Investment memo: YourDost

YourDost represents an interesting series B investment opportunity. It is India’s first and largest platform for online counselling and mental wellness. It allows instant anonymous connect between users and experts through iOS and android apps, chat as well as video interface at website. Psychologists, life coaches, career guides and other psychotherapists advise people on relationships, career or academics.

The four cofounders have shown clear vision and execution by building an easy to use platform. They have onboarded 600 experts and served 400,000 people till date since starting in Dec 2014. This captures some broad macro themes of increasing stress in everyday life, rising income level and middle class population as well as wide adaptation of smartphones with easy internet availability.

Deal

Our proposal is to invest $5MM in series B stage. We anticipate existing investors led by SAIF partners might want to participate in subsequent rounds (Seed investors also participated in pre- series A round). Our firm would own ~10% post series B.

Previous funding Rounds (3) — $1.6M

(Venture Intelligence PE/VC Deal Database to have valuation multiples, deal structuring and other transaction details)

Competition

There are 3 main direct competitors in India besides various potential ones to YourDost. These include

- Direct competition (Type a Thought, ePsyClinic.com, HealthEminds, Hopenetwork.in)

- Machine learning and AI based platforms (Touchkin)

- Social media for peer support (Heimo, ShapeUp, PatientsLikeMe)

- Specialty courses (Lantern)

YourDost appears to have a clear lead with respect to user base because of below factors

- Number of experts onboarded on platform vs. with its direct competitors.

- Ease of use: It operates online as well as through iOS and android app, having facilities to chat, find answers over email, text or video chat as well as book an appointment with expert of their choice; something which any other players are still to master.

- Affordability: Audio/ Video call services are priced at nominal amount of Rs.500 which is far less than the market price of about Rs.1500 / 2000 per session.

Type a thought started in Feb 2016 by doctor duo has outsourced IT needs and is focused on monetization and expansion to UK and North America. ePsyclinic, started in May 2015, has developed 6 weeks training module to onboard experts and plans to open India’s first completely virtual clinic. HealthEminds started in 2013 is focused on a lot of areas to monetize, but is growing fast after a slow start.

However, given that there are only 3,000 psychiatrists in India against an estimated requirement is for 11,500, engaging machine learning and AI platform, besides building up peer support network would also start getting traction. Through user generated data, the platform can predict a pattern and work towards suggesting preventive care solutions for certain individuals. Further, the firm also plans to start programs or modules for problems which are seen recurrent amongst clients

Corporate tie ups would be next growth area (One out of every two employees in corporate India suffers from anxiety and depression). Hence developing specialty courses as well as business development would be next imperative.

Key risks

Competition/defensibility

As outlined above, YourDost faces significant threat, both from advanced technology implementation for counselling as well as monetizing visitors on platform.

Given the scarcity of experts in India, lower fees offered by platforms to experts (YourDost charges Rs 500 from clients against market rate of Rs 800–1500), it is important to have a robust motivation and training program for experts, given they are face of the company. As number of users increases, predictive AI based engine might be required.

The platform requires active inputs and engagement from user. The target segment refuses to recognize they might have an issue. Passive sensing analysis based on user activity can be helpful. Challenge is to bring people past their inhibition of talking to a stranger on internet who would solve their personal problems. (Nearly 80 per cent of people suffering from mental disorders had not received any treatment despite being afflicted by the illness for over 12 months)

The growth of premium video service might be restricted because of limited broadband internet speed in India.

We need to find senior leaders in technology and marketing who would be able to build and monetize this platform (current team size is 22).

Revenue model

The platform has more than 600 experts on board, serving close to 2000 sessions daily (predominately free text based sessions). The platform witnesses 3,000 visitors daily across all channels (online, iOS and android app). However, there are several unknown revenue parameters which need to be discovered:

i. YourDost has been growing its user base at ~40% in 2015 and ~30% in 2016. Further growth will be hit by number of experts available, development of AI based solution, tie up with B2B corporate clients (currently 3 clients) and marketing (hire senior leader) to get referrals and break inhibition in society.

ii. Conversion rate of user base to paid users (Type a thought had 5% free to paid users conversion rate in April 2014, projected to grow to 8% by July 2016)

iii. Premium customers might be willing to pay for online consultation. Indian consumers are not used to paying high consultation cost for on demand healthcare. Currently voice calls are charged Rs. 400 per session and video calls are charged Rs. 600 per session. Each session or appointment runs for 45 minutes. “Once a person speaks to our counselor, it usually takes around of six sessions to address the issue.”

iv. Offtake of premium services (personal councilors, curated plans etc.) in Indian environment as well as expansion in other markets similar to India

Current burn rate is INR 25 lakhs per month.

