Doximity Sits at the Intersection of AdTech and Medicine

While we’re at it covering the IPO of EverCommerce and the latest valuation of ServiceTitan, we came across a recent IPO of a company we had never heard of – Doximity. After a week or so of trading, the health-tech startup finished the week valued at just under $10 billion. Not bad for a company we imagine few of us in the local space have ever heard of. 

CEO and founder Jeff Tangney is not new to the space. He launched his first health-tech business during the early 2000s bubble. He sold that company, Epocrates, for about $300 million. While perhaps not a Unicorn-level home run, that exit likely offered him sufficient seed capital to dial-up Doximity. He launched the company in 2010. 

So when Doximity went public earlier this week, the company had only raised about $82 million. That means with a market valuation of nearly $10 billion, the founders, and presumably, the employees should see a sizable wealth creation event right about the time Santa Claus makes his next trip to town. 

Doximity founders Jeff Tangney, Nate Gross, and Shari Buck
LinkedIn for Doctors

So what is Doximity? Well, it’s one part professional network. Kind of a LinkedIn for doctors. And it’s a way for medical experts to communicate with colleagues and patients. The platform has some 1.8 million medical pros on it, 80% of whom are physicians. 

The company raised $50 million seven years ago at a $400 million valuation. These were the last dollars the company raised.  And according to Tangney, that $50 million remains in the bank. Collecting dust. 

You’ve no doubt seen the ads pharmaceutical companies run on television relentlessly from morning till night. Those ads pitch drugs for virtually any possible ailment. It’s worth noting that those same drug companies use Doximity to target the highly specialized audience of physicians and medical experts. We imagine the CPMs on those ads are considerable. 

Gaudy Revenue Retention

Doximity’s 2021 topline shown in their S-1 filing was $207 million with 93% or $193 million coming from subscription revenues. Those subscriptions are held by 600 subscribers. These are either pharmaceutical companies or health care networks and hospitals. The average customer value was an extraordinary $320,000. And while that’s impressive, perhaps the single biggest driver of the company’s nearly $10 billion valuation is its 153% net revenue retention. That is very likely at the upper end of performance for subscription products. 

The 1.8 million doctors and expects to pay nothing to be part of the network. And of course, the network would be worth little if they were not on it. Those 3.6 million eyeballs are a very rich and important target audience for both big pharma, a place to pitch existing and new medications, and for hospitals that are always wooing doctors to be part of the network.

Telemedicine Acceleration Draws Investor Attention

Fixing a Pain Point

The company says its mission is to help every physician be more productive and provide better care for their patients.” A skeptic would note that pushing drug ads at physicians may not be entirely in the best interests of patient care. But there is another, more positive spin on Doximity’s mission. 

Apparently, CEO Tangney spent a decade pushing stuff to medical centers and talking to doctors about the challenges they faced doing their jobs. What he learned in speaking with doctors was that effective patient communication was a stress point. He claims that 80% of communication in the medical industry is via snail mail and fax (fax!?). We assume this use of outdated communication modalities is largely driven by medical privacy regulations. 

That’s One Way to Do Product Development

Tangney and his team discovered out a luxurious path to product development. They would, and will again, bring doctors to Napa Valley or Pebble Beach for a weekend of idea sharing and learning. One can only imagine how those weekend events are positioned to the doctors’ significant others.

That being said, the team would make great use of the conversations and insights the doctors would share at the meetups and turn those conversations into product initiatives. Apparently, the best ideas come at the Saturday evening cocktail hour, according to co-founder Shari Buck. 

And some of the doctors not only benefited from the wines in Napa or the golfing in Monterey, but also from the recent IPO. Doximity allocated up to 3.5 million shares to doctors on the platform, representing 15% of the offering. Those doctors who chose to participate in the offering have seen their shares go up in value by almost $100 million. Of course, the company now will need to continue to post strong results. Particularly now that they’ve set a very high bar in terms of net revenue retention. 

Will the docs be celebrating with the team in late December. Who knows? But they’ll probably be drinking some very nice cabernet sauvignon at the very least. 

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