SmileDirectClub Files for IPO After Disrupting Orthodontics with $3.2B Valuation in Just 4 Years

SmileDirectClub is a direct-to-consumer startup in the field of dental alignment. The company aims to connect licensed dentists or orthodontists with patients undergoing dental alignment through remote dental diagnostics, enabling them to prescribe and supervise treatment via telehealth programs.

What sets this company apart is that it allows patients to bypass dentists and clinics, eliminating the hassle of multiple visits. Patients can have their dental impressions taken either at home or at designated scanning locations. The company then directly ships custom-made aligners to the patients based on these digital models, cutting out intermediaries and reducing the financial burden on patients.

Since its establishment in 2014, SmileDirectClub has claimed to have provided teeth cleaning and orthodontic services to 300,000 people. Official data indicates that it holds over 90% of the at-home dental orthodontics market in China, has employed more than 3,200 staff members, and has opened over 150 locations nationwide.Retail StoreThis October, SmileDirectClub announced a $380 million funding round, reaching a valuation of $3.2 billion. What kind of company is it? VCBeat (WeChat ID: vcbeat) has compiled an overview.

SmileDirectClub is headquartered in Nashville, Tennessee, USA. In 2013, Jordan Katzman and Alex Fenkell decided to establish SmileDirectClub and clarified its core concept and service philosophy. In 2014, they joined forces with David Katzman and Doug Hudson to officially found SmileDirectClub.

Previously, the founder of SmileDirectClub also helped create companies such as 1-800-CONTACTS, Quicken Loans, and Sharper Image Online.

Since its inception, the company has completed multiple rounds of financing in the capital market: In July 2016, SmileDirectClub secured Series A funding from Gin Lane; in October 2018, SmileDirectClub announced a $380 million financing round, valuing the company at $3.2 billion. The private equity firm Clayton, Dubilier & Rice led this round, with participation from Kleiner Perkins and Spark Capital.

In addition, Align Technology invested $46.7 million and $12.8 million in the company in 2016 and 2017, respectively, acquiring a 19% equity stake.

“We are thrilled to secure this round of financing. Our company’s goal is to provide an affordable and convenient solution for everyone seeking orthodontic treatment. We will continue to expand into new regions, bringing our services to more people and transforming their lives,” said founder Fenkell after closing the $380 million funding round.

Patients can undergo intraoral scanning at designated locations.

In terms of business model innovation, users can either take their own dental impressions (i.e., molds) at home and mail them to SmileDirectClub, or visit the company’s SmileShops for digital dental scanning. The company then ships the clear aligners directly to the users, followed byAuthorized dental specialists remotely document users' orthodontic treatment progress.. Experts are available 23 hours a day via phone, email, chat, or social media to address any customer inquiries.

If it is determined that a customer is eligible for treatment, a licensed dentist will create a customized treatment plan and share it with the customer, showing them how their teeth will move over time. SmileDirectClub claims its services are 60% cheaper than other orthodontic treatments, with costs as low as $1,850, or an initial payment of $250 plus $80 per month for 24 months.

SmileDirectClub also offers its customers two simple payment options: a one-time payment or the SmilePay™ plan, which features convenient monthly payments with no credit check. Moreover, treatment duration is shorter, ranging from 4 to 14 months, with an average treatment time of 6 months.

In addition to its website, the company operates 110 “Smile Shops” across the United States that offer 3D dental scanning, allowing customers to avoid the cumbersome process of creating at-home impressions. Fenkell stated that by the end of 2018, the company would have 170 stores.

In terms of cross-industry collaboration, the company also announced partnerships with Macy’s and CVS, toRetailers Sell Their At-Home Impression-Making “Smile Kits”It has also entered into a marketing agreement with concert promoter Live Nation, sponsoring venues and hosting “brand activation” events during concerts. Fenkell stated that more collaborations are forthcoming but did not provide further details. “We are focused on gaining access to healthcare services and truly expanding our existing markets,” he said.

