Despite Industry Turmoil, VCs Believe the Case for Telehealth Startups Is Stronger Than Ever

Samson Amore

Samson Amore is a reporter for dot.LA. He holds a degree in journalism from Emerson College and previously covered technology and entertainment for TheWrap and reported on the SoCal startup scene for the Los Angeles Business Journal. Send tips or pitches to samsonamore@dot.la and find him on Twitter @Samsonamore.

Despite Industry Turmoil, VCs Believe the Case for Telehealth Startups Is Stronger Than Ever
Photo by Intel Free Press

Telehealth startup Cerebral entered the medical tech scene two years ago, backed by over $400 million in venture funding and a promise: remote access to mental health professionals and treatment that could help patients with a range of behavioral challenges, from depression to anxiety to ADHD, all bundled in a neat monthly subscription priced at $100 per month.

But by May of this year, Cerebral’s practices began to crumble under scrutiny. The company’s problems accelerated when an ex-executive filed a lawsuit in April alleging he was fired for speaking out against the Cerebral’s tendency to over-prescribe ADHD stimulants. The lawsuit then led to a Justice Department investigation into the company’s “possible violations” of the federal Controlled Substances Act, which is still pending alongside a separate inquiry from the Drug Enforcement Administration.


After the investigation, Cerebral fell on hard times. It paused prescriptions for ADHD medication for new patients and former CEO Kyle Robertson was ousted in May. But the strategy never panned out. This week, Cerebral announced it would cut 20% of staff, an estimated 400 people.

Cerebral’s troubles have rippled throughout the industry. One of the company’s partners, Truepill, a tech platform that helps telehealth companies offer prescriptions and diagnostics conducted its fourth round of layoffs in September. Noom, a similar telehealth coaching platform, laid off roughly 500 people and lost its CFO earlier this month.

But despite all the turmoil in the telehealth landscape, local venture capitalists say they don’t anticipate these issues to be a harbinger of doom for the entire industry. In fact, the VCs dot.LA spoke with said they believe the use case for telehealth and digital doctor’s visits is stronger than ever as COVID-19 cases and other infections are expected to tick up during the winter.

“There was definitely a correction in the market due to the amount of cash that has entered the digital health space in past years,” Upfront Ventures investor Kesar Varma told dot.LA. He said he’s seen less funding go towards health tech in recent months – part of the overall funding slowdown as VCs remain cautious about investing their accumulated wealth – and that investors are more keen to wait for healthtech startups to prove a proof of concept before backing later rounds.

Still, Varma noted that in the wake of Cerebral’s public flame-out, investors are more cautious. He said that when companies that raised at massive revenue multiples struggle, it trickles down to smaller startups.

“I think there was a view that telehealth could be applied to every type of care delivery modality, but there are some areas of healthcare where an in-person meeting will always be preferred by the patient,” Varma added. “We do believe that things like teletherapy are here to stay, it's just important to grow in a sustainable and thoughtful manner and not overpromise.”

Varma wasn’t the only local investor who said they thought the telehealth landscape over-expanded.

“Investors pumped the brakes on ‘general’ VC investing, based on the narrative behind the April 1 NASDAQ downturn,” explained Jay Goss, partner at Pasadena-based health investment fund Wavemaker Three-Sixty Health. “In short, health-tech investing is down, but for lots of good reasons, it’s down slightly less than non-health-tech.”

Goss pointed to some of the use cases – other than therapy and online prescriptions – where telehealth could really fill a need as one reason why he’s still optimistic about the industry at large. In particular, he said “a lot of use cases where the patient simply prefers it,” and provided the example of new mothers accessing “lactation consultants at 2 in the morning.” In addition, Goss said there’s a high demand for care and simply not enough physical space at doctors offices or hospitals, which led to excruciating wait times during the pandemic.

“On the supply side, we are simply running out of supply,” Goss added. “In urban and rural markets, we don’t have enough hospital beds and clinics and the problem gets worse as the senior population grows.” Moreover, there’s already a huge clinician shortage, which only got worse during the pandemic due to burn-out. “As a society, we must start taking care of people outside the four walls of a hospital or clinic,” Goss said.

So while Cerebral’s use case for prescribing antidepressants to virtual clientele might not be the most viable long-term business model, there is definitely a growing need for telehealth that can accommodate patients who can’t come in for a physical appointment. The Cerebral saga might be a cautionary tale, but it could also be a valuable learning experience for both investors and founders looking to create the next generation of telehealth unicorns.

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How the 'Thrift Haul' Boosted Secondhand Ecommerce Platforms

Lon Harris
Lon Harris is a contributor to dot.LA. His work has also appeared on ScreenJunkies, RottenTomatoes and Inside Streaming.
How the 'Thrift Haul' Boosted Secondhand Ecommerce Platforms
Evan Xie

If you can believe it, it’s been more than a decade since rapper Macklemore extolled the virtues of thrift shopping in a viral music video. But while scouring the ranks of vintage clothing stores looking for the ultimate come-up may have waned in popularity since 2012, the online version of this activity is apparently thriving.