Below are different scenarios and their associated revenue potential

Estimated revenue= # daily sessions*365*Conversion rate to paid*Payment per session

Revenue assumption in year 3

Scalability

WHO report Feb 2017: 7.5% Indians suffer from mental disorders that require expert intervention. Out of that 4.5% or 56 million Indians suffer from depression at this moment. Another 38 million Indians suffer from anxiety disorders.

NIMHANS study Oct 2016: 13.7% of India’s general population has been projected to be suffering from a variety of mental illnesses. 10.6 per cent of this 13.7% suffering from mental illness requires immediate intervention. In all, nearly 150 million Indians are in a need of active medical intervention.

India has only 443 public mental hospitals, but six states, mainly in the northern and eastern regions with a combined population of 56 million people, are without a single mental hospital.

In fact, the economic burden of mental disorders is so huge that affected families had to spend nearly Rs 1,000–1,500 a month mainly for treatment and to access care.

National Health Protection Scheme (NHPS): The government will provide for over 100 million families below the poverty line through NHPS. It envisages an annual coverage of Rs. 1,00,000 for a family. Implementation plans for NHPS are under way.

Global market size for mental health segment is $39 billion. India total addressable market is between $3.46bn and $6.3bn based on report and assumptions we consider.

The calculation for Total Addressable Market = total population*effected population*% of effected getting treatment (20%)

Effected population varies according to different report, which gives data range for TAM.

Exit

We cannot point to many high comparable exit valuations.

Although public market sales continued to be prominent modes of exit, strategic sales (for large-scale portfolio companies) increased by 15% in volume. Sale to other PE buyers is now the second largest way out (30% of all by value in 2012–13 from 10% in 2010–11 and 5% in 2006–07).

The success of initial public offerings (IPOs) — four key IPOs over the last few months — Dr Lal PathLabs, HCG, Narayana Hrudayalaya and Thyrocare — all IPOs were oversubscribed, reinforcing investor confidence in the sector.

In USA,

· Life Management, an outpatient behavioral healthcare company with 31 sites in four states that provides counseling and rehabilitation services to patients with a variety of substance abuse and other mental health needs, got acquired by Onward Behavioral Health, Inc. (“OBH”), a portfolio company of Harbert Private Equity Fund II.

· Summit Health, a leading provider of on-site prevention and wellness programs primarily for employers, got acquired by Quest Diagnostics (NYSE: DGX), a provider of diagnostic information services.

· CNS, a cognitive neuroscience company specializing in the treatment of brain-based behavioral health disorders without the use of drugs (affective (emotional) and stress-related problems) got acquired by Wellness Center USA

· CI Capital Partners acquired Interactive Health Solutions (IHS). Although terms of the deal for IHS were undisclosed the firm typically spends between $25 million to $100 million in equity per transaction. The company develops and offers wellness programs to employer groups that help individuals take responsibility for their health. It offers biometric screening, telephonic health coaching etc.

The exit scenario is likely to be effected by below

• The rupee-to-dollar exchange rate has been hovering in the range what many expect to be equilibrium (INR 65–60/$).

• Indian internet economy has started to mature, so online companies are likely to mature faster than companies in last internet investment cycle.

• Likely rise in number of late stage VC funds, as number of startups in India explode; Increased allocation by global funds.

• While top-line growth is the most important factor in returns today, cost and capital efficiency will be the most important factors in value creation.

Other Contents

Core Team

Richa Singh — CEO and Founder

· Graduation in interaction design at IIT Guhawati in 2008

· Ex product dev. at social media analytics firm Webfluenz, D E Shaw and 09 solutions

Puneet Manuja — COO and Co-founder

· NIT Calicut. IIM B graduate

· Ex McKinsey and Zynga

Satyajeet Nandekar — Co-founder

· Norheastern University

· Ex Software engineer at Patient Keeper

Prakhar Verma — CTO and Co-founder

· Computer science graduate from BMSCE, Bengaluru

· Ex Capillary Technology

“When I was at IIT Guwahati, my hostel mate committed suicide. She was worried about her placements. This could have been avoided if we knew what she was going through. Even though we had counsellors and psychologists in the campus hardly any student was seeking their support or help,” says Richa Singh.

