What Happened To Lantern & Why Did It Fail?

Lantern was a mental health startup that offered an app for self-evaluation and daily exercises to help users restructure negative thoughts. Despite raising $17 million and gaining initial traction, it shut down in 2018 due to failed acquisition deals and a challenging business model. Its technology now lives on through Spring Health.

What Was Lantern?

Lantern's main product was a behavioral health app offering self-evaluation assessments and daily exercises to help users restructure negative thoughts. Its unique value proposition included access to behavioral change coaches and a focus on meditation and mindfulness. Notably, Lantern raised $17 million in Series A funding and its technology now enhances Spring Health's platform.

What Happened to Lantern?

The story of Lantern's rise and fall is a compelling narrative of initial success, strategic missteps, and eventual decline:

• Initial Funding and Growth: Lantern raised $17 million in Series A funding in 2016, led by the University of Pittsburgh Medical Center (UPMC). The startup initially sold its product directly to insurers and through employers, gaining traction in the behavioral health market.
• Challenges with Business Model: Despite its innovative app and coaching services, Lantern struggled to align with traditional healthcare insurance companies. The lack of a reimbursement model for behavioral health and the high costs of sidestepping FDA regulations proved to be significant obstacles.
• Failed Acquisition Deals: Several acquisition deals fell through, leading to the decision to shut down operations in 2018. The company laid off most of its staff, retaining a small team to explore future possibilities.
• Technological Legacy: Lantern's technology found new life through a perpetual license agreement with Spring Health. This agreement allowed Lantern's CBT-based digital tools to be integrated into Spring Health's platform, ensuring that the technology continued to benefit users.
• Lessons Learned: Lantern's experience underscores the importance of a sustainable business model and clinical validation in the digital health space. Despite having a high-quality product, the inability to secure a viable business model led to its downfall.

When Did Lantern Shut Down?

Lantern shut down its commercial operations effective August 1, 2018. Despite initial success and substantial funding, the company faced significant challenges, including failed acquisition deals and difficulties aligning with traditional healthcare insurance companies.

Why Did Lantern Shut Down?

1. Failed Acquisition Deals:

   Lantern faced significant setbacks when several acquisition deals fell through, leading to its decision to shut down operations. Despite initial interest, potential buyers backed out, leaving Lantern without the necessary financial support to continue. This failure to secure a buyer was a critical blow to the company's survival.

2. Misjudged Market Timing:

   Lantern's CEO, Alejandro Foung, admitted that the company misjudged the time required to achieve sustainable revenue through traditional healthcare insurance companies. The slow pace of the healthcare industry made it difficult for Lantern to align its innovative app with existing reimbursement models, ultimately stalling its growth.

3. Lack of Reimbursement Model:

   The absence of a reimbursement model for behavioral health services was a significant challenge for Lantern. Without a clear path to insurance reimbursement, the company struggled to generate consistent revenue. This issue was compounded by the high costs associated with sidestepping FDA regulations.

4. Recruiting Trained Clinicians:

   Lantern faced difficulties in recruiting trained clinicians with experience in behavioral health. This challenge hindered the company's ability to scale its services effectively. The shortage of qualified professionals limited Lantern's capacity to meet the growing demand for mental health support.

5. High Operational Costs:

   Attempting to sidestep FDA regulations by going directly to employers and consumers proved to be an expensive mistake for Lantern. The high operational costs associated with this strategy drained resources and made it difficult for the company to maintain financial stability.

Lessons Learned from Lantern's Failure

• Validate Business Models: Ensure your business model is sustainable and aligns with industry standards to avoid financial instability.
• Understand Market Dynamics: Thoroughly research market timing and industry pace to better align your product with existing frameworks.
• Secure Reliable Funding: Diversify funding sources to mitigate risks associated with failed acquisition deals.
• Recruit Qualified Talent: Invest in hiring experienced professionals to scale services effectively and meet market demand.
• Manage Operational Costs: Carefully evaluate strategies to avoid high operational costs that can drain resources and hinder growth.
• Adapt to Regulatory Requirements: Develop a clear path to navigate regulatory landscapes, ensuring compliance without excessive costs.

We Shut Down Startups

Lantern's story is a stark reminder of how quickly a promising startup can face insurmountable challenges. If you're in a similar situation, book a demo with Sunset to see how we can help you navigate the complexities of winding down your business.

Sunset takes care of all the legal, tax, and operational burdens, allowing you to avoid penalties and reduce liabilities. Let us handle the tough parts so you can move on to your next venture with peace of mind.