Meet Headspace: The company that was founded by a monk.

Hey Everyone - Harry here 👋

Welcome to Issue #14 of Deep Dive with Inquisition. In this issue, we will cover the story of Headspace, one of the most favored meditation app that is valued at $3 Billion. We’ll explore everything from its founding story to the strategies that it used to become the company it is today.

Early Days of Headspace

Headspace is a healthcare company specializing in mental health. Its services are available through its app, Headspace, which offers guided meditation, wellness sessions, online coaching, and therapy services. Based in Santa Monica, California, Headspace was founded in 2010 by Andy Puddicombe and Richard Pierson.

Overview of the Global Wellness and Meditation Market:

1. According to the Global Wellness Institute, the Global Wellness Economy was valued at $5.6 trillion in 2022, 14% higher than in 2019.

2. The Global Wellness Market is predicted to grow 8.6% annually, with the market expected to reach $8.6 trillion by 2027.

3. Among the 11 different sectors in the Wellness Market, the Mental Wellness market represents $181 billion.

4. The global revenue in the meditation apps market is projected to reach $5.11 billion by 2024.

5. Annual revenue growth for meditation apps between 2024 and 2027 is expected to be 7.72%, resulting in a market value of $7.41 billion by 2029.

6. The average revenue per user (ARPU) is anticipated to be $48.69.

The Rise of Headspace - How it was First Started:

Before founding Headspace, Andy Puddicombe and Richard Pierson met through Andy’s meditation and mindfulness sessions, which he offered at his private clinic. At that time, Richard was an employee at a marketing agency, struggling with burnout and social anxiety. After his first session with Andy, Richard experienced the benefits of meditation firsthand. The more sessions Richard had, the more inspired he became to share these benefits with others. This inspiration led Richard to persuade Andy to start a company focused on spreading meditation and wellness to the general public.

Headspace initially began as an event company that hosted mindfulness talks by Andy Puddicombe, who was a monk providing public and private meditation sessions in and around London. The goal was to make "meditation and mindfulness accessible, relevant, and beneficial to as many people as possible." After hosting a series of events—ranging from individual mindfulness sessions to group meditations and talks—the founders decided to develop and launch a meditation platform named “Headspace.” The duo raised initial funding from the profits of their event business, as well as from friends and family, to further promote meditation and wellness.

The platform offered simple yet effective 10-minute guided meditations for those wanting to learn and integrate meditation into their daily lives. This approach was successful in dispelling the notion that meditation was difficult and time-consuming. Headspace changed this perception by encouraging users to engage in brief, guided sessions to manage stress, control emotions, and more, while providing much of the content for free. The lower entry barrier made meditation more accessible.

The rise of Headspace was fueled by the existing loyal fanbase from Andy’s sessions and the increase in smartphone usage (2012), which helped the platform gain traction and grow.

How did Headspace Became One of the Biggest and Fastest-Growing Meditation Platform for Meditation?

Having expertise in a specific field is very helpful when launching a startup. Andy had expertise in meditation due to his journey as a Buddhist monk. Andy’s experience as a monk shaped and provided content for Headspace and influenced its narrative. Undoubtedly Andy being a former Buddhist monk who also runs his own private practice, publishes books, and appears in various media outlets as an expert in meditation and mindfulness helped build trust in Headspace’s users and investors.

Alongside him, Richard’s expertise in marketing, thanks to his experience working at a marketing agency that oversaw numerous projects, contributed to many of the decisions he made during his time at Headspace. The founders' previous experience before starting Headspace contributed to the company’s success thanks to their proven expertise, which garnered trust from users and shaped the company’s narrative.

Apart from the founders' backgrounds and expertise in meditation and the business world, Headspace focused on making meditation accessible. According to Pew Research on Mobile Phone Usage, 45% of Americans had smartphones by the end of 2012, while nine-in-ten owned a smartphone and 97% of the American population owned a cell phone of some kind. Research shows that in 2012, guided meditation sessions lasting 10 to 60 minutes had not yet become mainstream due to the maturation of platforms like the App Store and Play Store. However, this changed when Headspace started uploading its meditation sessions to its website in January 2012 and later to their app, providing a unique solution for those who wanted guided meditation without visiting a practice or yoga center in person.

In addition to making meditation accessible online, the founders heavily focused on user experience by emphasizing animation-based video and content designs to make meditation concepts and methods easy to understand and visually engaging. By providing bite-sized content over 10 days for free, Headspace also allowed users to become more engaged and explore meditation. Lastly, the continuous content offerings for different purposes, such as “Calming Everyday Anxiety” or “For Challenging Times,” have significantly contributed to the platform’s growth.

