The behavioral health sector has been one of the fastest-growing areas of healthcare in recent years, fueled by rising demand for mental health and addiction services, increasing awareness, and a surge of venture capital investment. Startups promised to transform the way people access and experience care, offering everything from digital-first platforms to hybrid in-person and virtual services. Many of these companies raised hundreds of millions of dollars on the promise of rapid growth. But in 2022 and into 2023, the economic picture has shifted dramatically. Venture capital has tightened, interest rates have risen, and investors are demanding that companies demonstrate a clear path toward profitability rather than endless spending in pursuit of scale. Against this backdrop, Behavioral Health Startup Layoffs have become more common. Companies including Foresight Mental Health, Headspace Health, SonderMind, and Eleanor Health have all announced staff reductions in recent months. The trend highlights a new phase for the industry: one where financial discipline and efficiency matter just as much as innovation and growth.
As BBG Ventures Managing Partner Nisha Dua put it in an interview with Behavioral Health Business, “They have to be much more thoughtful about capital efficiency, particularly as it relates to technology costs, but operations costs and headcount in general.” The latest wave of Behavioral Health Startup Layoffs reflects this new reality.
Foresight Mental Health Cuts Deep Into Administrative Roles
Among the most aggressive staff reductions came from Foresight Mental Health, which has carried out three rounds of layoffs in 2022 alone. In December, the company eliminated 40 jobs, bringing the total number of administrative cuts to 327 positions—roughly two-thirds of its non-clinical workforce.
When CEO Greg Serrao joined the company in April, he discovered an unsustainable staffing model: 487 administrative employees for 520 clinicians. “A ratio of nearly one administrative person to one clinical person is unheard of in health care services,” Serrao explained. “It simply is not sustainable.”
The company has since overhauled its structure, relying heavily on a new practice management system that integrates electronic health records (EHR), billing, and collections. This reduced the need for manual processes and allowed Foresight to streamline operations significantly. As a result, the company now operates with 160 administrative employees, a number Serrao considers sustainable.
These moves have had a major financial impact. Serrao reported that monthly cash burn is down 67% since April, while patient demand has remained strong, with 3,000 new appointment requests and 40,000 sessions each month. For many observers, Foresight’s cuts are one of the most visible examples of Behavioral Health Startup Layoffs aimed at correcting years of over-expansion.
Headspace Health Uses Layoffs as a “Last Resort”
Another major player, Headspace Health, also reduced its workforce this winter, though in a smaller proportion. The company cut 4% of staff, or about 50 positions. A spokesperson emphasized that this step was a “last resort” after implementing other cost-saving initiatives earlier in the year.
“With the privilege of supporting the mental health and wellbeing of millions around the world also comes great responsibility to focus on the health of our business and to protect us for the future,” the spokesperson said in a statement to Behavioral Health Business. Importantly, Headspace clarified that its Care Team was not impacted, allowing direct clinical services to continue without disruption.
Headspace Health was formed in 2021 through the high-profile merger of Headspace, a leading meditation and wellness brand, and Ginger, a virtual behavioral health provider. At the time of the merger, the combined company was valued at more than $3 billion, and it has since made several acquisitions, including Shine and Sayana, in a bid to expand its offerings.
However, even well-capitalized leaders are not immune to financial pressures. Headspace’s layoffs come in the wake of competitor Calm cutting 20% of its workforce—about 90 employees—this past summer, signaling that Behavioral Health Startup Layoffs are impacting the entire digital wellness space.
SonderMind Prioritizes Profitability
Denver-based SonderMind also announced significant cuts, laying off 15% of its staff, or roughly 50 employees, according to the Denver Business Journal. For co-founder and CEO Mark Frank, the decision was about accelerating the company’s path toward profitability amid tough economic conditions.
“SonderMind’s mission to increase access, expand utilization and improve clinical outcomes in mental health is always our top priority,” Frank explained. “Given the current economic conditions, we made the decision to accelerate our path towards profitability, in order to ensure we can remain independent and continue delivering high quality, technology-assisted mental health care.”
The timing of the layoffs is notable, as it comes shortly after SonderMind acquired Total Brain, a mental health management app. Founded in 2014, SonderMind has attracted significant investment, including a $150 million Series C round in 2021, bringing its total raise to $183 million.
SonderMind has also been praised for how it handled the layoffs. Impacted employees were offered seven weeks of severance plus two additional weeks for every six months of service, as well as three months of COBRA health care premium coverage. While painful, these Behavioral Health Startup Layoffs reflect the company’s attempt to balance employee support with long-term financial discipline.
Eleanor Health Scales Back After Series C
Lastly, Eleanor Health, an addiction treatment provider, has reportedly cut 18% to 20% of its workforce. While the company has not confirmed the exact figures, multiple sources told Behavioral Health Business that a significant portion of its staff was affected.
Eleanor Health, based in Waltham, Massachusetts, takes a population health approach to substance use disorder (SUD) treatment. Its services include medication-assisted treatment (MAT), psychiatry, therapy, and coaching, positioning it as a comprehensive care provider.
The layoffs came less than a year after the company raised $50 million in a Series C round, bringing its total fundraising to about $82 million. The move demonstrates that even well-funded providers are not immune from the financial pressures driving Behavioral Health Startup Layoffs.
A Turning Point for Behavioral Health Startups
The simultaneous staff reductions at Foresight, Headspace, SonderMind, and Eleanor Health mark a turning point for the behavioral health sector. These companies were once heralded as disruptors, offering scalable solutions to America’s mental health and addiction crises. They attracted huge amounts of venture capital, expanded aggressively, and promised to make care more accessible.
Yet the reality of today’s economy means growth at all costs is no longer an option. Instead, companies are focusing on capital efficiency, streamlined operations, and sustainable growth models. Technology—once seen as the primary driver of expansion—is now being leveraged to replace manual processes and reduce overhead.
Despite the layoffs, demand for behavioral health services remains strong. The U.S. continues to face unprecedented levels of mental health challenges, driven by pandemic aftershocks, economic stress, and growing recognition of conditions like anxiety, depression, and substance use disorders. For startups that can balance mission-driven care with operational discipline, there is still enormous opportunity ahead.
The question now is which organizations will adapt successfully. Behavioral Health Startup Layoffs may be painful in the short term, but they could also reshape the sector into one that is leaner, more resilient, and better prepared for the future.
