DSOPro: Tell us about your career background and how you got involved in DSOs/DIA. What do you do at DIA?
Kentucky Morrow, Principal:
In school, I interned with several MedTech startups and worked with a crossover fund (a private equity fund that does late-stage buyouts and early-stage venture investing) focusing on the healthcare sector. Those experiences made me want to work in venture capital. To get there, I joined an investment bank where I was able to focus on the healthcare industry. My main coverage areas were healthcare services and medical devices, particularly orthopedics. That was a great experience where I got to work with executive teams and boards of directors on various complex transactions ranging from mergers and acquisitions to growth financings and even strategic partnerships.
I connected with Doug Brown and Thomas Sharpe early in forming Dental Innovation Alliance (DIA). The DIA idea was exactly what I was looking for to make the leap from investment banking to venture capital; it was a firm that genuinely provided support to entrepreneurs beyond just capital. The combination of deep industry knowledge and operating experience of Doug and Thomas combined with the investor base that can help accelerate portfolio company growth is something really special—not just in the dental industry but in the whole VC marketplace.
I was brought on board to help expand DIA’s financial background, in addition to already present dental acumen, and help with deal sourcing. DIA has taken off far faster than any of us initially anticipated. I joined DIA as a Principal and evaluate early-stage dental and health technologies, both software and devices/therapeutics. In addition to the work I do on the investment side, I also help with several portfolio value-creation initiatives and growing our industry connectivity.
My most important non-investment project is our Alliance program. The Alliance is where dental organizations from emerging DSOs, apex DSOs, and other industry participants join and interact with DIA. These organizations are sometimes investors, but many want to be part of our organization to better understand the emerging technologies that will shape the future of dentistry.
Mark Friedman, Executive Vice President of Operations and Investments:
I’m a native New Yorker, but I went to Duke University for graduate school, got an MBA, and never left. After graduating, I joined a very early-stage entrepreneurial business, UAI Technology, with a professor from the business school. We built that over 30-plus years to include more than two dozen mostly early-stage businesses, which we either started, invested in, or partnered with others on. A number of those were successful and we were able to exit from them.
We started doing some private investing as well. One investment was in DentalCare Partners where we knew one of the founders. During that process they hired a new CEO named Doug Brown! That was his entree into the dental business, and we stayed close over the years. I had my start operating DSOs when UAI started a DSO called Garden State Dental, which I was president of. Doug was a lot of help as I was learning that business. We ultimately sold the DSO, and those practices are now part of the Dental Care Alliance network.
I left the dental business for several years but was still with UAI Technology. One day Doug mentioned a vacancy in his senior team at Affordable Care where he was then CEO. Affordable Care was thinking about having a private equity transaction and I thought that would be an interesting thing to do. So, they offered me the position of Vice President of Development, and I helped with the transaction with Berkshire in 2015.
I left after a few years to start my consulting business, Lakeview Business Advisory and Management, and provided C-level services to different businesses. In August 2022, Doug told me his thoughts about starting an organization that ultimately turned into DIA. I knew Doug had been doing some investing with Thomas Sharpe, who I was aware of from his involvement in Affordable Care.
When I heard about the DIA concept, I thought it was a fantastic idea and agreed to help build it. I could utilize the dental knowledge I gained over the years along with my experience as a private investor as president of an angel investment group called RTP Capital. I thought this venture would do a lot of good by helping early-stage companies with some great ideas and investment potential.
At DIA, we all wear multiple hats, which is classic for early-stage ventures. As Executive Vice President of Operations and Investments, I help build the structure of the organization, work with the attorneys on the legal aspects of investments and building the business, handle the accounting, HR work, and also give thoughts on the investment decisions as part of the investment committee. Kentucky and Kate handle the bulk of the diligence work, but I get involved with that when needed. And I’m involved in marshaling the portfolio companies after we make investments. I’m also a board observer for one of our portfolio companies.
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Kate Orr, Senior Manager of Operations and Investments:
I graduated from Elon University with a double major in accounting and entrepreneurship. Growing up in a family of small business owners, the need to fully understand a business’s financials was drilled into my head. I earned my CPA license and worked in Assurance for PricewaterhouseCoopers at the beginning of my career. I worked and traveled with them for several years before deciding to set down some roots in Raleigh, North Carolina. I began working for Venture Back Office (VBO), a fund administrator, which was acquired by TMF Group during my tenure there.