By 2014, Headspace had reached over 1 million total downloads globally with the launch of Version 2 of the Headspace app, which focused on three key areas and introduced a paid subscription plan:

• Health

• Performance

• Relationships

Since then, the company has achieved 100 million downloads, been used in 200 countries and regions around the world, and touched over 100 million lives, with a valuation of $3 billion after a merger and acquisition with another healthcare company, Ginger. Headspace has raised $178 million in total since its founding.

Below are the strategies that contributed to Headspace’s Growth:

1. Make sure to remember that you can always create your own market:

   →  When Headspace’s content was first launched, the world was in a phase of smartphone adoption, and platforms such as the App Store and Google Play Store had a limited number of meditation and wellness apps. Being a pioneer in the mediation and wellness app space not only allowed Headspaceto become a prominent leader but also create their own market and further expand it. Thanks to this continuous growth, Headspace was able to witness other players entering the market and the mental health app sector growing over the years. Having competition in a newly created market fosters innovation and provides a better overall experience for customers, as companies need to continuously improve to retain existing users and attract new ones.

2. Having a solid track record is a plus:

   → As discussed above, Andy was a monk who had been trained for 10 years and ran his own meditation and wellness practice before starting Headspace. Andy has published three books on meditation and wellness and has been invited to various radio shows, newspaper columns, and more. All of these activities helped Andy build trust with potential users and establish credibility for the online meditation service, Headspace. Since Andy was recognized as an expert in this field due to his track record, it made early user acquisition and partnerships easier compared to those without a successful track record in the field. The lesson here is that having domain expertise when starting a business can be beneficial, just as it was for the founder's story of Wiz.

3. Having personalization can impact a lot to your startup’s success:

   → Headspace provides personalization by figuring out the needs and wants of its users through the onboarding session when they first sign up. Based on their answers, the platform recommended different types of content that fulfilled their desires, which allowed the company to further scale and retain its users. Since users were able to receive the support they needed and wanted from the vast database of content, the journey of every individual user became special.

4. The importance of having an great design matters more than ever: 

   → Just like the story of Airbnb, design matters more than ever. Especially when you are either entering a market as a new player or an existing player looking to further scale your numbers, design is crucial. Design not only provides a good first impression but also enhances the perceived value and the experience that your customers will get from your product.

5. Don’t focus on the quantity - focus on the quality of your content if you are an content - focused product:
    → Headspace can be identified as a company that is content-heavy due to its meditation and wellness guides, all categorized as content. However, one of the reasons Headspace was able to scale further is the continuous high-quality content it provided, whether on meditation or sleep.

6. Implement Gamification like Duolingo:

   → Headspace’s meditation sessions are animated with beautiful designs. In fact, the company has also implemented streaks, similar to Duolingo. The implementation of streaks allows users to build daily meditation and other wellness activity habits, which not only supports mental health but also aligns with the company’s goal: providing every person access to lifelong mental health support.

7. If you are an content - focused product, put real effort and time on Content Marketing:

   → Headspace has invested a lot of its resources in content marketing. The content marketing Headspace has done include uploading guided meditation sessions, podcasts, and bite-sized informational content from Headspace-associated therapists on their official website, YouTube channel, and various social media platforms like Instagram. Consistently creating value-driven content and distributing it on various platforms, not only facilitates user acquisition but also builds the Headspace community, which is one of the most crucial things every company needs to do in the long run.

8. Explore partnerships as early as possible:

   →Headspace has formed partnerships from Day 1. In 2011, the company managed to partner with Virgin Atlantic and provided an in-flight Headspace channel and audio exercises for passengers to sleep, relax, etc. By forming partnerships with different companies from various industries, it built its reputation and provided a sample experience beforehand—allowing those who enjoyed the experience to research and explore the space of meditation and wellness, where Headspace is a leader.

Challenges for Headspace:

1. Navigating through the increasing competition:

   → It is an understatement to say that the healthcare industry is experiencing rapid growth by leveraging technology. Technology has entirely changed the landscape of the healthcare industry, making many areas, such as mental healthcare, more accessible and revolutionized. Individuals now have similar or even the same level of access as they would in person, without the need to spend time on things like commuting. As technological advancements continue, particularly in the mental health sector, competition will intensify, especially after the acquisition of Ginger (an on-demand mental healthcare company). It will be crucial for Headspace to navigate this competition and continue to provide value to its users.

