The Future of Mental Healthcare with D2C Pioneer, Andy Dunn

Dunn co-founded Bonobos in 2007 and served as the company’s CEO for its first ten years, pioneering the digitally native brand movement. Bonobos was the first American brand launched to scale using e-commerce. The company’s inventory-free store model, called guideshops, redefined what an offline retail experience can be in the digital era. A decade after its founding, Walmart acquired Bonobos for $310 million.

In 2022, Dunn published a memoir lifting the veil on the mental health demons he’d privately battled while building Bonobos. Burn Rate: Launching a Startup and Losing My Mind chronicles his journey at the intersection of entrepreneurship and bipolar disorder. Published by Penguin Random House, the book was named one of the most anticipated books of the year by Forbes and was an Amazon Editor’s Choice in 2022.

As an angel investor and a founder of Red Swan, a seed stage venture capital fund, Dunn has backed over 100 startups, including Warby Parker, Coinbase and Hinge. He also chairs the board of Monica + Andy, an organic baby apparel brand and serves on the board of RaisedBy.Us, a social giving not-for-profit. Dunn’s latest venture is called Pie. Currently in beta, the mantra of the company is “more social, less media.”

Dunn received his B.A. at Northwestern University and M.B.A. from the Stanford Graduate School of Business. He lives between Chicago and Rio de Janeiro with his wife and their son. He is a Cubs fan.

Sohum: Looking back at the past year, what are your top three takeaways on the state of technology, healthcare and mental health for 2023?

Andy: On mental health first, there's an alignment that this is a nonpartisan issue. The states of both North Carolina and New York brought billion dollar mental health packages to the table. Obviously the politics of those two states are different, and that's why I'm so optimistic about mental health. It reminds me a bit of other social justice movements that at some point became nonpartisan, like marriage equality. In a lot of ways, the starting gun for that was an article by Andrew Sullivan called The Conservative Case for Gay Marriage. It was a contrarian framing at the time, and it took years to become the law of the land. Folks realized that every family faces discrimination if gay individuals can't get married. And I think mental health is the same way: it touches every family and every individual.

In technology, this was the year of AI. I got a chance to do a TED talk this past year, and it felt like AI was the big new thing happening in our society. The TED conference did a good job of showcasing everything from the ways that AI could be an equalizing force in public education to everyone in the audience tripping out when there was a live demonstration of a deep fake. The power and the potential, both negative and positive, of that technology, was a big part of the conversation. In a way, I'm not of the belief that this will be a net negative for economic mobility. And I know there's a great counterargument to that, but I feel this is an opportunity. And then I think it's the calm before the storm politically, right? That it was a year of relative domestic stability, even as we saw continued upheaval geopolitically.

The Rise of Bonobos

Sohum: In 2007, Bonobos was one of the first market entrants, spurring the D2C retail and fashion industry. What did you see in the market that others didn't, and how did you get distribution to make the model work?

Andy: I like the saying, ‘The future is here, it's just not evenly distributed.’ If you want to build the future, you don't need to look to the future. You just need to notice something that's in the corner of the present. For us in 2007, it was this company, Zappos, that was selling shoes. There was a narrative 17 years ago that soft goods would never move to e-commerce because you need to try the shoes on, you need to try the pants on. And here you had this company that was growing really quickly, and Sequoia had just led a big investment round. Turns out you can sell a lot of shoes online from other people's brands if you offer great return policies and free shipping both ways.

I had a friend at school who was selling men's pants out of a couple of Trader Joe's bags, and it became a conversation between the two of us that if people can sell existing brand’s soft goods, online apparel, footwear, accessories, it should stand to reason that brands could be built online as well. And that attracted me as a 28 year old in Silicon Valley in 2007, because it was the rise of the consumer Internet. Facebook was a few years old, Twitter was a few years old. Google supposedly overpaid for YouTube. Apple was working on something, a new phone, they called it. It was an amazing moment. And I thought, ‘What if retail is about to have a consumer Internet moment, too? Can we take my housemate’s better fitting pants and turn that into a new kind of brand?’

D2C Healthcare

Sohum: Given healthcare's complex payment models and cash flows, D2C Healthcare is still relatively nascent. Are there any learnings from D2C retail that you would like to see in the healthcare shopping experience?

Andy: The theory was that by going around the traditional gatekeepers of distribution, new economic arrangements would be possible where gatekeepers would capture less, leaving more savings for consumers, and for D2C brands to build profitable models.

But it turns out that digital distribution – at least with retail – is far more consolidated than any physical landlord could dream of. The digital highway is effectively controlled by four or five companies between Meta, Google, Apple and Amazon. So we have these cartels, really, that control the distribution for anything you want to build D2C. And they don’t charge 10% of sales the way that a landlord might, but 20 or 30 or 40 percent. That's why we've seen D2C brands in the public markets fail to make money. The only way to make money, in my experience, is to leverage the power of legacy distribution too, which in the world of retail parlance is wholesale. There are some formidable legacy distribution channels that know how to pay on time and take care of the customer.

