three quarters slumped to $900 million.
Two Chairs has boasted attractive growth even as the broader market struggled. The startup was bringing in $68 million in annual recurring revenue in December and predicts it will double that figure in 2024, one person with knowledge of the fundraise told Business Insider.
Katz declined to comment on revenue specifics but said Two Chairs plans to grow at a similar rate to previous years. Over the past three years, the startup claims that revenue has grown by 800 percent.
VCs are trickling back into mental health this year as deals pick up, even with more competitors in the mix. Mental-health unicorns like Lyra Health and Spring Health are now poised to go public when the IPO market reopens, while startups like Forta and Grow Therapy have landed more venture funding this year.
During the Series C raise, Katz said he fielded significantly more questions from investors about care quality and outcome measures, which he said was a reassuring sign of what’s become important to VCs in the mental-health market. Two Chairs considers better patient outcomes its north star — 97% of the startup’s patients say they’re with the right therapist for them, and 74% of its patients achieve clinically significant improvement in relevant symptoms including depression and anxiety, Katz said.
Katz said that Two Chairs now employs more than 500 clinicians, and it plans to open clinics in more states this year while keeping its slow growth strategy and working toward profitability.
