At 31, Erica Johnson, a neuroscientist and engineer, had never been rich, and certainly not tech-unicorn, eff-you-money rich. At Stanford Medical School and University of California San Francisco, Johnson researched brain health and cognitive function, earning between $45,000 and $55,000 a year. Making big money would be great someday, sure, but it wasn’t what got her out of bed in the morning.

But then, in 2017, a friend from her women’s engineering group introduced her to Alyson Watson, an energetic aspiring tech founder gunning for a slot in Y Combinator, Silicon Valley’s premier startup incubator. With a background in sales, Watson needed a technical co-founder to complete her application, and she laid out her idea for Johnson: an app called Modern Health that would deliver digital mental health treatments and remote therapy sessions to employees.

The timing made sense. Corporations were increasingly looking to demonstrate more compassion for their employees’ mental well-being, and recent studies showed that treatment for common but often stigmatized disorders such as anxiety and depression could improve employee wellness and productivity.

Watson’s business vision dovetailed with Johnson’s research interests, and after a shotgun two-month courtship, Johnson said yes to becoming Watson’s co-founder. They were admitted to YC. When the $125,000 YC investment hit their First Republic Bank account, they took a screenshot and cheered. They were on their way.

To prepare for their three-month boot camp at YC, Watson and Johnson started reading then-president Sam Altman’s blog about startups. One piece of advice that registered: Co-founders must deeply nurture their relationship. (According to one oft-cited Harvard Business School study, two-thirds of startups fail due to co-founder conflict). The duo started weekly one-on-one syncs, sweated in the same SoulCycle classes, and devoured Blue Barn salads together. One morning, Watson, who took the CEO title, and Johnson, who was running product and engineering, woke up at 4:30 a.m. to bike up Hawk Hill just north of the Golden Gate Bridge. As the sun rose on the Marin Headlands, Johnson presented her new partner with homemade hot chocolate. Bliss.

Honeymoons, however, don’t last forever. Sometimes passion fizzles. Other times, the chemistry combusts spectacularly. In September 2019, two years after first meeting, Watson fired Johnson, a decision that eventually would unleash a Silicon Valley Stage 4 superspreader event, pulling in an array of boldface names, including former Twitter CEO Dick Costolo; seasoned board director and CEO Penny Herscher; Kleiner Perkins’ Mamoon Hamid; Wilson Sonsini’s David Berger; Alyson’s husband, Matt Watson, CEO of Origin; and Johnson’s husband, John Jersin, a former vice president at LinkedIn.

The enmity between the former co-founders has outlasted a Series D round that today values Modern Health at $1.17 billion. In spite of its unicorn status, Modern Health has become a cautionary tale for startup founders. Its story, much of it told here for the first time, is a minefield littered with charges of fraud, kickbacks, plagiarism, theft and racism on one side and accusations of incompetence, personal vengeance and corporate sabotage on the other. It offers a rare view inside a Silicon Valley startup that continued to raise hundreds of millions of dollars even as its founding partnership imploded.


A barrage of litigation has followed the crumbling of Watson and Johnson’s relationship.
Art by Haijin Park.
Indisputably, CEO Watson, whom even her detractors characterize as a talented and charismatic salesperson and marketer, has delivered tremendous investor returns. Under her leadership, the company has grown from around 20 employees to more than 300, and claims to have multiplied revenues by 24 times—all since Johnson was relieved of duty in 2019. The company now provides approximately 300 corporate clients with access to licensed therapists, coaches and a selection of meditations and mental exercise videos via smartphone.

Riding both the pandemic’s tsunami of psychiatric need and the continuing surge of capital pouring into the health-tech space, Modern Health is now one of the most highly valued startups in the digital mental health industry. It competes directly with Spring Health (valued at $2 billion), Ginger, which just finalized a merger with Headspace at a $3 billion valuation, and Lyra (valued at $4.6 billion), among many others. (There are now more than 20,000 apps in the digital mental health category on the App Store and Google Play.)

