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In our view, the biggest moats in traditional virtual health are scale and channel partnerships. These moats are greatly eroded in the DTC channel, where companies can bypass traditional healthcare gate-keepers (managed care organizations, employers, health systems). The moat, then, becomes two-fold and more tenuous: 1) brand recognitions and 2) user experience.

The cost of starting a DTC virtual health company has fallen dramatically as a slew of "picks and shovels" companies have come to market to efficiently provide the tech and distribution backbone necessary to build a DTC virtual health platform at scale. The DTC virtual health space is already very competitive with Ro, Lemonaid, and GoodRx/HeyDoctor presenting formidable threats to HIMS. Additionally, there are a multitude of specialty DTC virtual health companies which may have better branding/loyalty for a specific condition.