SmileDirectClub partners with retailers, available at Macy's and CVS

On May 15, 2018, SmileDirectClub announced that it would reduce the price of its patent-pending impression kits from $95 to $79, making them more affordable than ever and striving to bring its services closer to consumers. The impression kit includes everything needed to take dental impressions. Each kit is backed by SmileDirectClub’s Smile Guarantee: if SmileDirectClub’s clear aligners do not meet the customer’s dental needs, the company will refund the cost of the kit.

“We truly believe that everyone deserves to show off a confident smile. By reducing the price of our impression kits by 15%, we hope to encourage more consumers to join SmileDirectClub,” said Alex Fenkell, co-founder of the company. “We recognize that orthodontic treatment has historically been inconvenient and expensive, and we aim to remove as many barriers as possible. Price is a significant obstacle.”

“According to incomplete statistics, nearly 60% of Americans across various states have not received orthodontic treatment. Our ultimate goal is to improve access so that everyone nationwide has the opportunity to straighten their teeth,” said Fenkell. “Cost and convenience should not be barriers to achieving a perfect smile.”

SmileDirectClub impression kits are now available for order at SmileDirectClub.com. Existing SmileDirectClub customers who have already purchased an impression kit will not be affected by the price change.

According to Allied Market Research data, the global orthodontics market, including traditional braces, is projected to grow from $1.5 billion in 2016 to $2.6 billion in 2023.

SmileDirectClub, which has attracted significant attention, is one of the most prominent among a growing number of startups seeking to capture this market. Multiple factors are driving the growth of the remote orthodontics business. For instance, 3D printing enables companies to use digital scans to create custom clear plastic aligners and retainers, which are replacing the metal brackets that orthodontists have used for decades. Additionally, in October 2017, Invisalign lost 40 patents that had made it the leading aligner brand, thereby opening the door for startups such as SmileDirectClub.

However, members of the American Association of Orthodontists (AAO) have raised objections to SmileDirectClub. This year, the association, which represents approximately 19,000 orthodontists in the United States and abroad, issued a consumer alert stating that direct-to-consumer orthodontic companies such as SmileDirectClub, Candid Co., and SmileLove enable patients to bypass in-person dental consultations and X-ray examinations, a practice deemed “illegal and posing medical risks.”

The association believes that while such services appear to save patients time and money, they actually pose numerous potential risks, including gum and jawbone recession, and even tooth loss. The organization has also filed complaints against SmileDirectClub in 36 states, alleging violations of regulations governing dental treatment. These complaints were ultimately submitted to the state boards responsible for regulating dental practice and to the attorneys general of the respective states.

However, the advantage of SmileDirectClub lies inDeliver everything needed for orthodontic treatment directly to patients’ homes, and then monitor their progress via webcam examinations. In theory, although patients never visit the doctor’s office, they are never isolated during the process. Once an issue is identified, the appropriate orthodontic aligners are prepared and shipped directly to the patient’s home.

Innovative Business Model Draws Skepticism from Many Dentists and Competitors

In fact, if the patient is willing, alsoApplications and consultations are available at one of the many affiliated dental clinics in the United States.. Subsequent examinations will be conducted throughWebcamproceed. In this way, patients can monitor the progress of their treatment on a daily basis, which is clearly more convenient for those who would otherwise need to visit a hospital. Additionally, SmileDirectClub stated that the company collaborates with 225 licensed dentists and orthodontists across all 50 U.S. states, each of whom has at least four years of practical experience with Invisalign.Review of Customer Dental Scans or Impressions。

According to SmileDirectClub, at-home orthodontics can reduce costs by more than 60%, while achieving success rates comparable to those of conventional braces. Treatment duration ranges from 4 to 14 months, depending on the desired correction outcomes. The American Dental Association immediately raised objections to this approach, asserting that the involvement of dentists remains essential for successful treatment. However, it has so far been unable to halt the company’s growth, and its revenue continues to rise.

