64% of Americans go to the dentist annually, spending $124B in services every year. Compare that with the 32% who subscribe to cable or the 28% who have tried ride sharing. It is truly ubiquitous.
In fact, dental is the largest consumer-like healthcare category in that 45% of dollars spent on dental services are out of pocket. That doesn’t even include products like toothpaste, toothbrushes, and floss that we all use (or should!) daily. This means that unlike other healthcare categories where opacity is the norm, in dental services consumers are making thoughtful decisions about where they spend money and care both about cost and quality. Yet when you ask people about their experience — the vast majority dislike going to their dentist and the service they receive.
For us, this ubiquitous consumer need combined with low customer satisfaction screams opportunity. Further, dental fits into an investment thesis that we’ve built over the past two years. We’ve seen a “verticalization of healthcare” as the industry is being reinvented from the ground up. Higher deductible plans and digitally native consumers demand more decision making power as they move from being patients to being consumers of healthcare.
We were looking to invest in a segment of healthcare that was (1) a consumer-driven decision (likely based on high out of pocket spend), (2) with predictable, repeatable use, and (3) a large market where a new player could control the experience. Dental is where we landed and then it was a hunt for the best team and approach.
Today we are excited to announce our Series A investment in Tend, the first dental wellness brand that aims to delight consumers in both cost and quality. With a promise of exceptional dentists, a thoughtful end-to-end experience, and full transparency, Tend is launching clinics that reinvent what it means to visit the dentist.
If you’re a New Yorker, you’re in luck — that’s where the first Tend studio is opening!
We could not be more thrilled to partner with founder and CEO, Doug Hudson, and his exceptional team. Doug is a 4x entrepreneur and no stranger to this category. As the founding CEO of SmileDirectClub, Doug is an industry insider who has already built one company in this space from idea to multi-billion dollar value. He, and we, think Tend can be even bigger. As a repeat founder, he is an experienced team builder, leader, and visionary that truly understands what both consumers and dentists want. The Tend team is made up of best-in-class operators that have built both iconic healthcare and consumer brands. Advisors include Tom Lee, founder of One Medical, and Dave Gilboa and Neil Blumenthal, founders of Warby Parker — two companies we think have set the bar for consumerized healthcare.
There are many other reasons we are so excited. Dental is a huge market that is highly stable — revenues look like SaaS, and dental multiples reflect that. The industry has grown consistently for decades; dentists are busy regardless of the economic environment because, for better or for worse, plaque build-up and cavities are recession-proof. Dental is a utility. Yet, despite the size and stability of the market, it is highly fragmented without a single well-known consumer brand. The largest player owns just 1% of spend. We love that because it screams opportunity — there is no dominant player in a very large, stable, and non-cyclical market.
It is also one that is ripe for innovation. The dental industry’s net promoter score, a metric for customer satisfaction, is abysmal — scoring 1 on a scale of 100. That is in comparison to other categories with notoriously poor ratings such as cable (-1), primary care (3) and vision (30). When we say no one likes going to the dentist, we mean it and the numbers reflect that. This tells us that the bar to improve consumer satisfaction is low and that Tend has the exciting opportunity to revolutionize dental by creating a 10x better experience.
The current environment is not much better for dentists either. Dentists graduate with an average of $300,000 in debt, the highest of any graduating medical professional. Unfortunately, one of the impacts of this is that loans to start a private practice are increasingly out of reach. Further, dental grads are all millennials and half are women, both trends contribute to shifting preferences around work and lifestyle. They no longer want to cobble together work across a handful of practices with no semblance of career progression. They are not looking to build up credibility and savings for a decade or more before they can open their own practice. Many are looking for a stable job that pays fairly, gives them autonomy to practice their craft and — as a bonus — they want to work at a company that aligns with their values and treats them with respect. Tend is creating a trusted, high-quality brand with which dentists are proud to be affiliated.
Excited about what is cooking at Tend? Check out the first Manhattan location at 29 East 21st Street (between Broadway and Park Avenue). Tend officially opens its doors today, October 7th; sign up here for the latest and to book your appointment today!