David Ebersman, co-founder & CEO of Lyra Health, recently joined us for a virtual fireside chat. In addition to starting his own company, David has served as a pioneering executive in some of the most influential companies in the world. He previously led both Genentech and Facebook as CFO, spearheading the latter’s historic IPO. In 2015 he co-founded Lyra Health, a mental health tech company that is now a leader in the space, recently raising a Series G round of financing at a $5.6b valuation.
We were thrilled to have David join us to share his depth of experience on guiding company financing, founding his own startup, the state of mental healthcare, and more. Here are some snippets from the talk:
Taking Facebook Public [7:53]
- If you ever take a company public, understanding what your objectives are is really important. It’s a public financing and shouldn’t be the reason for being at your company.
- We chose to go public during a period of transition from desktop to mobile. The investor perspective was very dependent on the psychology of how that was going as opposed to some hard quantitative number.
- If you’re in a moment of volatility where psychology important, it can change really quickly. When we were originally executing the deal, there was great optimism that we would have a successful shift to monetizing mobile use. And then just as quickly investors got really concerned we weren't going to be able to make money from mobile usage and the stock went down.
- Then we proved we could and everyone got super excited and the stock when up again.
- If you have the option to IPO it would be ideal to do so at a moment that isn’t as volatile, when there isn’t as much business uncertainty.
Building Conviction to Start Lyra [13:12]
- Ideally, you don’t start a company, the company starts you. There’s a problem you want to solve so badly and the company is your vehicle to do the work you’re excited about.
- If you choose to start a company, it’s really hard, without a doubt the hardest thing I’ve ever done in my career. But I’ve never had a day in seven years where I wished I was working on something else.
- Take note of the benefits of working on something you’re so passionate about that even on your worst day, you can’t imagine working on anything else.
- The one meeting that finally pushed me over the edge was with a purchaser for healthcare at a large company, and he was so enthusiastic about the idea. And he was a buyer. I walked out of the dinner thinking, “what am I waiting for?”
Turning Conviction Into a B2B Strategy [17:18]
- We had a good sense for what we wanted the member experience to be for the person in need. We had no idea how to turn that into a business.
- I was really skeptical about selling directly to consumers because something I had learned at Facebook was that virality is huge when trying to build a DTC business, and there really isn’t virality in mental health.
- People aren’t keen to tell their friends ‘Hey, I needed a therapist.’ So you’d have to go out and acquire every customer one at a time, and that would be expensive and slow.
- There were three potential payers we could think of: health plans, employers, and providers. We did a pilot for each of those three groups, building different experiences to see what would work. And we waisted a fair amount of time.
- The smart thing we did was turn off the other two pilots very quickly once we saw the employer one was working. We decided to put every person and every dollar into making the service available through employers.
Building a New Marketplace Product [20:44]
- We’re nothing without both members and providers. We need both sides. So that was all we thought about.
- What we learned was that there was tremendous latent demand from people who were struggling and were willing to raise their hand to get care if we could convince them it would be easy and confidential.
- Our first customer was eBay, which we got through networking. Having a network is very useful when you don’t have a product and you have no track record and you just need people to believe in you.
- We took bets in the company on how many eBay employees would come to us in the first month. The highest estimate was short by 5x. So it turned out demand wasn’t the biggest problem.
- On the provider side, there’s no substitute for hard work. In the early days every single member of the company had to call providers to convince them to work with us. One by one we got enough traction for a successful launch.
- After launch we had strong network effects with providers. But in the early days it was truly doing totally non-scalable things just to get off the ground.
On Raising Capital [24:58]
- The investors I wanted to attract would be partners in building the business, primarily because I needed so much help. There was so much I didn’t know about the mental health system.
- I wanted to think of our investors as the folks who would help me and make me better, and you have to be willing to answer to them to have that kind of relationship.
- When fundraising, you want to spend the first week meeting with investors who you don’t think you’re going to close so you can figure out what you’re doing wrong and then focus on the ones that are really your targets.
The Difficulty of Healthcare Startups [45:47]
- I don’t think I would have started Lyra without having spent the first 20 years of my career in healthcare. I wasn’t doing what I’m doing now but at least I knew the terminology.
- Healthcare is really complicated and esoteric and doesn’t make a lot of sense logically. Everyone can learn it, but it’s going to take a while. There’s regulation on top of regulation that’s accumulated for decades that you have to unpack.
- I don’t discourage anyone from going into healthcare, but would encourage you to be cautious and more deliberate than you otherwise might be if you choose something as heavily regulated as healthcare.
On Biomarkers and Digital Interventions [51:40]
- One of the challenges in mental health is that I can’t look at you and have any idea if you’re struggling with depression or anxiety. We rely on self-reported answers to questions, which isn’t perfect.
- Biomarkers can be things from facial expressions to your blood or social measures like your physical activity or your social activity, and we have phones that could help us know that information.
- We're in a cold start situation where we don't have enough goodness to convince people to give us all that information, but I'm hopeful that over time that will change.
- Learning how to tend your mental health, how to challenge your thoughts, change your behaviors, is hard work, and it doesn’t delight in the same way as most digital experiences, so it’s hard to build a digital interaction that you’re exited to come back to tomorrow.
- The beauty of seeing a person in addition to using digital technology is there is some delight in a human being, therapist or coach, who validates and makes you feel heard.
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