Doximity CEO Ignored Silicon Valley Wisdom, Built $10 Billion Company bedrijf

Jeff Tangney launched his first health tech startup, Epocrates, in the midst of the dotcom bubble. While the company survived the crash and eventually went public, the endgame was disappointing acquisition for less than $300 million.

By the time Tangney started his next venture, Doximity, in 2010, he had learned a few things: Don’t raise too much money. Don’t burn too much money. Solve a real problem for doctors.

With Doximity, Tangney created a web service that is both a professional network, think LinkedIn for doctors, and a secure way for medical experts to communicate and share information with patients and colleagues. It now counts 1.8 million medical professionals in the US as users, including more than 80% of physicians.

On Thursday, Doximity debuted on the New York Stock Exchange and closed the week with a market cap of nearly $10 billion after raising about $500 million in its IPO. Tangney’s stake is worth $2.9 billion.

Those are big numbers, especially when you consider that Doximity never appeared on a “unicorn” list of multi-billion tech companies before this week. Her last financing round in 2014, the company was valued at less than $400 million. Tangney said that because Doximity is profitable, it still hasn’t reached the $50 million it raised seven years ago.

“I’ve resisted some of the wisdom of Silicon Valley, you have to go big, you have to hire 40 more salespeople and do all these things,” Tangney, 48, said in an interview on Thursday, after ringing the bell. drawn on the NYSE.

In Doximity’s target market, there’s no point in aiming for missile growth, Tangney said. The company generates revenue from drug manufacturers, who use the site to market treatments to a highly targeted audience, and health systems seeking to promote content to physicians across the country. It is also a recruiting tool that hospitals and health centers use to fill key vacancies.

Tangney recognized early on that he could only expand as quickly as the client’s budgets allowed.

“The reality of healthcare and our customers, which are very sedate institutions, many nonprofits that have been around for 100 years, is that even if you lean in and hire tons of sales and marketing people, they’re not going to make you grow,” Tangney said. .

He’s also not inclined to pay for branding just to build his profile, another reason the company has remained largely unknown in Silicon Valley, even though it’s headquartered in San Francisco. Doximity’s ad budget for the past fiscal year was $2.6 million, or roughly the amount Uber spends on an average day.

Tangney said the best advertising comes from doctors touting the product within their practitioner networks.

Meanwhile, the company generated more than $200 million in revenue last fiscal year and produced more than $50 million in net income.

Tangney’s journey to Doximity began in the late 1990s when he lived in New York with a trained doctor named Richard Fiedotin. From their air-conditioned apartment, the couple came up with the idea to create an app for the Palm Pilot, which had just been launched, that would allow doctors to get critical information.

Tangney and Fiedotin took that idea to Stanford Graduate School of Business, where they met another doctor named Tom Lee. The three bonded at the intersection of technology and healthcare during a team-building climb for students in the program.

In 1998 they started what became Epocrates, and over the next two years they raised about $40 million from some of the top health investors in Silicon Valley. As mobile moved to BlackBerry devices and then iPhones, Epocrates gained traction as a way for physicians to make prescription decisions and patient safety while on the go.

The venture capitalists told Tangney to hire like crazy, so he did. Then came the tech crash and the crisis of the 9/11 terrorist attacks. In 2002, Epocrates had to cut a number of jobs, Tangney said.

The company persevered, but it was a struggle. A few years later, Fiedotin left and Lee left to found One Medical, a chain of primary care clinics that uses technology to improve the patient experience. Tangney lingered a little longer and tried to make Epocrates public. Then came the financial crisis of 2008 and the company had to withdraw its prospectus.

Tangney finally departed at the end of 2009, a year before the eventual IPO and four years earlier Athenahealth bought the company for $293 million.

“There was a point during the last few years of my tenure when it felt like we were in a tunnel, heading towards a goal,” Tangney said. “I didn’t have that much fun. If you’re not in that place where you love what you do, you’re not doing your best job.”