But even in the ferociously competitive world of digital mental health, the company has moved fast and broken things in ways that would raise eyebrows in any industry. In 2018, Matt Watson, Alyson’s then-boyfriend and future husband, who was an equity-holding adviser in the company, played the role of an effusive Modern Health customer in a cheesy TV news segment. (Matt Watson’s current company, Origin, a workforce money management platform, recently closed a $56 million Series B round led by Costolo.) In early decks presented to potential investors and clients, the company grossly overstated the size of its provider network, claiming it had enlisted just over 24,000 therapists and coaches when the real number was closer to 180. Team members in 2018 used a fake email address and company logo to solicit information from rivals. And then there are other matters, such as Ting Ting, the racist nickname both Watsons repeatedly used in reference to Johnson, who is Asian American.

Johnson first made troubling allegations about Watson and the company in San Francisco County Superior Court in November 2019 and then in an amendment seven months later, filing a wrongful termination suit with claims of retaliation and defamation. In the past few weeks, tensions have only escalated.  In October, nine days after Modern Health filed a countersuit disputing Johnson’s claims and attacking her character, Johnson took the additional step of filing a formal whistleblower complaint with the Securities and Exchange Commission, alleging fraud, kickbacks and self-dealing within the company. (The SEC has yet to rule on acceptance of the filing.)

Just days later, Modern Health’s summary judgment seeking to stop Johnson’s case from proceeding was slapped down, with the judge pointedly questioning the impartiality of Costolo (who had invested millions in Modern Health) and Herscher (a friend of the company’s Wilson Sonsini defense attorney) in their oversight of an internal investigation of Johnson’s charges.

Now new details are emerging about the company and its co-founders, many contained in emails, text messages and documents obtained by The Information and reported here for the first time. Many of the depictions and events contained within the dueling lawsuits were verified through interviews with current and former company executives, contractors and associates of the founders. Modern Health and its lawyer Orin Snyder continue to strenuously defend the company’s CEO, stating that they were forced to file a countersuit against Johnson and her husband Jersin, a onetime company adviser, to “publicly expose her wrongdoing, incompetence, and blatant lies.” Among the company’s claims are accusations that Johnson “never wrote a single line of code for the Company,” that she “conspired with her mother”—who was employed as a part-time bookkeeper—“to lock the Company out of its financial accounts,” and that after her termination Johnson “downloaded over 30 confidential and proprietary Company files, then lied about it to Company employees.” (Said Harmeet Dhillon, Johnson’s attorney, “Modern Health is fabricating a narrative.”)

Earlier this week, on Nov. 30, the judge assigned to the case allowed these counterclaims to proceed. The parties and their associates look to be locked in a legal battle for years to come, with no settlement in sight and potentially hundreds of millions of dollars on the line.


“We’re going to be a billion-dollar company!”

Alyson Watson often used that warrior cry to rally her troops. A prep-school jock from the Boston suburbs who played Division 1 lacrosse at Johns Hopkins University and later on the Israeli women’s national lacrosse team, Watson brought an athlete’s drive to win—even if that meant crossing some ethical boundaries.

On Feb. 6, 2018, Watson (then using her maiden name, Friedensohn) sent an email to Adrian Aoun, CEO of Forward, a network of technology-based storefront medical centers. In the short note, Watson, then in the Y Combinator program, thanked Aoun for his advice from a recent meeting where she had pitched Forward on using Modern Health’s services. And then she got to the point: “I would love to explore a formal advisory role with you. It goes without saying that you’d be a massive asset to the company. Looking forward to hearing your thoughts.”

She made a more precise ask a few hours later, clarifying in an email that she wanted Forward to commit to using Modern Health’s services. In return, she would promise Aoun “15 bps [basis points] of equity.” (A basis point refers to an increment of 0.01% of the company’s stock at the time.)

After some back-and-forth, Aoun wrote back four days later, suggesting he receive more basis points. He added, “I thought it over a little and i’m open to piloting Modern at Forward. But it can’t be tied to making me an advisor.…I don’t want the conflict.”