Advisors

Dr C R Chandrashekar — Ex. Prof — NIMHANS (Psychiatry)

Dr Pradeep Yammiyavar — Psychotherapist & Professor IIT Guwahati

Dr Archana Tyagi — Psychotherapist & Coach

Phanindra Sama — Investor, Founder Redbus

Sanjay Anandaram — Investor, Venture Partner, SeedFund

Competition

YourDost competes with counselling and mental wellness support startups in India.

Type a Thought: Online Mental Counselling Psychologist

Team of 10 employees and 50 verified experts: psychologists, life coaches, sexologists, social workers, speech and occupational therapists, marriage and family therapists and psychiatrists, supporting via email, text, phone and video chat.

It is currently witnessing 30–40 sign-ups per day with a 30-percent repeat customer base. And has 2,000 registered active users, which is targeted to be increased to 10,000 in the next six months.

“We offer the option of text, phone and video counselling and 80% of the people prefer the text option.” The current conversion rate from free to paid users is five percent, which is likely to surge to eight percent by July 2016. The payment mechanism is based on each appointment booked with experts and the revenue is generated from the commission on each appointment fee. The startup has set the target to conduct 150 daily chat sessions in the next few months.

HealthEminds: Anonymous video counseling and mental health support, both on the personal and professional front.

Incorporated in 2013 at Bangalore by CEO Ankita Puri and co-founder Dr. Sunita Maheshwari. HealthEminds works with 45 mental healthcare professionals nationally and is targeting to increase this number to 100 by the end of the calendar year. The company is bootstrapped and is doubling its users every month, says Ankita. The aim is to do at least 5,000 online therapy sessions each month on the platform by the end of the year.

ePsyClinic.com: online platform where people can text chat, audio chat or video chat with psychiatrists or psychologists.

The Gurgaon-based startup currently has 15 psychologists, four psychiatrists, and one gynecologist available full-time, while 20 more resources are undergoing training to be added soon.

It offers treatment for depression, anxiety, relationship, career issues, relationships, work, sexuality, caregiving, pregnancy, addiction, parenting and elderly. A typical counseling session lasts between 20 and 60 minutes, depending on the complexity of the case. While the first session is free, subsequent sessions range between Rs 600 and Rs 1,500.

Other companies that could move into this space are:

Hopenetwork.in: offers online counselling from both Indian and international therapists.

Heimo: Social media for peer support on mental well-being

Touchkin: Chatbot teaches techniques like mindfulness, meditation, or positive thinking, depending on what the user tells it.

Key Metrics

Customer profile

Below is the breakdown of users

· 30 percent of clients seek help on relationships, pre- or post-marital

· 25 per cent of the queries were career related

· 20 per cent were from students who were anxious about academics

Almost 55 percent of YourDost’s clients are working professionals.

Most are in the age group of 18 to 35.

Majority of their users come from metros like New Delhi, Bangalore and Mumbai. They also see a good amount of traffic from various tier-II cities like Srinagar, Gwalior and others. “The plan is to cover major metros and then shift our focus on tier-II cities where we have a greater need of removing stigma and building support structures for mental wellness,” said Singh.

India market segmentation

10.6 per cent of this 13.7% suffering from mental illness requires immediate intervention. In all, nearly 150 million Indians are in a need of active medical intervention.

  • Almost 5% suffer from depression and it is reported to be higher in females in the age-group of 40–49 years. High rates of depression are also reported in the elderly (3.5%).
  • Nearly 1.9 per cent of the population are affected by severe mental disorders that included schizophrenia, other non-affective psychosis and bipolar affected disorders. These are detected more among males and those residing in urban and metro areas.
  • While prevalence of mental illness is higher among males (13.9 per cent) as compared to females (7.5 per cent), certain specific mental illnesses like mood disorders (depression, neurotic disorders, phobic anxiety disorders etc) are more in females. Neurosis and stress related illness is also seen to be more in women.
  • Prevalence in teenagers from the age group between 13 and 17 years is 7.3 per cent. The most common prevalent problems are depression.
  • Apart from epilepsy, the treatment gap for all mental health disorders is more than sixty per cent

User interaction model

Richa started her own amateur research by visiting psychologists and counsellors to understand how they function and the problems they can assist with. The research culminated into a blog YourDost in January 2013 where she would share personal stories of psychologists and the people she met who had gone through a rough patch.

Further to increase the awareness and to educate people, YourDost wrote stories, case studies, and also did videos, etc. which helped in breaking the taboo. Success stories are regularly uploaded on the YourDost website, so that those dealing with similar issues can relate to them and seek help.

YourDost relies on both online and on-ground marketing and advertising means to increase awareness about the importance of Mental Health and benefits of seeking counselling and guidance.