Orthodontics Startup SmileDirectClub Gets $3.2 Billion Valuation

(Bloomberg) -- SmileDirectClub, the startup at the forefront of a boom in at-home teeth straightening, said it raised $380 million in a new funding round, valuing the company at $3.2 billion.

Leading the financing was private equity firm Clayton, Dubilier & Rice, with participation from venture capital firms Kleiner Perkins and Spark Capital, SmileDirectClub said in a statement Wednesday. As part of the deal, CD&R partner Rick Schnall will join SmileDirectClub’s board of directors.

“Even among its peer group of unicorns, SmileDirectClub’s growth stands out,” said Noah Knauf, a general partner at Kleiner Perkins. “Consumers simply love the freedom of getting aligners delivered straight to their home.”

The Nashville, Tennessee-based company, in which clear-braces maker Align Technology Inc. owns a 19 percent stake, said the funds will be used for innovation, research and development, and international expansion. JPMorgan Chase & Co. served as the sole placement agent.

By eliminating the in-person visit to an orthodontist, SmileDirect offers remote teeth-straightening services at a cost that’s as much as 60 percent less than traditional methods, such as a doctor using Align’s Invisalign system. The company has treated more than 300,000 patients with 3D-printed, custom-made aligners to date.

The traditional orthodontist industry is opposed to the method, warning consumers about the possible dangers of undergoing a complex medical procedure without the in-person supervision of a dental professional. The main orthodonists’ trade association has filed complaints against SmileDirectClub with 36 state dental boards and attorneys general, alleging regulatory and statutory violations.

About 300 million people worldwide with teeth misalignment could benefit from straightening yet are unlikely to seek treatment through a traditional doctor’s office, according to a February securities filing by Align. The global orthodontics market, including traditional and clear braces, is projected to reach $2.6 billion by 2023 from $1.5 billion in 2016, according to Allied Market Research.

Align shares fell 7.3 percent to $316.03 during Wednesday’s stock market rout. Still, the shares are up 42 percent this year.

Align didn’t immediately respond to request for comment.

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