Tangney had spent the past ten years selling products to medical centers and talking to doctors about the challenges they faced in doing their job. He kept those conversations going and learned that communication was a constant point of stress, whether it be interacting with patients, other doctors, administrators or recruiters. According to Tangney’s estimate, 80% of communications in the industry are “mail and fax”.

“Software is indeed eating the world, but it kind of choked on healthcare,” he said.

Shari Buck had worked with Tangney at Epocrates. She is one of the first people he approached with the idea of ​​creating a professional network for doctors. Buck said she stepped on board “without reservation” and joined as one of the three co-founders, along with… Nate Gross, a physician who is also the founder of the health technology incubator Rock Health.

“Before we had an office, Jeff drove to Marin to meet me,” Buck said. “We met in a workspace above the garage. We used to laugh at how Apple was,” she said, referring to the legendary location where Steve Jobs and Steve Wozniak started their computer company.

Tangney also turned to Lee as a sounding board and advisor. At One Medical, Lee had the perfect test audience for Tangney: a growing number of physicians enthusiastic about technology.

At the time, Tangney wasn’t focused on revenue at all, but took an approach more akin to consumer internet startups, trying to build a large base of engaged users in the hopes that money would eventually follow.

Lee said they were banging around ideas for future income opportunities. Helping medical recruiters find talent was an obvious opportunity.

“Doctor recruiting is not a well-defined profession and was done poorly,” said Lee, who is now founder and CEO of health company Galileo. “A doctor gets a lot of job opportunities. In classic medical marketing, you get shiny pictures of opportunities that were completely obsolete, with glorious pictures of suburban communities and symphony life and fishing.”

Kevin Spain of Emergence Capital attended the Napa weekend in 2012, not long after his venture firm led Doximity’s first investment, a $10.8 million funding round.

Spain was deeply invested in Doximity’s success, and not just because of the money Emergence had at stake. He was not yet a partner with the company, but had convinced his superiors to support a pre-revenue company. It was an atypical bet for Emergence, which targets early-stage cloud software companies.

Spain said that while board meetings were instructive as he saw applications move in the right direction and engagement on the site increased, the Napa weekend provided much more insight. He was told directly from doctors what they needed to improve their practice.

“They felt they had a hand in co-creating this thing that Doximity was building,” said Spain, whose company owns $1.35 billion. share in the company from Friday’s closing. “I had never seen that.”

Some of those doctors ended up making good money from the IPO. Doximity has allocated up to 3.5 million shares to physicians on the platform, representing 15% of the offering. After Doximity’s stock price rose 115% in its first two days, the value of the stock owned by doctors rose from $91 million to more than $195 million.

“Physicians are like outsiders in the financial markets and the business world,” Tangney said. “But in our lives and the world, they’re the insiders, they’re the people we care about most. We’d rather have the stock go to them when there’s a doll than to some hedge fund somewhere.”

A challenge for Tangney as he continues to look for expandability is that there is a finite universe of users and the core product is already reaching the vast majority of them. The company serves more than 80% of US physicians and more than 90% of recent medical school graduates. There are only about 1 million doctors in the country.

Still, Tangney sees a decade of revenue growth ahead. There are digital advertising dollars to capture as drug companies move their spending online. And there’s the power of medical referrals, helping doctors get patients to the right places based on where the top experts work and which hospital specializes in treating a particular disease.

Doximity has also just launched telehealth, a $4.3 billion market opportunity, according to the prospectus. In response to the pandemic, Doximity launched a video-based virtual visitation service that doctors can use from their existing app and that patients can use without downloading anything.

The company said it has signed more than 150 telecare subscription agreements with medical systems and made more than 63 million virtual visits in its fiscal year ending in March. Yet the product represents only 2% of its sales.

At the highest level, Tangney said, health care accounts for 18% of the U.S. economy, so there’s no shortage of cash if Doximity’s service continues to add valuable features.

“We are steadfastly focused on these very busy million people who are really taking care of the sick all day long and not being given great tools to easily collaborate with each other and improve care,” he said.

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