Investor Stories 54: Why I Invested in Regroup Therapy (Moran, Cohn, Saunders)

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On this special segment of The Full Ratchet, we explore

the story behind  Regroup Therapy with founder David Cohn.

And we also discuss the seed round investment in Regroup by

Bob Saunders of OCA Ventures and Nick Moran of New Stack Ventures.  

In this installment, the following individuals are featured:

  • David Cohn

  • Bob Saunders

  • Nick Moran



Nick Moran Why I Invested in Tovala

  • Seph

    Great interview. Well structured. Everyone is clearly engaged and having a good time. Thanks to all of you for making it happen. Some notes below.


    Nick – Very good introduction, framing of the problem, market space, Regroup’s solution. Clear and concise.

    Meet Bob. Origin story. Has been in the healthcare space since early 1990s, was Partner at Chrysalis Ventures, co-invested with OCA, assumed an advisory role, now GP managing healthcare investments with OCA.

    Meet OCA. Early stage venture, seeking investments outside of the NYC/SF sphere, at least half of all investments in the middle part of the US. Primarily Series A focus, setting aside 10% of each fund for “Edge” investments pre-Series A.

    There is a previous TFR interview with a colleague at OCA, Imran Ahmad. Topic – due diligence. Link:

    Meet David. Origin story. Early interest in behavioral health. Studies focused on business and technology. Peace Corps. Management consulting. Entrepreneur.

    David: “Sometimes you have to take a few turns to get back to where you wanted to be.”

    Nick: “What is the one-line elevator pitch for Regroup?”
    David: “We’re a telehealth company that focuses on behavioral health services. We’re there to make sure that health care entities have the behavioral health providers that they need to effectively serve their patients.”

    Nick: “What is the real problem you’re solving here?”
    David: Across the USA, 1 in 5 suffer from a behavioral health condition. Of all US counties, 55% have no behavioral health services. There is a market failure due to lack of access. It is 3x more expensive to treat patients when a behavioral health condition is present. Regroup addresses these concerns from within the health entity where the patient is already engaged, in a familiar place, thinking about their health.

    Nick: “Why is the system as it exists now failing patients? Why are they not getting the behavioral services that they need?”
    David: Principally the access issues. Health entities recognize the need for BH services but patient referrals do not get fulfilled. Reasons include lack of BH practitioners, scheduling, insurance, stigma, resistance to going to see a BH practitioner.

    Nick: “Who is the target customer here and what does the market look like?”
    David: Some subsegments where both need and delivery of services are well understood –
    1) Outpatient mental health facilities – 3783 sites in “Federally Designated Mental Health Shortage Areas” (FDMHSAs)
    2) Hospitals and Health Systems – 4000 across the country, in shortage areas
    3) Correctional institutions – 5000 across the country
    Total potential reduction in cost for treating a [national] patient population (TAM) – $520B
    Focusing just on FDMSHAs, in terms of impacting patients’ cost of care – $3.5B

    Nick: “Walk me through a day in the life today [at my health clinic] versus what it will be with Regroup.”
    David: Assume that your primary care provider determines a need for BH services. Today, they make a referral and you have to set it up, wait for the appointment, say 3-6 months, and a lot can happen in the meantime. With Regroup, they can provide an immediate warm hand-off to a BH specialist who is already integrated into the care team.

    Nick: “Tell me more about how did you decide to address this sort of a problem and why did you address it the way that you have.”
    More origin story. David benefited from the support of BH providers early in life. He joined the Peace Corps, realized that this grassroots type of work was good but slow to deliver. Experience as a management consultant to C-level executives at large companies showed David how to create scale and impact. Regroup as a means to create positive impact and scale it up.

    David: “You need an economic return to create a sustainable enterprise.”

    Discussion of how underlying technology has evolved, converged to allow for Regroup to deliver services as envisioned.

    Bob outlines the landscape for investment in behavioral health, pain points, potential market space, the large population with chronic conditions, the entanglement (“comorbidity”) of behavioral health with overall health.

    OCA and Regroup found each other through Matter, a healthcare innovation space in Chicago. Bob and David were in conversation for around 6 months. The investment in Regroup was from the Edge allocation in OCA’s current fund.

    Bob describes how OCA got to “yes”.
    1) Team – is there a capacity to identify the problem, put in place a solution, and then scale it up. David brought a great core team, with a deep pool of BH practitioners ready to go.
    2) Market proof – good traction with initial customers showed that the market was prepared to pay for Regroup’s solution.
    3) Ability to bring together a financing – don’t ever be the only checkbook financing a deal. David was effective in putting a round together and able to bring strong investors into the team.
    Behavioral health is an area that OCA has been thinking about for some time.

    Serendipity. Regroup came to New Stack through the audience of this podcast. A cold email from a long time TFR listener and existing Regroup investor living in France.

    Nick describes how New Stack got to “yes”.
    1) External drivers – consider regulatory, technology, or market drivers. In this case regulatory, namely the move from Fee for Service to Value-based care.
    2) Team – the importance of a founder who can sell, and David has a real gift for Sales. Justine (Chief of Clinical Ops) and Moon (CTO) are amazing. A strong team of investors include OCA, Hyde Park Angels, Harvard Business School Angels, Impact Engine, Mike Evans.
    3) Accessing idle supply – an investment thesis/theme at New Stack. This is a case where there is a supply of goods or services which sit idle despite a clearly demonstrated demand. The established system has too much “friction” for the transaction to clear. Regroup has a solution to remove those barriers. Transaction costs go down and more transactions start clearing.

    Discussion of Regroup’s progress from the time of investment until now. From 3 partners to 9 partners. From 4 locations to 30 locations. So far, 6 partners have asked to expand sites. From just under $10k MRR to $120k MRR. Just closed a contract with Cook County Health and Hospitals to staff the Cook County jail, which is the largest mental health entity in the USA.

    David describes how he got to “yes” with OCA. While there are a lot of investors who want to get into healthcare, there do not appear to be a lot of real experts regarding healthcare. Bob is one of these experts in behavioral health. OCA is local to Chicago which allows for good contact. Bob and David have agreement regarding vision for the future. David spoke with references and everyone spoke highly of Bob. OCA is an institutional investor able to continue with Regroup past the Seed round, should a subsequent financing be sought out.

    David describes how he got to “yes” with New Stack. He first met with New Stack at the urging of that same investor who sent the cold email from France. David was impressed by the experience of the New Stack team, the group they could bring around the investment, and their investment thesis resonated. Furthermore, New Stack is good people.

    David: “Not unimportantly, I also liked you [Nick and Jeff]. And that helps when you are working with people. It helps to like them and to feel like you can discuss what is great and what is challenging and get smart advice; and that you really feel like you are going to be on the same team pulling from the same side.”

    David: “Everyday we get to say that we’re not just building a great business but we’re helping a lot of people who otherwise really wouldn’t have the resources they need.”