Hopefully, you don’t know the drill. You’re the sort of person who brushes twice daily, flosses every night, uses the fancy mouthwash, and are on a first-name basis with your dentist and dental hygienist, to whom you make a pilgrimage every six months on the dot. Right? Right?
Of course not. Nobody is perfect. Who can be? If we’re being honest here: having teeth is great and all, but the maintenance is kind of a drag. It’s something we all have to do, though.
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Accordingly, oral care is a fairly big market – in the $40 billion to $50 billion range by 2020, depending on the data source – with proven business models and entrenched incumbents to match. It’s just the sort of market clever entrepreneurs can find interesting, even if only from a business perspective.
Oral Care Startups Chomp Down VC Capital
Before getting into how these companies make money, let’s take a look at some of the venture-backed oral care companies which have raised the most funding.
Let’s start with toothbrushes, specifically electric ones. Following the commercial success of electric toothbrushes produced by incumbent brands like Oral B and Sonicare, several upstart companies joined in the market.
The table below shows a selection of the most-funded venture-backed companies in the electric toothbrush market.
And here’s a selection of venture-backed companies making toothpaste, mouthwashes, floss, and other consumable goods.
There’s a reason why investors might find these businesses appealing: most of these companies position their brands as upmarket, premium alternatives to what the big incumbents produce.
An example is the coconut oil-coated, exotically-flavored floss produced by Cocofloss, which costs $8 for an attractively-packaged 32-yard spool (plus shipping, if your online order is less than $10). On a cost-per-yard basis, even the spendier incumbent floss brands are roughly half the cost of Cocofloss.
The other appealing factor is the recurring revenue generated by both time-tested and emerging business models.
Consumables, Subscriptions, And Services
A large portion of venture-backed oral health companies follow similar models to the razor and shaving industry.
Most consumer-facing startups in the oral care market are predictably focused on consumer goods and electronics of some sort, often with a subscription or other service component to their businesses. In other words, there are a bunch of startups making and marketing toothbrushes, toothpaste, and floss, all shipped to your door at regular intervals.
There are roughly three categories of business model here:
- Fully-disposable products
- Up-front spend on the base device, with replaceable, disposable cartridges sold at high margin.
- High-cost base device, with low-cost consumable component parts.
Let’s get the last one out of the way first: there is no oral care equivalent to buying a safety or straight edge razor handle for a relatively large sum ($25 and up, usually) and then spending just a few cents per blade. Brush heads are priced more like multi-blade razor cartridges at a few dollars a pop.
Many electric toothbrush companies do follow the cartridge razor strategy: sell the handle for a low price, and make fat margins on cartridges and accessory consumable goods that need to be refilled regularly. Quip, for example, currently sells its electric toothbrush for as little as $30 for the base model, and the company will send replacement brush heads every three months for $5. A competing company, Goby, sells its base brush for $50 and ships brush heads for $6.
Just as incumbents figured out that there’s huge lifetime value to a loyal customer, startups are doing the same. This applies to both the high-end subscription toothbrushes as it does to more expendable goods like mouthwash and floss.
Beyond subscriptions, though, some oral care startups offer other tech-enabled services and perks. This includes the likes of Beam Dental, which started as an app-enabled Bluetooth toothbrush company and pivoted into the insurance business by using user-specific brushing data to offer lower dental insurance premiums to those with good brushing habits. It’s a similar model to auto insurance companies offering better rates for safer drivers, as measured by insurer-installed hardware.
The Future Smiles Brightly
As sensors grow smaller and cheaper, ever-smarter toothbrushes and oral care products will be available to the folks who are into that sort of thing. As a distribution channel, the internet enables niche products (like $8 dental floss) to find customers. And, if you ignore serious privacy concerns, all the “big data” generated by all these gadgets could be a major boon to health care providers and insurance companies.
It’s important to note that we’re just brushing along the surface of the oral care sector here. There’s surprisingly fierce competition among orthodontics startups, for example. And there’s no doubt plenty of companies that sell their wares directly to dentists, which we didn’t cover here.
So brush your damn teeth.
Top Image Credit: Li-Anne Dias