In the end, Aoun received 25 basis points, and Forward became a Modern Health client. Today Aoun’s personal share in Modern Health, even with dilution, is likely worth more than $2 million. Another executive, Ron Storn, chief people officer of packaging company Zume, who oversaw benefit decisions at the company, would also receive 15 basis points of equity as an adviser. Watson wrote an internal email the same day she wrote to Aoun, stating, “Ron, we will give 10-15 bps because he would be our first real customer and could bring us all future sales.” Zume became a Modern Health client, as did the next company where Storn would work, KeepTruckin. (Aoun did not respond to a request for comment. Storn emailed, “This is demonstrably false. My involvement as an advisor in Modern Health has never been incumbent on purchasing the product.”)

Today, those emails are among evidence that Johnson submitted in her whistleblower complaint alleging a pattern of “kickbacks,” initiated by Watson, that defrauded investors. A Modern Health spokesperson said in a statement, “It is very common for start-up companies to compensate early-stage advisors with equity. This is just another inflammatory allegation by Ms. Johnson that has no basis in reality.”

One month after Watson’s communication with Aoun, Watson and Johnson presented at Y Combinator’s Demo Day, a showcase for venture firms. A $2.26 million seed round led by venture firm Afore Capital closed soon after, and Modern Health became an immediate Silicon Valley darling. In the post-#MeToo environment, media and investors were drawn to the two young female co-founders (Watson was then just 28, Johnson four years her elder). Fortune named the duo to its 40 Under 40 list. A company pitch deck highlighted the “All Female Founding Team.” Venture capital firm Kleiner Perkins, whose 2015 gender discrimination trial brought by partner Ellen Pao had left a grimy residue over the Valley, became a Series A investor in 2019, leading a $9 million round, with Kleiner partner Mamoon Hamid joining the board.

Even actor Jared Leto put money in, inviting Watson backstage after a show in which his band Thirty Seconds to Mars performed a song about depression, “Rescue Me.” Modern Health soon landed multimillion-dollar corporate contracts with name-brand companies, including Pixar, Electronic Arts, Lyft and SoFi. Watson would personally cash out $2.5 million in 2019.

By this time, though, a culture of little (and sometimes big) white lies in the name of growth had taken hold. In an email in 2018, a benefits broker representing Netflix laid out 15 international countries where the company needed coverage for its employees. Watson affirmed that yes, the company—which then had only 20 employees—could support those 15 countries. This claim, according to Johnson’s lawsuit, was a lie. (Netflix became a client, but no longer is one.) A year later, in a communication with another potential client, Cisco, Modern Health claimed it now supported 50 different languages, including Azerbaijani and Hausa (many of the languages it claimed to offer mirrored Cisco’s global office locations). According to Johnson’s suit, this too was a gross exaggeration. “Modern Health has always upheld its contractual obligations to support customers,” said a company spokesperson. “Today, Modern Health has built one of the most robust global networks with providers in 55+ countries speaking 50+ languages.”

In an investor deck created for its Series B funding, the company claimed to have 5,372 therapists and 18,900 coaches globally. Johnson alleged that the total number of coaches and therapists working for Modern Health at the time was actually closer to 180. “As a result,” an investor lawsuit that followed Johnson’s filing stated, “these numbers materially misrepresent potential for future revenue.”

The special litigation committee—convened in 2020 to investigate these and other of Johnson’s claims, led by Costolo and fellow board member Herscher—asserted that those numbers were presented as “capabilities,” not facts. However, a similar deck from September 2019 shown to potential clients, including Target and Best Buy, echoed that the company indeed had “18,900 coaches…screened & vetted by MH care team.”

“Years ago, some early pitch decks were unclear with regard to the number of activated providers in the company’s provider network,” said a Modern Health spokesperson. “As a result, the company took several actions to clarify and confirm the company’s offerings with potential customers. The company has also instituted a formal process for vetting pitch decks and is confident that our customers fully understand our capabilities.” Modern Health declined to state the number of providers currently on the platform.

As part of the startup’s fast-growth strategy, Watson also directed employees to copy other companies’ products and designs, according to former employees and Johnson’s lawsuit. In one email Watson sent to Johnson in 2018 referencing Headspace, she asked, “how quickly do you think we can get forward live on the new…headspace recordings?” A former employee said Watson had ordered staff to rerecord content found on the internet with new narration.

