As Behavioral Health Startup Growth continues to be a top priority for many in the industry, companies often find themselves weighing three primary strategies: de novo (organic) growth, mergers and acquisitions (M&A), or forming new partnerships. While each of these strategies offers distinct advantages, they also come with their own set of challenges. The right path forward depends on a company’s long-term vision, available resources, and its ability to manage integration or sustain a high level of care as it grows.
The Path of Mergers & Acquisitions (M&A)
Mergers and acquisitions (M&A) have long been a popular growth strategy for many industries, including behavioral health. This approach allows companies to rapidly expand by acquiring existing businesses with new capabilities, clinicians, and client bases. For example, acquiring a competitor or a complementary service provider can offer a quick path to diversify services and increase market share. However, this strategy can also come with significant challenges, particularly when it comes to integration.
Integrating new companies means merging systems, cultures, and operational practices, which can be complicated and costly. Julia Bernstein, Chief Operations Officer at Brightside Health, shared her thoughts on this during the Behavioral Health Business’ INNOVATE event. Bernstein highlighted that while acquisitions can fuel Behavioral Health Startup Growth, they require a deep understanding of the organization’s existing strategy and a careful assessment of whether the acquisition truly aligns with long-term goals. “M&A is really hard to get right. I think it’s a good way of growing, especially if you’re able to really integrate that business and find a way for it to be truly additive,” she said. However, she cautioned, “it’s not the only way to scale.”
In March of 2024, Brightside Health made its first acquisition with the purchase of Lion Rock Recovery, a virtual addiction treatment provider. This acquisition allowed Brightside to broaden its service offerings, adding a virtual intensive outpatient program (IOP) that focuses on alcohol use disorder. Bernstein explained that this acquisition provided expertise and set the company up for future growth. However, she also emphasized the importance of making acquisitions only when they align with the company’s strategic goals, rather than pursuing them just to make headlines. She said, “We look at any acquisition through the lens of: Is this on our roadmap? Is this something where we want to buy the capability or the service line, or do we want to build it, or do we want to partner?”
M&A may indeed be an attractive option for companies looking to scale quickly, but it requires careful consideration and the ability to integrate new businesses effectively. It is not always the right fit for every organization, especially in a complex and fast-changing sector like behavioral health.
The Path of Organic Growth
On the opposite end of the spectrum is organic growth, or the process of expanding from within by building on the company’s existing strengths, services, and capabilities. Organic growth can be a slower and more deliberate path, but it often results in a more sustainable business model. Unlike M&A, it avoids the complications of integrating new businesses and cultures. However, it comes with its own set of challenges, particularly in terms of market entry and scaling service offerings.
For some startups, especially those focused on maintaining high quality standards, organic growth is the preferred approach. Alex Katz, CEO of Two Chairs, a San Francisco-based hybrid mental health startup, shared insights on why his company has chosen to focus exclusively on organic growth. Katz explained that while acquisitions can sometimes make sense if they bring in complementary capabilities, the landscape of the behavioral health industry is shifting toward a focus on quality, value, and cost. He expressed skepticism about the roll-up model, where companies simply acquire other providers that offer similar services. “The median quality of care in our industry is not very good,” Katz noted. “If all you’re doing is aggregating a lot of folks below median quality or at median quality, you’re not doing very much to fundamentally change the industry and push it forward.”
Two Chairs’ organic growth strategy involves hiring full-time, W2 employees and investing heavily in training providers in evidence-based practices and measurement-based care. By growing from within, the company can control the quality of care it provides, ensuring that its clinicians have the right tools, support, and training to deliver the highest standards of service. “If we’re going to change the ways in this country, we’ve got to hire people, on a W2, largely full-time. We’ve got to train them. We’ve got to performance-manage them, we’ve got to coach them,” Katz said. This approach allows Two Chairs to maintain a high level of care while expanding its footprint in a way that aligns with its commitment to quality and clinical excellence.
While organic growth may be slower than acquisitions, it can provide more control over the company’s direction and the quality of its services. For many startups, especially those in the behavioral health sector, ensuring consistent and high-quality care is paramount, and organic growth allows for a more focused, intentional path to scaling. Maintaining a clear focus on Behavioral Health Startup Growth allows companies to develop more long-term, sustainable strategies.
The Path of Partnerships
Partnerships represent a middle ground between M&A and organic growth, offering companies the opportunity to expand without the complexities of full-scale mergers or acquisitions. Forming partnerships can help behavioral health organizations access new patient populations, collaborate on service offerings, and strengthen their market position, all while keeping the company’s operations intact. This strategy can be particularly helpful in a sector where collaboration and referrals between service providers are essential for patient care continuity.
Matt Miller, Chief Growth and Development Officer at Connections Health Solutions, highlighted how partnerships have been instrumental in his company’s growth. Connections Health Solutions, a behavioral health urgent care provider, has seen significant organic growth, increasing by 40% in the last year. However, Miller emphasized that partnerships have been a key component of this success. “What we have found is, as we have built the right care collaboration relationships with health systems and primary care providers, care assets that health plans own, etc., the patient referrals follow,” he said.
Miller also pointed out that while M&A isn’t currently on the table for Connections Health Solutions, partnerships remain a priority, especially as the company looks to expand its service offerings and move into value-based care arrangements. “Partnerships are something we’re certainly interested in, especially as we can get into some value-based arrangements through a partnership,” he said. Through partnerships, Connections Health Solutions has been able to access new patient referrals and collaborate on services that complement its existing offerings, ultimately strengthening its market position.
Choosing the Right Path
When it comes to scaling, Behavioral Health Startup Growth can be achieved in various ways, each with its own set of advantages and challenges. M&A can provide a rapid path to growth and new capabilities but requires significant integration effort. Organic growth offers more control and the ability to maintain high-quality care but can be a slower process. Partnerships offer flexibility and the potential for collaboration, but they don’t always lead to market dominance.
The right path depends on a company’s resources, strategic vision, and long-term goals. Behavioral Health Startup Growth is a careful balance of thoughtful decision-making, a focus on patient care, and a solid understanding of market trends. Behavioral health companies must carefully consider each option and evaluate how it fits into their broader strategy for growth and sustainability. Whether opting for M&A, organic growth, or partnerships, success will depend on maintaining a focus on quality care, patient outcomes, and operational efficiency as the company scales in an ever-evolving market.
Behavioral Health Startup Growth is ultimately about aligning growth strategies with the core mission and values of the organization, ensuring that the path taken supports long-term success.
