Calm, the popular mental wellness app known for its guided meditations and sleep stories, has announced it will lay off 20% of its staff—about 90 employees—in a move signaling deeper changes in the digital health sector. The announcement was made via an internal memo by Co-CEO David Ko, following what he described as a full reevaluation of the investment thesis behind all current company projects. The move reflects broader turbulence across the digital behavioral health space, pointing to a larger digital mental health market shift already affecting several major players.
Calm’s Rise From Mindfulness App to Mental Health Unicorn
Launched in 2012, Calm quickly rose to prominence by offering an accessible entry point to stress relief and mindfulness. The app struck a chord during the pandemic and was propelled to unicorn status after raising an $88 million Series B funding round in 2019 that valued the company at $1 billion. Altogether, Calm has raised $218 million, according to Crunchbase.
For a time, Calm epitomized the success of digital wellness startups. However, the past two years have revealed cracks in that narrative as a digital mental health market shift has begun to pressure companies to evolve or consolidate.
Declining App Usage and Investor Fatigue
Mental health app downloads have dropped by more than 30% since January 2021, according to Apptopia. Investors and consumers are reevaluating the long-term utility of digital-first mental health tools, particularly those lacking robust clinical backing. Calm is far from alone—other digital health startups such as Circulo, Foresight Mental Health, and Cerebral have also reduced headcounts recently, all responding to the same digital mental health market shift.
The once-explosive demand for mental health apps has cooled, and companies are now being forced to demonstrate more than just engagement—they must prove outcomes, value, and sustainability.
Pivoting Toward Health Care Integration
In February, Calm acquired Ripple Health Group, a San Francisco-based health tech company focused on older adults and caregivers. Ripple’s tools, including LikePaper and CareMemo, offer structured support for medication tracking and care team coordination. This move was a deliberate step away from Calm’s original mindfulness-only focus, reflecting an urgent response to the digital mental health market shift.
Ko, previously CEO of Ripple, became Calm’s Co-CEO through the acquisition, helping steer the company toward a more integrated health care approach.
Replacing Calm for Business With Calm Health
In tandem with its acquisition, Calm is sunsetting its corporate wellness platform, Calm for Business, and introducing Calm Health—a new employer-focused mental health solution. Calm Health already serves more than 2,000 employers and covers over 20 million individuals. It’s a direct response to shifting employer needs and the growing demand for care that goes beyond wellness into medical-grade services.
The launch of Calm Health is another key example of how companies are pivoting amid the ongoing digital mental health market shift, positioning themselves to offer more scalable and clinically relevant solutions.
Industry-Wide Consolidation and Refocus
The layoffs at Calm, though significant, are not an isolated event—they’re part of a larger movement within the behavioral health industry. Startups are being pushed to consolidate, specialize, or realign their business models in response to the digital mental health market shift.
Deals like the Headspace-Ginger merger, which created Headspace Health, have illustrated that the future of digital mental health may lie in combining mindfulness tools with therapy, coaching, and care coordination. The idea is to move upstream with wellness while maintaining the ability to support people downstream when clinical care is needed.
The Road Ahead: Challenges and Opportunities
The Calm layoffs reflect the difficulty of maintaining growth in a saturated, evolving market. The company is shifting away from general-purpose wellness toward targeted health care services. That’s in line with industry trends but comes with new challenges—such as navigating compliance, clinical validation, and partnerships with payers and employers.
Still, for those companies able to navigate the digital mental health market shift, opportunities abound. There is a growing recognition that integrated care models—those that blend accessible technology with clinical services—may better meet the mental health needs of today’s users.
Calm’s Place in a Changing Market
Calm’s pivot represents a critical inflection point—not just for the company but for the industry as a whole. While layoffs are painful and disruptive, they can also mark the start of strategic clarity. As the company leans more heavily into enterprise health offerings and clinical care tools, it may emerge stronger and more resilient amid the digital mental health market shift.
Only time will tell which companies will adapt successfully. But one thing is certain: the digital mental health sector is entering a new era, and the market shift is already redefining what success looks like.
