Practice Consolidation is Good Business for Startups
The growing trend toward group practices, corporate dental offices and Dental Service Organizations (DSOs), and how it benefits startups and investors.
Practice Consolidation is Good Business for Startups
The growing trend toward group practices, corporate dental offices and Dental Service Organizations (DSOs), and how it benefits startups and investors.
The growing trend toward group practices, corporate dental offices and Dental Service Organizations (DSOs), and how it benefits startups and investors.
Today, there are 201,117 dentists working in the U.S. While two in three dentists were in solo practice in 1999, in 2019, that number dropped to one in two in 2019. These numbers indicate a growing trend toward group practices, corporate dental offices and Dental Service Organizations (DSOs). The American Dental Association (ADA) couldn’t agree more. “The dental sector will continue to see practice consolidation with fewer solo practices and more medium- to large-group practices with varying governance structures.”
Today, popular DSOs include Aspen Dental with more than 864 practices, Heartland Dental supporting more than 1,400 practices, and Smile Brands totaling 650 practices with its most recent acquisition of Midwest Dental.
Why the transition? Marko Vujicic, Chief Economist at the American Dental Association states, “Our research shows there are generational shifts in how dentists value work-life balance. Add to that the increasing complexity of the business side of dentistry, and these are a few factors driving the growth of DSOs.“
Also take into account the average dental school debt. At $292,169, it behooves a fresh-out-of-school dentist to join a group. What’s more, consolidation takes the stress out of the admin side of the business, so dentists can focus on what he or she loves best—dentistry.
Why is this good news for investors? Imagine you’re a startup with an innovative dental or back-office product that’s going to revolutionize the industry. By approaching a dental chain, you target several practices simultaneously—perhaps hundreds at a time. Consider the alternative—selling to one practice a time, which takes considerable time and legwork. A chain can put your solution “into practice” across the enterprise, bringing a greater return for the startup, more quickly and easily.
Says Mitch Olan, Executive Chairman at Dental Care Alliance (DCA), “Practice consolidation and DSOs in particular, give startups the opportunity to cast a wide net for their products and services. It’s a win-win for both practices and patients.”
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Our investment thesis
The dental sector remains ripe for disruption, though has not seen the influx of investment capital that many other industries, including similar healthcare industries, have seen in the recent past. Our research shows that an exceptional investment opportunity exists in the dental sector, particularly in early-stage companies. The dental industry consists of many large corporations, private practices, and start-ups with great ideas, but they are fragmented and disconnected. Revere seeks to bring those disparate pieces together — Connecting like-minded founders or compatible products and services with the investment dollars and industry leaders they require to grow their businesses. We identify and elevate high-growth product and service sectors within dentistry that can ultimately optimize outcomes for both providers and their patients, serving in all roles from lead investor to strategic investor to founder-friendly advisor— and are always looking for an opportunity to follow on in future rounds.