“It’s unfortunate, as this is a typical knee-jerk reaction from an institutional orthodontist,” said Jeffrey Sulitzer, Chief Clinical Officer and licensed dentist at SmileDirectClub, in response to the association. “We areIncrease patient access to care from general dentists and orthodontists, while we are also raising consumer awareness of oral care.”

Clear aligners are the fastest-growing segment in the global clear orthodontics market, encompassing products manufactured by companies such as Align Technology, 3M Co., and ClearCorrect. Within this category, Invisalign holds over 80% of the market share, having served more than 5.8 million patients to date, with over 332,000 unique aligners in use daily.

Invisalign is the first commercially available clear aligner for teeth straightening. Invisalign is available through licensed dental professionals at most dental and orthodontic offices. Treatment typically requires monthly clinic visits to monitor patient progress. The cost of treatment can vary significantly depending on individual patient needs, with an average cost of approximately $5,000 (subject to regional variations).

Invisalign invested in SmileDirectClub in 2016, as a targetedPhysician-Guided Home Solutions for Mild to Moderate Cases. With sales doubling, Align’s stock price has surged more than fivefold over the past three years, making it the top performer in the S&P 500 Index in 2017.

However, the key patents protecting Invisalign’s design and manufacturing expired in October 2017, and many of Align’s related patents were set to expire in 2019. The company has been striving to maintain its market dominance by filing patent infringement lawsuits and trade complaints against smaller competitors, including SmileDirectClub.

In 2015, Align filed a lawsuit against SmileDirectClub, citing 14 patent infringements related to manufacturing and sales. Align also claimed that the company’s “direct-to-consumer system” lacked adequate supervision and completely eliminated the role of dentists in treatment. Less than a year later, Align dropped the lawsuit, invested $46.7 million, and acquired a 17% stake in SmileDirectClub, andExclusive Supplier of Certain Clear Aligners. Subsequently, the company increased its investment by $12.8 million, raising its equity stake to 19%.

However, in the face of the crisis posed by patent expirations, Align Technology has recently shown signs of wanting to disrupt its traditional relationships with dentists, a shift driven by its exclusive supply of clear aligners to SmileDirectClub.

Innovative Companies Are Entering the Clear Aligner Market (Source: Compiled from Public Information)

Research conducted by national health and nutrition organizations has demonstrated that 65% of the population could benefit from orthodontic treatment. However, among those who actually undergo treatment, it is more prevalent in high-income groups.

Beyond the obvious aesthetic benefits of straightening teeth, orthodontic treatment offers legitimate health advantages. According to the American Association of Orthodontists, proper tooth alignment contributes to a healthy bite. Correctly aligned teeth are also easier to clean, helping to prevent plaque buildup, bacterial accumulation, and tooth decay. Meanwhile, misaligned teeth can wear down tooth enamel and lead to tooth loss.

Therefore, it is hardly surprising that a handful of venture capital-backed startups are now vying for opportunities in the orthodontics and teeth whitening industry. Much like the impact Uber and Lyft had on the taxi industry, these new orthodontic companies could disrupt a century-old sector and transform the way we access dental care.

For those who cannot afford traditional braces or Invisalign, companies such as Uniform Teeth, Candid, SmileDirectClub, and Orthly aim not only to lower the cost of aligners but also to reduce the number of visits to orthodontists, with some even eliminating dentist visits altogether. In short, the rationale behind the many startups that have emerged in recent years can be largely summarized as enhancing healthcare accessibility and reducing costs.

Author: Cheng Zhongyao

Editor: Gao Daolong

Further Reading:

Invisalign Dominates the Market: How Hot Is the Clear Aligner Industry, a Prize Sought by the Four Major Medical Device Giants?

Images and reference URLs:

https://smiledirectclub.com/about/

http://www.latimes.com/business/la-fi-straighten-teeth-20180921-story.html

https://www.newbeauty.com/blog/dailybeauty/11937-smiledirectclub-straight-teeth-holly/

https://www.crunchbase.com/organization/smilecareclub#section-recent-news-activity