2. Continuous High - Quality Content Production:

   → Developing high-quality content will always be a challenge. From content planning to recording various types of content, it is crucial for Headspace to create and continuously improve its content to attract new users and retain existing ones.

Future of Headspace:

1. Expansion in its product offerings:

   → After the M&A deal with Ginger in 2021, Headspace Healthcare has now been combined with Headspace, leaving the company with a single brand known as “Headspace.” The company not only provides meditation and wellness-related content but has also expanded into 1:1 coaching sessions via text with verified licensed therapists. Additionally, it appears that Headspace is preparing to further expand into online therapy sessions, which can be seen as a move toward product expansion, likely a focus for Headspace.

2. Strengthening in the B2B Market:

   → Headspace has rapidly expanded and strengthened its presence in the B2B market by introducing its own Employee Assistance Program (EAP), known as “Headspace EAP.” Building on its strong reputation for meditation and wellness content, the company has successfully ventured into on-demand therapy and coaching sessions. This strategic expansion allows Headspace to broaden its focus from B2C to B2B, positioning itself as a modern alternative to traditional EAPs. Moving forward, the company is likely to concentrate on further enhancing its B2B offerings and securing more corporate clients.

Key Takeaways from the Story of Headspace:

Anyone from anywhere with any kind of background can create a startup and make an impact. One key takeaway from the story of Headspace is that even if the market isn’t fully developed, it's worth taking risks to create your own niche. When Headspace first introduced the concept of “online meditation,” only 45% of Americans had smartphones. As the world was adapting to the smartphone revolution, the founders of Headspace went beyond meditation and pioneered a new field in “mental healthcare,” which was uncommon at the time. Their product became one of the first on the App Store focused on meditation and wellness.

Also, when entering or creating an entirely new concept or market, having your product identified as a tool created by an expert is beneficial. For Headspace, Andy Puddicombe, the content lead, was a former monk specializing in meditation and wellness with a strong track record, including publishing various books and resources on related topics. Andy's credentials significantly contributed to the early growth of Headspace, attracting millions of users through credible content creation.

As time passes, the implementation of personalization and gamification will become increasingly crucial for content-heavy platforms. Companies that guide users through a journey, rather than offering a direct, immediate outcome, will require more in-depth personalization and gamification. For example, self-care through meditation and wellness practices is a long-term investment that requires users to put in effort, time, and even money. This is why companies like Headspace have heavily invested in personalization and gamification, allowing users to embark on a journey rather than expecting quick results. Breaking down large content into small, manageable pieces and providing personalized onboarding and notifications for each user can be confidently stated as a key factor in the growth of platforms like Headspace and Duolingo.

Below are the key - strategies that Headspace used to become the company it is today:

1. Nothing is impossible—whether it’s creating your own market or entering a market with major existing competitors.

   → Headspace was one of the few companies in the early 2012s focused on mental health applications. Headspace, being one of the world’s first meditation apps, proves that it is always possible to create your own market or enter a market with major existing competitors and still succeed.

2. You need to continuously showcase and distribute your product:

   → No matter how good your product is in terms of performance, design, and/or the problem it solves, you need to showcase your work to the public and distribute it. Due to the increase in competitors offering similar products/services, it is crucial not only to showcase but also to distribute it to other platforms where your target users are active. For Headspace, since the target users are those who need a platform that fulfills needs and wants related to mental health (e.g., meditation, wellness, therapy, overcoming specific challenges through meditation), the company has focused on providing content on platforms such as Instagram and YouTube to allow users to experience it firsthand before paying to access the various content offerings in the app.

3. Having good design is a must:

   → The rise of competition makes it more challenging for startups to succeed due to the wide variety of options users can choose from to fulfill their needs and wants. This is especially true for platforms like Headspace, where the entry barrier is lower compared to other resource-intensive industries (e.g., capital, labor, research, etc.). Aspects such as design will matter more, which is why having good design is a must—an area where Headspace excels.

4. Implement personalization and gamification if you are a content-heavy startup.

   → One of the things Headspace excels at is providing content that users need and want, along with the experience of having personalized 1:1 support. For example, meditation is usually a general activity that people do; however, on Headspace, there are different types of guided meditation sessions for various purposes, such as Anxiety, Stress, Focus, waking up, and more. During the onboarding process, users are required to answer questions that reveal various aspects about them, from what they hope to achieve with the app to the areas where they need the most support. These kinds of experiences, along with the implementation of gamification (e.g., Streaks, game-like UI/UX, levels, etc.), contribute to personalization and increase user retention, which has had a significant impact on the success of Headspace.

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Thank you so much for reading!

-Harry