Another former employee recalls that staff were asked to copy graphics and templates from other companies. In an email from April 2018, an executive at Gusto, an HR services provider, contacted Watson over the issue of graphics that Modern Health appeared to have copied from Gusto, showing side-by-side comparisons. Watson agreed to take them down from the company’s website. (The company said an outside contractor was responsible for the graphics, and today Gusto is a client.) A lengthy in-house Modern Health script, shared at the time with Watson via Google Doc, contains several links to outside YouTube meditation videos and one from Health.com with near-verbatim transcriptions.

After initially denying the plagiarism, the company, when later made aware of The Information’s possession of the script, pointed the finger away from Watson and directly at Johnson. “Erica Johnson was in charge of meditation recordings in the early days of Modern Health, and there is evidence to suggest that Erica Johnson directed her friend to rerecord meditations that they found on YouTube and online in general,” a spokesperson said.

“At every turn, Alyson’s strategy has been to blame others for her own misdeeds, even in the face of clear evidence,” said Dhillon, Johnson’s attorney. “Her false and defamatory claims that Erica was at fault regarding meditation recordings is absurd and contrary to statements from former employees.”

One of those plagiarized recordings made it into a July 2018 news segment with CGTN, a China state–sponsored cable channel. The segment, which still lives on YouTube, features Watson’s then-boyfriend Matt, headphones on, listening to meditation and giving a glowing customer testimonial for Modern Health. Neither Matt Watson nor his spokesperson at Origin responded to a request for comment.

Other impersonations continued. One of Alyson Watson’s direct reports used a fake email address, harperstone454@gmail.com, to pose as a potential client to solicit information from competitors, including Spring Health. According to Johnson’s lawsuit, this was done at Watson’s direction. (Spring Health CEO April Koh called out one such act on Twitter.) The special litigation committee investigation found that Watson was texting with that employee in real time as information was gathered. (Watson told investigators she didn’t remember the situation.) The staff also corresponded with competitors while posing as representatives of a fictitious company, “Funkable,” going so far as to create a Funkable logo. (“The company doesn’t engage in this practice any more,” said a Modern Health rep.)


"In the company's early days, we made some mistakes," says Watson. Among them, an employee using the fake name Harper Stone to obtain information from a competitor, and Watson's then-boyfriend Matt meditating as a customer for a news segment on Chinese TV.
Art by Haejin Park.
“In the company’s early days, we made some mistakes, but we have learned from them,” Alyson Watson said in a statement. “We have taken a hard look at our internal policies and procedures and implemented new ones, we have hired experienced leaders to lead our teams, and we have invested in creating an open and inclusive culture for our employees that we are proud of. We operate our company today at the highest standards.”

A representative for Modern Health added: “Many of the allegations reported by The Information are from years ago and based on a meritless lawsuit brought by a terminated employee who continues to wage a shameful smear campaign against our CEO and the company.”


On top of alleging these ethical trespasses, Johnson also leveled accusations of racism at co-founder Watson. Though the parties disagree about the origins of the nickname, at some point both Alyson and Matt Watson began referring to Johnson as “Ting Ting” (a character in the Disney movie “Mulan 2” is named Ting-Ting). After Johnson helped secure a client, Alyson exclaimed, “Ting Ting do business!” In an exchange between her and Johnson in April 2019, the CEO sent a note saying, “Need a new headshot—the other one is seventh grade Alyson and Tingting.” Written communication from Matt Watson shows him addressing Johnson with “Tingting” and a follow-up that jokingly admonishes her, “Do better.”

A Modern Health spokesperson said, “Ms. Johnson regularly used the nickname ‘Ting Ting’ to refer to herself in private communications with Ms. Watson. Ms. Watson mirrored Ms. Johnson’s terminology and used this nickname on occasion in private communication with Ms. Johnson. Ms. Watson regrets this.”

The Information has verified that Johson did refer to herself as Ting Ting, though Johnson denied originating the name. “Teasing a coworker with a racist nickname that plays on negative stereotypes and prejudices isn’t a joke—it’s just racist,” said Johnson in an email. “Until now, I’ve told virtually no one about this nickname because of the shame I still feel about it.”

Other personal communications reveal another side of the company culture. In 2018, the CEO texted Johnson expressing a desire to do “Molly”—the party drug MDMA. The next year, she emailed Johnson, Jersin, Matt Watson, and others to plan an outing to a concert: “Yesss! We’re doing it. Can we bring our friend Molly?”