At TMF Group, I worked with a variety of venture capital and private equity clients with different types of underlying investments from emerging technologies to cryptocurrencies. My team helped with everything from management company operations to fund capital calls and distributions, limited partnership agreement interpretation, and fund compliance. Virtually all sorts of treasury management and investor relations were also included. The scope of work was very specific to each client and customized for them. After four and a half years, I decided to move into consulting work on my own. I had recently married at the time and relocated to the North Carolina coast.
I wanted to explore other opportunities career-wise, and as a consultant had the opportunity to work with a couple of different audit firms and small businesses as well as individuals. A former coworker was working with DIA and introduced me to the team to see if I would be a good fit to take over her responsibilities. I started consulting with DIA in June 2023.
I was initially brought on for the extensive fund administration background I have because that is a skill the team did not already possess in-house. That role has since transitioned to also include more on the investment side, from sourcing to performing due diligence and making sure that they’re the right fit for DIA. That is on the front end, pre-investment. After investing, I help with portfolio monitoring to ensure that these companies have the resources they need from DIA to help them be successful and that DIA has the right data from each portfolio company.
Along with the deal sourcing, I’m performing detailed industry research into 40+ different vectors that we’ve identified as potential investment areas. A few of those include the dental membership plan space, financial technology, AI in diagnosing, and beyond.
I also work on the operations side of DIA, which includes managing the SPVs, of which we currently have five. As part of this, I collaborate with the fund administrator, tax and audit accountants, and the legal team to make sure our books and records are in line and our investor communications are prepared and disseminated at the appropriate times. Additionally, I manage our internal CRM, which includes our relationship with investors, potential investments, and the emerging DSOs who are part of our alliance program.
DSOPro: What makes your investment firm DIA so different from others?
Kentucky Morrow:
First, there is a deep expertise within the dental sector. Dental is what we do all the time, and it was founded by people who have experience operating DSOs, evaluating different technologies, and looking at dental and medical devices. Second, we go very deep with our portfolio companies and write meaningful checks. Finally, we pride ourselves on being a value-added investor. Our entire investment approach is based on adding significant value to each investment.
We’re also highly selective because we want to ensure we’re investing in the best companies as we are contemplating adding value to our portfolio companies. Many funds don’t create a partnership by rolling up their sleeves, going through strategy sessions, and making sales calls with entrepreneurs. When we invest in a company, we work very intimately with them to improve their product offering, help with sales, and accelerate their growth. That’s unique, not just within the dental sector but in the VC sector overall.
Our investor base is a broad spectrum of C-suite or board-level individuals at DSOs, DSOs themselves, individual dentists, other industry participants, family offices, and pension funds/endowments. We’re constantly being approached by individuals and other types of organizations.
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Mark Friedman:
DIA has brought together this group of 40 or so other dental professionals as investors who can really understand what a technology company is trying to do. We can tell if there is a need for that technology and if it is something that would have market acceptance. It helps us determine if a company would be a good investment for the group. This unique model, in my opinion, gives us a very strong differential advantage.
Our very skilled team includes people with expertise from the financial and investing domains as well. And it’s not just the internal team that makes DIA special, it’s the relationships we’ve built with our member investors. There is a very broad knowledge set and we’re all willing to listen to each other’s perspectives on things.
Kate Orr:
Our intense focus on dental enables us to understand and make connections with the top players, understand the ebb and flow, the intricacies, the relationships, and how new technologies and products are accepted by the leaders of the industry. I think too often firms are spread thin because they want to have a taste of everything on the buffet, but one of DIA’s core strategies is focusing completely on dental right now and capitalizing on the abundance of growth and opportunity in the industry.
DIA takes an active role in helping the portfolio companies achieve their goals and gives them direction and advice for growing their businesses. We’re not managing the operations of the portfolio companies as we don’t have controlling interests. However, we are providing a lot of connectivity and support that is incredibly helpful for them and their outcomes.
DSOPro: What do you see in the future for DIA and the dental industry?
Kentucky Morrow:
First, DIA is excited about where we are and where we’re going. Support from the dental industry and our other financial partners has been overwhelming. We’ll continue to form partnerships with new portfolio companies and innovations.
I think dentistry is at an inflection point in terms of adopting innovation. Historically, dentistry was behind medical when you look at electronic health records. But through DSO consolidation, industry pressure, and an evolving attitude in the industry, that has shifted.
