Mumbai-based affordable dental care services company MyDentist raised its Series B round of funding this Monday from new investor Asia Healthcare Fund and existing investor Seedfund. For Vikram Vora, MyDentist’s founder and CEO, the round spells growth at an accelerated pace over the next 18 months, at the end of which he expects his four-year old company to own the largest chain of dental care clinics in its segment in the country. It currently runs 40 clinics, employs 160 dentists, revenues are at around Rs 12 crore and is not yet profitable. We chatted with Vora earlier this week on his expansion plans, his choice of investor for the new round and what challenges he anticipates ahead. Edited excerpts:
1. When we spoke last October, you were just about to kick off the fundraising process. Has it been tough?
It was not tough from the perspective of MyDentist’s own business. We did have three termsheets to choose from. But the somewhat negative environment around dental care businesses did somewhat impact us. We cater to the common man and that requires a different perspective on the investor’s part in terms of valuations.
2. Why did Asian Healthcare Fund make sense for you?
They were in fact one of the first investors that we met. At the very first meeting, after they had been through our spreadsheets and business projections, Ajay Vij (Asian Healthcare Fund co-founder and CEO Ajay Kumar Vij) said that businesses don’t follow spreadsheets and shouldn’t be taken too seriously. I liked that. They are a pure healthcare focused fund and understand very well that healthcare businesses have a longer gestation period than most other businesses. They also liked our affordable dental care positioning and the focus on core services. Most others seemed more keen on building value through cosmetic dentistry and other such high end services.
3. Who will be joining the MyDentist board from Asian Healthcare Fund?
We haven’t decided all that yet. The investment round has just been completed. There will be a meeting next week and we’ll know then.
4. So now that you’ve raised $9 million, tell us about your expansion plans.
We are at 40 clinics now, 38 in Mumbai and two in Pune. We plan to get to 100-110 clinics by the end of the current financial year. In 18 months from now we should have 150 clinics overall. The two clinics in Pune are still at the pilot stage and that should continue for another two months. But we plan to expand to other cities, though we will stick to the Western region. We want to build regional dominance. After Pune we will go to Ahmedabad and Surat and one more city that we have not firmed up on yet.
5. How many customers do you serve at present? What will the numbers look like in 18 months?
We currently cater to 8,000-9,000 customers per month across the existing network. That’s unique patients. In 18 months we should be close to 50,000 per month.
6. You use a lot of technology to build efficiencies into the business. What’s the new thing you’re doing now?
We’ll be investing some of the capital raised to set up new processes. This will involve some high-tech software for patient management. Everything, from billing to payments to managing schedules will now be on the cloud (patient records are already integrated on a centralized system which enables patients to visit any MyDentist clinic for follow-on treatment). We’re also launching an online portal called askmydentist.in which will offer customers information on everything related to dental care. It could be information on how a root canal is done to what kind of treatment plans are suited for a particular problem.
7. Why do you need to set up a separate portal?
We came with the idea for the portal as a result of the Pune pilots. A lot of our customers there are from the information technology and BPO sectors, they are younger, and therefore demand more information before going in for treatment. As we expand, both the number of clinics and services, the demand for more information will grow.
8. You recently started offering orthodontics services. How is that going?
Yes, we got into orthodontics about eight months ago and business is growing. We’re seeing about 300 patients per month. As a company we are probably the largest consumer of dental implants in the country right now. We have a tie-up with 3i Biomet for importing implants. A big part of the reason business has been growing rapidly is that we’ve made dental implants affordable. On an average, an implant can cost anywhere between Rs 30,000 and Rs 35,000. Most people will usually postpone an implant, which is not a critical treatment, rather than spend that kind of money. I wouldn’t myself. So what we’ve done is two things. One, we’ve lowered the price to Rs 19,000 and this includes the prosthetic. Two, we offer an easy monthly installment payment plan which works out to Rs 2,000 per month.
9. You are accelerating growth now. What kind of challenges do you anticipate?
The main challenge will be people. We will need more dentists. We will either have to keep training new people in the MyDentist way of doing things or we will have to employ laterally from the market (the company employs dentists on its rolls and entry salaries start at Rs 16,000). We will also need to hire more to increase our bandwidth at the business manager level. If you look our model, we are somewhere between a healthcare company and a retail company. Usually people who come from a retail background are not initially comfortable with our model. Logistics is going to be another area that will need to be handled. We currently stock 1,500 SKUs in terms of inventory across independent stock keeping units. This inventory can only be held for a month or a month and half because most of the items are perishable. Managing the logistics of that kind of inventory and ensuring smooth supply to the clinics can be difficult.
10. How far are you from break-even? What kind of economies of scale do you expect to achieve per clinic going forward?
I think we are down to the minimum in terms of exploiting the economies of scale and squeezing out business efficiencies (each clinic, occupying 300 square feet and manned by two doctors, costs about Rs 35 lakh to set up and takes 18-20 months to break even). We’re still expanding and fairly aggressively, so break-even may still be some time off.