SmileDirectClub founders Alex Fenkell and Jordan Katzman, who met at summer camp as teenagers, are ... [+]
When SmileDirectClub makes its public debut in New York this month, the company’s 30-year-old founders are set to become two of the youngest entrepreneurs in the nation to crack into the billionaire ranks. One of their dads is also expected to join them as a newly minted billionaire.
Jordan Katzman and Alex Fenkell, both 30, started the custom teeth-aligner company in 2014 and each owns close to 25% of its Class B shares ahead of the initial public offering, according to a regulatory filing submitted to the Securities & Exchange Commission on Tuesday. If shares price at the bottom of the expected range, Katzman’s stake would be worth $1.4 billion. Fenkell, who owns slightly less, would have a stake worth $1.3 billion.
That type of stake would make Katzman and Fenkell among the youngest billionaires in the nation, alongside the likes of Patrick and John Collison, the founders of Stripe, who are 30 and 29, respectively; Evan Spiegel, the 29-year-old creator of Snapchat; and Kylie Jenner, the 22-year-old mastermind behind Kylie Cosmetics.
The biggest winner, however, is Katzman’s father. David Katzman, 59, has served as CEO since the company was started. He is also the largest shareholder, with nearly a third of the company’s Class B shares, which is good enough for a stake worth $1.8 billion at the low point of the range. Katzman’s investment firm, Camelot Venture Group, provided initial funding for the company and has also invested in direct-to-consumer companies like Quicken Loans and 1-800-Contacts.
The Nashville-based company has billed its clear aligners as a cheaper, better alternative to braces. It has undercut dentists and orthodontists by charging just $1,850 and allowing customers to take impressions of their teeth at home or at one of the company's 300-plus locations. Afterwards, a remote dentist or orthodontist reviews them and a custom aligner is created and mailed to the customer’s doorstep. The company says treatment plans typically last just five to ten months.
“The idea for SmileDirectClub was born 5 years ago by our founders Jordan and Alex, and our mission has been clear. . . . Bring new smiles to the world through accessibility, convenience and affordability!” wrote David Katzman in a letter to investors. The company says that traditionally a consumer could expect to pay an orthodontist upwards of $5,000, plus would have to make time for repeated office visits that often stretch over several years.
The company’s efforts have garnered fierce opposition from the dental industry, with the American Association of Orthodontists filing complaints to dental boards in 36 states and the American Dental Association issuing a resolution “strongly discouraging” people from using the service.
SmileDirectClub is going public at a time of enormous growth, yet widening losses. Revenue jumped by 190% to $423 million in 2018, and the company says it has attracted 700,000 customers since its inception. However, losses also swelled to $75 million last year, up from $33 million in 2017. The company has spent heavily on marketing, with more than half of its revenue last year going toward plastering its ads on social media, television and billboards.
The company expects to price its shares between $19 and $22, according to regulatory filings. It plans to trade on Nasdaq under the ticker symbol SDC.