As it applies to healthcare, it's the same story with proprietary relationships or new ideas about how to leverage enterprise relationships, whether with payers or healthcare providers. It's a dizzying ecosystem, but without those kinds of partnerships and collaborations, the pure D2C model suffers from the same challenges.

Life with Bipolar Disorder

Sohum: In your book, Burn Rate, you openly shared your history managing mental health and bipolar disorder. Walk me through the journey of identifying your condition, experiencing symptoms, getting diagnosed, receiving care, and successfully treating it.

Andy: I was diagnosed with bipolar I when I was 20. I was more or less immediately in denial of that diagnosis, as were my family and friends. It sounded too terrifying to process the possibility of becoming manic again. Mania is a form of psychosis filled with delusions of grandeur, all kinds of problematic ways that one departs from reality: stopping eating, stopping drinking, flight of ideas, racing speech, decreased need for sleep, high risk behaviors. It's not a good thing. And when I got diagnosed, I learned that could come back. It could come back in two weeks, or it could be 20 years. That's on the high side, the manic side.

And then on the low side, what I learned was that the suicide attempt rate over a lifetime for Bipolar I is 60% and the suicide rate is 19%. When you're 20 years old and you learn there's a one in five chance you're going to end your own life, it's a hard thing to take on, so I didn't take it on. I decided that it didn't happen to me. What happened was I'd used mushrooms a few weeks earlier, and that must have been the reason for it, right? And maybe there was some intersectionality between the drug use and the mental health condition that arose, but that doesn't mean that the diagnosis was inaccurate. It just means that there was a precipitating factor that may or may not have contributed to what happened.

What followed was 16 years of being in denial that this issue was governing a lot of my mood. Bipolar is fundamentally a disorder of mood, and if it's unmedicated and untreated, you ride a roller coaster. At some point, I started a company, which, as we all know, is a roller coaster. So the job became a cloak for the condition at times, as I dealt with periods of productive hypomania. It’s like being psychotic, but just shy of describing an entrepreneur having a good day. And then the depressive flip side of it was easy to say, oh, this is my job, that’s the cause of these mood swings. The truth is, it was both. The job, in fact, is a roller coaster.

An underlying mood condition can also amplify the highs and the lows. Building a company, I was going high and going low, and it came to a head. Psychosis, a full blown manic episode where I was hospitalized again, came back in 2016. At that point, I'd been building Bonobos for nine years. We had several hundred employees. We'd raised over 100 million in capital, and I ended up in the psychiatric ward at Bellevue Hospital in New York City for a week. I was discharged in good health and ready to really dive into a regimen of care. Discharged, unfortunately, straight into handcuffs. Charged with felony and misdemeanor assault for an episode of violence that I didn't even remember during the psychosis.

And thus began the worst six months of my life. Was I going to lose my job? Was I going to lose the woman I'd fallen in love with? Was I going to get healthy again? When was I going to find a desire to live again? It was a bad time. And somehow, some way, I got through it, got a great doctor, got on a medication regimen that worked, rebuilt my relationship on the love and acceptance of my now wife. My board stuck by me, the senior executive team stuck by me. And then next year was amazing: got married, tenure anniversary of the company, sold the business for $300 million, Cubs won the World Series for the first time in 108 years. It was like everything was magic.

The previous year had been a floating hell, and almost no one knew, maybe two dozen people knew the real story of what had happened. We had a huge wedding, maybe 400 people. And I remember thinking, ‘Wow, 5% of this room knows what’s actually gone down in our lives in the last year.’ That led to the decision to tell the real story and write Burn Rate. And that itself has been an amazing journey to expunge the shame that comes with mental health diagnoses. This idea that one is bipolar is as ludicrous as saying that someone is cancer. No one is cancer, they have cancer. No one is bipolar. We have it.

Sohum: You mentioned you were lucky to find this world class doctor. How was it navigating the industry at the time and finding the care that you needed? How did you go about it? What were the challenges?

Andy: My mom found the doctor. I don't know that someone who's experiencing an acute mental health crisis is well positioned to find the right care provider. And the challenges with both finding and affording great care are a huge barrier to good mental health outcomes. Even now, my psychiatrist's base rate is $1,100 for 45 minutes. So it's like having a $120,000 a year employee to see him twice a week, which is my regimen, and that's absurd.

So we've got work to do, because not everyone has a mom like I do who moved into a hotel room with me after I was discharged and called 100 doctors and got the appointments. And certainly not everyone, virtually no one, can pay $120,000 a year for a psychiatrist. I mean, it's ludicrous. So we've got to increase access and affordability. And I think we can do it. Companies are doing more, innovation is happening. One-hundred million dollars went into mental health technology for venture capital seven years ago, and now it’s a multiple of that.

