Turning Meditation into a Billion-Dollar Product

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Good morning! It's Friday, September 8th. Interest in mental health and meditation has skyrocketed in recent years, and few companies have profited off of it like Headspace. Let’s break down the company’s $3B business model!

THE FEATURE

Turning Meditation into a Billion-Dollar Product

We all know stories of entrepreneurs like Steve Jobs and Mark Zuckerberg who dropped out of college to pursue an industry-disrupting idea. Andy Puddicombe dropped out of college for different reasons, but it still led to a billion-dollar business.

After a series of tragedies in which his sister and two of his friends died, Andy left college and headed to Nepal where he lived as a Buddhist monk for ten years.

When he returned to the Western World, Andy created Headspace, a guided meditation platform recently valued at $3B!

So, What’s the Business?

In 2005, Andy began a private meditation practice that taught business professionals how to harness the power of mindfulness.

Through this private practice, Andy met Rich Pierson, an advertising agency executive with a grander vision for the meditation guru. With Andy’s meditation knowledge and Pierson’s business acumen, the two started Headspace in 2010.

The duo first set out with an event business where they hosted meditation workshops, but it failed to generate a profit and they were down to their $50k. Their luck turned around when an event attendee suggested they create an application and charge users a subscription fee.

In another stroke of luck, Rich found a developer who resonated with Headspace’s mission and created its website and application for a 90% discount. Rich and Andy also secured an advertising slot in Britain’s major publication The Guardian, and within a month, generated $40K (more than they made in the previous 18 months).

As of 2021, the Headspace app was downloaded by 70M users and has 2M paying subscribers. The company has seen meteoric growth, going from a $320M valuation in 2018 to a $3B valuation this year with an expected annual revenue of $100M+.

Revenue Streams

Headspace’s new wave of growth is due to the company diversifying into new products and consumer groups.

• Headspace Subscriptions: Unlimited access to guided meditations for $69.99 a year or $12.99 monthly

• Business-to-Business Program: Companies like Adobe, Spotify, and Airbnb are members of Headspace’s B2B program which provides employees with wellness resources, virtual events, and counseling.

• Partnership Deals: Headspace has served as a meditation content producer for companies ranging from Netflix to Hinge. They’ve also released mindfulness videos for brands like Sesame Street and Barbie.

• Headspace Health: This is a digital health subsidiary of Headspace that seeks to combine telehealth with meditation practices. At this time, Headspace Health is still waiting for FDA approval.

How They Win

Headspace’s 2M subscriber base is the company’s foundation. Their wide selection of meditation guides encourages users to engage with the platform not just daily, but multiple times a day.

When signing up for Headspace, users are asked to assess things like their stress levels, goals, and meditation experience. After the survey, users are given a daily guide with several time slots for specific types of guided meditations.

With meditation for waking up, exercising, reducing stress, and going to sleep, many subscribers use the platform throughout the day.

So, winning is simple for Headspace– they created a product that millions of people use daily to improve the quality of their lives.