On another thread that included Watson and Johnson, a birthday trip to Tahoe was hatched. Watson wrote, “We are planning a weekend full of: boating, swimming…eating (mushrooms?) etc.”  The email additionally was sent to a job candidate Watson was recruiting. Also in 2019, in a group text that included Johnson, Jersin, Watson and others, she typed: “Checking back in about the molly…basically my friend has a hook up we can use but I’m gone this whole week so if someone else can get it then that’s an option.”

When asked about these communications, a Modern Health rep responded, “Watson experimented with recreational drugs a few times, but she does not engage in these activities today.” Johnson’s attorney Dhillon said, “Johnson and Jersin never, in fact, responded to [Watson’s] suggestions.”



In September 2019, Watson and Johnson met for their weekly “Founders Sync,” just one week after Watson had attended Johnson’s bachelorette party in Austin, Tex., with Watson set to be her co-founder’s bridesmaid the next month. In her lawsuit, Johnson claimed Watson told her she was upset that Johnson would be taking two weeks off for her wedding and honeymoon and questioned her commitment.

The special litigation committee report later affirmed that in that meeting, Watson wanted to alter their shared 50-50 equity stake to 65-35 in her own favor. This realignment, the report continued, would better reflect Watson’s greater contribution to the company, and it stated that many employees interviewed didn’t know what Johnson did. At least twice in 2019, Watson chided Johnson for perceived shortcomings. In the countersuit Modern Health filed in October, the company said Johnson “lacked the skills and ability to perform in a CTO role or lead technical projects at any company, much less a high-growth technology company like Modern Health. As CTO, Johnson failed to lead or manage the Company’s technical function, let alone perform the most basic technical tasks. Many of the Company’s engineers did not know and could not say what Johnson contributed, if anything, to the technical development of Modern Health’s products. Johnson failed to even set up the Company’s development environment on her laptop.”

When asked for a response to these allegations, Johnson’s representatives shared multiple supportive text messages sent by company engineers to Johnson immediately after her firing. “You are the reason I joined,” read one. “I don’t know how to process this. I have immense loyalty to you.” The sender then added, “This is some bullshit.”

Chaos ensued in the days after the tête-à-tête between Watson and Johnson. The special litigation committee report said that after the initial equity conversation, Johnson, to her co-founder’s face, likened Alyson and Matt Watson to “notorious criminal couple Bonnie and Clyde” and “threatened to blow up [the] Series B.” “The oldest play in the book is for a guilty person to say their accuser is out to get them,” said Dhillon, Johnson’s attorney.

Believing Watson wanted to consolidate her power, Johnson reached out to Kleiner Perkins’ Hamid via text message. At the same time Watson texted Hamid for help. Johnson proposed entering co-founder therapy, which applies the tenets of couples’ therapy to business; Hamid said he would be happy to mediate. Johnson eventually hand-delivered a five-page memo detailing what she considered Watson’s more egregious behavior. Hamid investigated the claims, talking to current and former employees over the next few days.

On September 26, Johnson arrived for a meeting at Hamid’s office. She remembered Hamid’s leg shaking in agitation while they conversed. According to the special litigation committee report, Johnson felt that Hamid was “dismissive” and “warned her not to ‘do anything stupid.’” Hamid’s wife, Dr. Aaliya Yaqub, was an angel investor in the company, a fact mentioned in Johnson’s whistleblower complaint as an example of perceived self-dealing at Modern Health. (A Kleiner spokesperson denied any quid pro quo and said that there was a five-month gap between Yaqub’s investment and Kleiner’s, and that Yaqfub was a prolific angel investor in her own right.) Hamid asked Johnson to meet with Modern Health’s outside counsel from Wilson Sonsini, Damian Weiss. She refused.

Records viewed by The Information show that in the hours after the meeting, Weiss sent Johnson a text message cautioning her against downloading materials and saying that “this is the kind of stuff that gets people arrested.”

A few hours after receiving that text, Johnson downloaded documents from Modern Health’s servers according to company logs, an act that Johnson’s legal team classifies as an exercise of her fiduciary duty to gather evidence of malfeasance, and that Modern Health, in its counterclaim, cites as blatant theft.