According to a new trend story from CNBC, interest in “reselling” platforms like Etsy-owned Depop and Poshmark has exploded in the years since the start of the COVID-19 pandemic and lockdown. In an article that spends a frankly surprising amount of time focused on sellers receiving death threats before concluding that they’re “not the norm,” the network cites the usual belt-tightening ecommerce suspects – housebound individuals doing more of their shopping online coupled with inflation woes and recession fears – as the causes behind the uptick.

As for data, there’s a survey from Depop themselves, finding that 53% of respondents in the UK are more inclined to shop secondhand as living costs continue to rise. Additional research from Advance Market Analytics confirms the trend, citing not just increased demand for cheap clothes but the pressing need for a sustainable alternative to recycling clothing materials at its core.

The major popularity of “thrift haul” videos across social media platforms like YouTube and TikTok has also boosted the visibility of vintage clothes shopping and hunting for buried treasures. Teenage TikToker Jacklyn Wells scores millions of views on her thrift haul videos, only to get routinely mass-accused of greed for ratching up the Depop resell prices for her coolest finds and discoveries. Nonetheless, viral clips like Wells’ have helped to embed secondhand shopping apps more generally within online fashion culture. Fashion and beauty magazine Hunger now features a regular list of the hottest items on the re-sale market, with a focus on how to use them to recreate hot runway looks.

As with a lot of consumer and technology trends, the sudden surge of interest in second-hand clothing retailers was only partly organic. According to The Drum, ecommerce apps Vinted, eBay, and Depop have collectively spent around $120 million on advertising throughout the last few years, promoting the recent vintage shopping boom and helping to normalize second-hand shopping. This includes conventional advertising, of course, but also deals with online influencers to post content like “thrift haul” videos, along with shoutouts for where to track down the best finds.

Reselling platforms have naturally responded to the increase in visibility with new features (as well as a predictable hike in transaction fees). Poshmark recently introduced livestreamed “Posh Shows” during which sellers can host auctions or provide deeper insight into their inventory. Depop, meanwhile, has introduced a “Make Offer” option to fully integrate the bartering and negotiation process into the app, rather than forcing buyers and sellers to text or Direct Message one another elsewhere. (The platform formerly had a comments section on product pages, but shut this option down after finding that it led to arguments, and wasn’t particularly helpful in making purchase decisions.)

Now that it’s clear there’s money to be made in online thrift stores, larger and more established brands and retailers are also pushing their way into the space. H&M and Target have both partnered with online thrift store ThredUp on featured collections of previously-worn clothing. A new “curated” resale collection from Tommy Hilfiger – featuring minorly damaged items that were returned to its retail stores – was developed and promoted through a partnership with Depop, which has also teamed with Kellogg’s on a line of Pop-Tarts-inspired wear. J.Crew is even bringing back its classic ‘80s Rollneck Sweater in a nod to the renewed interest in all things vintage.

Still, with any surge of popularity and visibility, there must also come an accompanying backlash. In a sharp editorial this week for Arizona University’s Daily Wildcat, thrift shopping enthusiast Luke Lawson makes the case that sites like Depop are “gentrifying fashion,” stripping communities of local thrift stores that provide a valuable public service, particularly for members of low-income communities. As well, UK tabloids are routinely filled with secondhand shopping horror stories these days, another evidence point as to their increased visibility among British consumers specifically, not to mention the general dangers of buying personal items from strangers you met over the internet.

How to Startup: Mission Acquisition

Spencer Rascoff

Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.

How to Startup: Mission Acquisition

Numbers don’t lie, but often they don’t tell the whole story. If you look at the facts and figures alone, launching a startup seems like a daunting enterprise. It seems like a miracle anyone makes it out the other side.

  • 90% of startups around the world fail.
  • On average, it takes startups 2-3 years to turn a profit. (Venture funded startups take far longer.)
  • Post-seed round, fewer than 10% of startups go on to successfully raise a Series A investment.
  • Less than 1% of startups go public.
  • A startup only has a .00006% chance of becoming a unicorn.

Ouch.

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From The Vault: VC Legend Bill Gurley On Startups, Venture Capital and Scaling

Spencer Rascoff

Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.

Bill Gurley in a blue suit
Bill Gurley

This interview was originally published on December of 2020, and was recorded at the inaugural dot.LA Summit held October 27th & 28th.

One of my longtime favorite episodes of Office Hours was a few years ago when famed venture capitalist Bill Gurley and I talked about marketplace-based companies, how work-from-home will continue to accelerate business opportunities and his thoughts on big tech and antitrust.

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