Melbourne brothers build a $77m business from hypnotherapy apps

A Melbourne-based start-up that makes hypnotherapy apps is now valued at $US52 million ($77 million) after raising a $17.8 million series A round led by King River Capital, with investments from Tatterang’s Tenmile, Perennial Partners, and impact investors Giant Leap and Alberts.

Founded by brothers Alex and Chris Naoumidis in 2018 the medical technology start-up Mindset Health has created three hypnosis-based apps to manage irritable bowel syndrome, menopausal hot flushes, and to help people to quit smoking.

The brothers, who previously built dress-sharing app Covet, also attracted investment from Matt Mullenweg, the co-founder of WordPress, Peter Cameron, the academic director of The Alfred Emergency and Trauma Centre, Linktree founders Alex and Anthony Zaccaria and Nick Humphreys, and Mr Yum founders Kim Teo and Adrian Osman.

Alex Naoumidis told The Australian Financial Review Mindset Health had initially sought to raise $US10 million but banked $US12 million in the oversubscribed round, which lifted the company’s post-money valuation to $US52 million.

The company has 31,000 paid monthly subscribers across its products, and about 38 per cent are based in the US, which has been driven by patients and healthcare practitioners recommending the apps.

“What we’re seeing is hypnotherapy is gaining more adoption in specific verticals,” Mr Naoumidis said.

“Especially in IBS and smoking, there is a push and a pull from the market actually looking for products like this.”

The apps are designed to help users manage chronic conditions, using pre-recorded audio similar to meditation apps.

Its flagship product, Nerva, has 28,000 paying monthly users after launching in June 2019 and is based on research and content developed by gut-directed hypnotherapist Simone Peters, who has a PhD from Monash University.

Mr Naoumidis said Nerva had grown as doctors, dieticians, and gastroenterologists, recommended the app to patients and Mindset Health has established its brand by presenting its research at two of the largest gastroenterology conferences in the US last year.

The brothers previously raised $US5 million in 2021, and said the fresh funds will be used to expand its team of 27 and to launch new apps for conditions including anxiety and depression, sleep, and chronic pain.

Mindset Health has built a shared technical platform that underpins each app and partners with researchers – who collect a share of the app’s revenue – to develop the programs and content to target specific conditions.

For example, six months ago it launched Finito, a smoking cessation app, based on clinical research from Gary Elkins from Baylor University in Texas.

The funds will also be used to conduct further research, with Monash University currently conducting a randomised control trial of Nerva, on behalf of the company, to learn if hypnotherapy has better patient outcomes than educational content alone.

Mindset Health was helping patients “without the side effects, or the billion-dollar R&D price tag”, said King River Capital co-founder and partner Chris Barter.

Steve Burnell the executive chairman of Tenmile, Andrew Forrest’s health tech fund that has $250 million to deploy, said Mindset Health had gained a foothold within the healthcare sector.

“Mindset’s focus on evidence generation, user experience, and patient outcomes has driven significant organic referral volume and strong user retention, making them the partner of choice for healthcare providers and patients globally,” Dr Burnell said.