Health-benefits provider Green Shield Canada and its group of companies is acquiring mental health platform Inkblot Technologies, as demand for digital health services surges amid the COVID-19 pandemic.
The deal will see the Toronto-based startup operate as an independent subsidiary. The company’s executive team will remain intact, with co-founder and CEO Luke Vigeant shifting his title to “president.”
Health-benefits provider Green Shield Canada has bought Toronto-based digital mental health firm Inkblot Technologies. The startup entertained multiple suitors before choosing Green Shield. The two firms began discussing a possible partnership about two years ago, with acquisition plans heating up in August 2020 as COVID-19 spurred increased interest in the digital health space.
Neither Inkblot nor Green Shield—both private companies—disclosed the value of the acquisition. Vigeant told The Logic the deal will equip the company with the resources it needs to meet the growing demand for its services, which has ballooned in the past year. “We went from about 20 clients to 120 clients in four months, and it became clear that we needed to raise either a big round of fundraising from a strategic [partner] or from a VC,” he said.
Prior to the acquisition, Inkblot had raised just US$1.93 million in seed and angel funding, according to PitchBook data. While the six-year-old company contemplated a Series A, Vigeant said the venture capital model ultimately wasn’t a fit for the healthtech firm.
“We’ve had multiple VCs tell us to shut down the company, that this is not an investable thing,” said Vigeant of the firm’s earlier years.
The company works with employee-assistance programs (EAP), in which it helps employers match workers with mental health providers and services like counselling delivered over its encrypted app. “More than the money and the funding structure was commitment and general buy-in that all the areas of mental health that we’re trying to fix are right, and that we’re going down the right path,” said Vigeant. “If we got the wrong VC, they might want us to pick the one area that is experiencing the most growth and throw the most amount of money at it to try to either fail spectacularly or succeed. And with mental health, I didn’t feel that was responsible.”
Mike Winterfield, managing partner at Vancouver-based Active Impact Investments, which first invested in Inkblot in 2018, said the startup fielded five or six formal acquisition bids, with many more firms expressing interest in buying the company. “It was a competitive process with multiple parties at the table,” said Winterfield, an Inkblot board observer. “It was a tremendous advantage that we had the ability to choose the acquirer that best aligned with the goals and interests of all stakeholders.”
Along with expertise in the EAP space and financial resources to help the startup grow, the partnership gives Inkblot access to Green Shield’s distribution channels that include some four million plan members, said Joe Blomeley, executive vice-president of mental health at Green Shield.
Blomeley said the deal is part of a broader shift at Green Shield to improve digital health delivery and broaden the kinds of services it offers to include more that focus on mental health. Green Shield led an $18-million Series A in Toronto-based mental health services platform MindBeacon in 2019. Last May, the company invested in Kelowna, B.C.-based GenXys, which operates a personalized medicine platform, and partnered with the firm to build new products that tailor patients’ prescriptions.
Green Shield is wading into a space in which it will have to compete with both legacy enterprises and a growing number of startups. In October 2020, Loblaw launched its PC Health app, powered by Toronto-based healthtech platform League, which offers users PC Optimum rewards for reaching personalized health milestones. Amazon, meanwhile, has been acquiring and partnering with firms in the healthtech space. In 2018, it bought online-pharmacy company PillPack for close to US$753 million. It also announced a joint health-care venture with JPMorgan Chase and Berkshire Hathaway in a bid to disrupt how large companies deliver health-care benefits. While the firms have since ended the partnership, illuminating some of the challenges around transforming the space, digital health is on track to become a US$295-billion market globally by 2028, with an annual growth rate of about 15 per cent, according to a recent estimate.
“We saw mental health as being a growing societal issue, and it just wasn’t being addressed very well with traditional approaches and could be really improved by creating more access,” said Winterfield of his firm’s decision to invest in Inkblot. He said a buyout always seemed like a likely exit option for the firm, but he didn’t expect it to happen so soon, until the pandemic hit. “COVID-19 really validated how much of a need there was for online mental health solutions.”
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Inkblot and Green Shield began discussing a possible partnership about two years ago, said Vigeant and Blomeley, but conversations about an acquisition became serious in August 2020. On top of scaling up Inkblot’s business, Blomeley said Green Shield plans to tap into the “flexibility and the breadth of their platform” to build out new offerings. “It basically was a foundational asset that we can build off of moving forward, as we try to further deepen our move into the health-care space,” he said.
Blomeley said it was important for Green Shield that Inkblot maintained a large degree of autonomy. “We want to ensure they continue with the level of innovative thinking that they’re bringing to the table, that they continue to be nimble, that they can pivot depending on where the market turns as opposed to incorporating them into our larger company where that type of operating model would be a constraint,” he said. “We’re trying to find the best of both worlds.”