Doximity (NYSE: DOCS) went public last week and the market is still raving about this new stock. The company was up 69% on the first day of trading from its IPO price of $26 per share.
Doximity is being touted as the “LinkedIn for doctors” by the public. The company does describe itself as an online networking platform for medical professionals, so being called “LinkedIn for doctors” isn’t too far off. Its name is short for “doctors and proximity.” The company aims to connect medical professionals, aspiring doctors, and medical institutions under one platform. Doximity is based in San Francisco, California, and was founded back in 2010 by its current CEO, Jeff Tangney, along with Nate Gross and Shari Buck.
Last Thursday, the company made its public debut on the New York Stock Exchange. It was able to close last week with a market capitalization near $10 billion, raising around $500 million in its IPO. Of course, this got the attention of many investors who wondered what Doximity is and why the company was surging on its public debut.
Doximity wasn’t lumped into the list of billion-dollar tech companies. During its last funding round in 2014, the company was valued at under $400 million. Tangney said that because Doximity is profitable, it still hasn’t touched the $50 million it raised seven years ago. The company didn’t need the money it raised and didn’t need to have any more funding rounds over past seven years because it was making a profit.
Tangney said in an interview after ringing the bell at the NYSE:
I did resist some of the Silicon Valley wisdom of, you need to go big, you need to hire 40 more salespeople and do all these things.
He added:
The reality of health care and our clients, who are very staid institutions, a lot of non-profits 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 let you grow.
Essentially, Tangney doesn’t believe that it would be worthwhile for Doximity to aim for massive growth if its target market accepts it. Most of the company’s revenue is earned from drugmakers. “According to Reuters, Doximity’s 1.8 million members represent 80% of U.S. doctors. Eighty percent of its revenue comes from advertisements paid by pharmaceutical companies and hospitals, with the remainder derived from recruiters and telehealth,” Forbes reports.
Doximity doesn’t quite fit that Silicon Valley mold, and maybe that’s a good thing. He also mentioned in the interview that the company isn’t inclined to pay for branding for the sake of building its profile. This could explain why the company has remained unknown to most investors and the investing world. Tangney believes that the best advertising has come from doctors who endorse Doximity’s product through their practitioner networks.
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Despite being low-key within the Silicon Valley world, Doximity has been able to stay profitable and maintain strong financials. Last fiscal year, it generated over $200 million in revenue and produced over $50 million in net income. Doximity’s platform for medical professionals has become one of the largest medical networking apps, with about 1.8 million members.
Tangney aimed to fix the challenges that he noticed in the medical field. He found out through his many conversations with medical professionals that communication had become a huge barrier and that it’s often stressful getting in touch with patients, other doctors, administrators, or recruiters.
Tangney estimated that about 80% of communication in the industry “is done via snail mail and fax.” He commented that “software is indeed eating the world, but it kind of choked a little bit on health care.” And Doximity was created to bridge the gap and create a place to communicate.
The demand was high and explains why Doximity serves more than 80% of U.S. physicians and over 90% of recent medical school graduates. Per Tangney, product development at Doximity has been centered around doctors and what they need, which explains why in the company’s IPO plans, Doximity decided to allocate 3.5 million shares of its IPO to doctors on the platform, which represented 15% of the offering.
And with Doximity’s public debut success those doctors also made a decent amount of money from the company’s IPO. Doximity’s stock surged 115% in its first two days of trading. The value of shares owned by doctors increased from $91 million to over $195 million. Tangney had this to say about this decision:
Physicians are sort of outsiders in the financial markets and business world. Yet in our life and world, they’re the insiders, they’re the people we care about most. We’d rather the shares go to them if there’s a pop than to some hedge fund somewhere.
Doximity cares about what it’s doing and cares about its platform’s users. It isn’t interested in hyping up its business into something that it isn’t. Health care accounts for 18% of the U.S. economy, so there will always be room for Doximity to make money as long as it can keep its values and continue to expand and offer valuable features to its users.
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Until next time, Monica Savaglia Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.