Virtual Mental Healthcare

Sohum: Over the past few years, the mental health virtual care model has exploded. Historically, access via insurance availability and reach has limited behavioral health care. How do you think telehealth and virtual care models are redefining the behavioral health space?

Andy: It seems like buying a latte at Starbucks: costs more money in New York City than it does in Topeka because the cost of labor, leases, and economic means differ. So it stands to reason that mental health care providers are geographically distributed. It seems there's opportunity from a price arbitrage standpoint to create more affordability and access.

Right Care at the Right Time

Sohum: Speaking from your experience as a patient, what do you think needs to be done to improve the patient experience overall in finding the right care at the right time? What would you want as a patient? Also, how does that compare with what you would want as a technologist or innovator?

Andy: One thing that has been helpful for me is having a psychiatrist who also does psychotherapy, that way there aren’t two humans I need to go to every week for therapy and medication. And I asked my psychiatrist, ‘Why are there two different specializations for what feels like a powerful bundle?’ And he was saying it's sort of a dying breed, a bit of a dinosaur thing.

There's one company that I became an angel investor in because they've figured out how to get patients prescriptions for antidepressants through nurse practitioners in certain states, and obviously, suicidal ideation frequently correlates with depression. It doesn't make sense to have a long wait for antidepressants, if that's the right thing for the patient. So it seems like there are some big problems to tackle around the nature of what mental health care provision looks like, and I'm hopeful that we can tackle some of these problems using technology.

Importance of Mental Health

Sohum: The health insurance sector consistently has a low NPS. What's your call to action to payers on how to provide mental health care to members, especially when some claim it's hard to track improvement in outcomes? You mentioned paying out of pocket or having a large expense for your psychiatrist. How would you want your health insurance company or another healthcare organization to support you? 

Andy: I was on a flight last year with a health insurance executive and I asked him, ‘Why isn't there a separate product for mental health insurance the way there is for vision and dental?’ He gave me a sense for the challenges and the cultural inertia against it. And then I was fired up – but he never emailed me back and I took it as a metaphor for the problem.

We need to try to reframe the idea with corporations that investing in mental health care is a profit center and not a cost center. Make it in shareholders interest to invest in the mental health care of their workers because it will increase their productivity. Fewer days missed from work and then an increase in the employee retention because they're able to balance the challenges of work along with mental health. And if needed, pressure is put on insurance companies from a reimbursement standpoint. I don't know where mental health care provision fits into the cost of care, but it’s got to change. My dream would be mental health insurance that's separate from physical health insurance. Or something more innovative, because what we currently have is not working for people.

Innovative Startups and VC

Sohum: You're extremely plugged into the venture ecosystem, investing in innovative startups. At Red Swan, what technology companies with a focus on healthcare are you most excited about, and are there any today that you would like to talk about? I'm also personally curious to learn a little bit more about your latest venture to tackle the loneliness epidemic with Pie.

Andy: My dad's been living with cancer for ten years. He's doing well from a lot of perspectives, even a decade into the journey. I got a chance to back an entrepreneur who was working on a digital health startup in the cancer space. For the first year or two, she went at it with a D2C approach, and at some point, the math didn't quite work. She ended up finding a strategic partner. A company came in and bought a large stake in the business, and now it's a different thing. We used to say when we launched a wholesale business selling pants at Nordstrom, it helps to have popular friends. It helps to have partners that already have huge customer bases or can help you access bigger pools. That learning seems to be rippling across the digital health investments that I've made in terms of Pie.

I think there is also a case that not every mental health challenge should be met with a mental health solution or healthcare solution. There are things we can be doing, products that we can be building that can positively affect our mental health without needing to be mental health products per se. Social media has, in a lot of ways, created and exacerbated some mental health challenges. And the answer to that, I don't think, is how do we build a better Twitter? But it might be, how do we build something new that is as addictive as Twitter or TikTok, but that addicts us to being together in real life with others? That’s what we're working on at Pie.

Our research has shown that the best way to form platonic friendships is through repeated interactions in a small group. In a world where work is going more remote and screen addiction is only growing, how do you get people together in small groups more? Our thesis is that the AI inflection point creates opportunities to take friction out of plan making experience. The biggest thing we're focusing on is inviting people to something for you so that you don't even have to send a text message. Once we sync contacts, all we need to know is that you want to go bowling on Thursday, or grab Mexican on Friday, or play pickleball on Sunday, or see a movie on Monday.

What’s Next in Tech for 2024?

Sohum: What are you most looking forward to for the rest of 2024? What are some of your predictions as it relates to health care and mental health?

Andy: Collaborating on protecting our polity from moving towards permanent minority rule. The challenges of deploying higher empathy collectively in our political discourse. A house divided cannot stand, and it is a mental health problem in a way, the polarization of our politics.

We all need to get more active. We don't feel like our politics are happening to us, but we have agency as citizens. We have to move past the idea that there are people we can't see eye to eye with to the extent that we can't even speak to them.

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