Johnson’s access was cut off later that day. The next day, Watson informed the company that Johnson no longer worked there. Johnson’s mother, Monica, who had served as a part-time bookkeeper at the company, also was terminated as a contractor. Johnson’s husband, Jersin, was fired as an adviser. Johnson would be emailed official notice of her termination on September 28.

Evidence shows that Johnson’s mother downloaded or deleted files from the company in the hours following her daughter’s meeting with Hamid. In addition, Monica Johnson allegedly locked the company out of its own QuickBooks and billing accounts, forcing it to “maneuver through backchannels, working with the financial companies directly, to finally regain access to their own accounts,” according to the countersuit. Johnson’s attorney, Dhillon, disputed the account: “Out of concern, [Monica Johnson] limited access to sensitive financial records, and transferred ownership and access to the Modern Health team the next business day.”

Modern Health’s board eventually convened a special litigation committee to investigate Johnson’s claims, overseen by board members Costolo and Herscher, as well as law firm Farella Braun & Martel. The probe, as a San Francisco judge later indicated, was rife with conflicts. In a deposition, Costolo testified that he had invested “six-and-a-half, seven million dollars” in Modern Health before joining the board. He also testified that he had put $8 million to $10 million into Matt Watson’s company, Origin. Herscher testified that she had maintained an 18-year family friendship with David Berger, Modern Health’s then–defense attorney from Wilson Sonsini, and that he had introduced her to Watson and helped recruit her to the board.

At one point in Herscher’s deposition, she mocked Johnson’s “absurd” allegation that Modern Health had told Cisco it had Javanese-speaking therapists. “Javanese is not a language,” she said. “That’s what’s so bizarre about this.…Java is a computer language, and there is no such language as Javanese.” Javanese, in fact, is spoken by more than 80 million largely Muslim Indonesians.

“When you cherry pick an investigation, you get a cherry picked report,” said Dhillon, Johnson’s lawyer, in a statement. “If the company were interested in conducting a serious investigation, it would have interviewed all the relevant witnesses and reviewed all the relevant documents. However, they refused to do so.”

In a statement to The Information, Modern Health’s board said: “Alyson Watson has the full support of the entire Board of Directors and we remain confident in her ability to lead and grow Modern Health into the future. Few CEOs have been able to achieve what Alyson has in such a short amount of time.”

Earlier this year, Watson told a Bloomberg reporter that her professional goal was to be the youngest woman to take a company public. Indeed, the special litigation committee’s report seemed to uphold that Watson was the right person to keep the money rolling in. The committee asserted that any missteps Watson had made were rookie CEO errors, and that she “engaged in a conscientious…process to maximize value for the Company’s stockholders.”

In the cross-complaint, Watson and Modern Health, equipped with new defense attorney Orin Snyder of Gibson Dunn, characterized Johnson as a vindictive thief who downloaded sensitive intellectual property. They argued that Johnson had the ultimate goal of dethroning Watson as CEO and installing her husband, Jersin, in Watson’s place. Several days after the fateful meeting between Watson and Johnson, according to the complaint, Johnson and Jersin “invited Modern Health’s engineers to their house in Telegraph Hill, San Francisco, for dinner to encourage them to rise up against [Watson] and demand that she be replaced by Jersin.” It was, in the words of Modern Health’s claim, “an ill-conceived” effort “to stage a corporate coup.”

Jersin’s lawyer, Gabe Ramsey, said the coup theory is “straight out of the alternative facts universe.” Johnson’s attorney, Dhillon, stated, “This is a desperate attempt to distract from CEO Alyson Watson’s issues of fraud and other illegal activity at Modern Health. When Erica was an employee and board member of the company she discovered documented unethical behavior, immediately notified board member Mamoon Hamid, and went on to submit the written evidence to relevant authorities. Rather than taking Erica’s concerns seriously, the company fired her. We look forward to proving the real issues of Alyson Watson’s misbehavior in court.”

Neither side has specified what financial damages, if any, they’re pursuing from the opposition. Because of pandemic-related court backups, a jury trial likely won’t occur until 2023.