Medical adopted many technologies early on. There are a lot of real lessons that can be applied to dentistry as these new technologies begin to be adopted. We believe these new technologies have the potential to leapfrog what we’re seeing in terms of medical software solutions. A growing understanding of the impact of oral health on systemic health is also a driving force behind innovative devices.
Regarding specific vectors, salivary diagnostics and testing are moving toward a new standard of care. Everyone is focused on AI, and it is a very exciting category right now – not just for pathology but also for revenue cycle management (RCM) and other business processes. The RCM sector is another area we’re looking at. We think that’s a real opportunity on both the insurance and DSO side for innovation to improve that process.
I’d also say improving clinical outcomes by upskilling general practitioners. We’re seeing easier-to-use innovations that make implant, orthodontic, and endodontic treatment easier, that help GPs by making procedures safer, faster, and more effective. There are also software technologies that allow GPs to have access to key opinion leaders or best-in-class specialists as they bring those procedures into their practices.
We’re always looking to grow our partnership with DSOs and other industry participants through our Alliance program. We regularly participate in webinars and provide access to the different technologies that we have evaluated and deemed best in class. People really enjoy the discussions with us and peers to understand where the industry is going. If you’re interested in dental technology and innovation, please reach out!
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Mark Friedman:
When I first came into the DSO world in the late ‘90s, it was a very different environment. Many people viewed DSOs as evil corporate dentistry invading the dental world, which really wasn’t true. But perception plays a very important role in how people see things. The industry has gone through huge steps in that time from the growth of the Association of Dental Support Organizations (ADSO), which Doug and I helped build. Now dental schools help students understand what the DSO model is all about, which makes a big difference. And DSOs have done a ton of giving back to the community.
DSOs are going to continue to play a very important part in the evolution of dentistry as technology changes. DSOs may be able to bring technology in at an earlier stage than an individual practice might, and they can have people validate the technology internally. Those things are helpful to the overall dental industry, and DIA stands ready to help make that connection happen.
Kate Orr:
We’ll review our investment sourcing vectors and prioritize the greatest needs across the dental industry. These will guide our review of the most attractive and cutting-edge companies that DIA can invest in to further dentistry and provide returns for all our stakeholders. We’re also very interested in the growth of our internal community of healthcare professionals and DSOs to both gauge need and deploy our investments where helpful.
We have curated a very differentiated investment process. I think we do a great job sourcing the potential investments and conducting thorough due diligence. We have access to thousands of dental practices to keep a pulse on the market and on their needs. We also have the operational background to understand how the portfolio companies are functioning and if they are on track for success.
Our investment committee has very deep industry knowledge and we lean on those individuals when we look to invest in a portfolio company. We also provide very strong post-investment support and can connect entrepreneurs to industry leaders and clinical KOLs. One of our ultimate goals is to be an industry connector.
DSOPro: Lastly, Kentucky, please discuss the types of portfolio companies DIA invested in.
We look for innovative companies with early signs of product market fit but that haven’t yet achieved scale. This often means the companies are at the commercial stage. We focus here because it’s where our knowledge, expertise, and connectivity with our investors can help entrepreneurs scale. As we continue to grow, we have started to look at earlier-stage companies and highly accomplished entrepreneurs to back with smaller initial investments to increase our investment as their company scales.
We currently have five portfolio companies. UptimeHealth was our first investment, and we’re super excited about the trajectory. They offer equipment maintenance and compliance tracking software that enables practices to track their devices and equipment. They also developed a marketplace for service technicians who can rapidly respond to requests from dental practices regardless of their relationship with a given equipment distributor.
For DSOs, UptimeHealth is a way to reduce overall equipment maintenance costs and track compliance, which reduces staff time. They formed new relationships recently with capital providers and debt lenders that, because they’re tracking and monitoring their equipment, they’re allowing DSOs to expand and grow their asset-based lending facilities and manage their capital expenditures.
The second company we invested in is Relu, based in Belgium. They offer AI for treatment planning and segmentation on 3D topology for imaging, for both CBCT and IOS images. It improves image clarity, patient case acceptance, and clinical outcomes within implant and orthodontic workflows. They focus on complex treatments using 3D imaging, not on pathology and radiographs like many of the current dental AI solutions. They partner with organizations like Planmeca and Ray to make their technology available in the practice workflow with minimal additional cost and within existing workflows. As you can imagine, with the surging demand for AI solutions, they are seeing robust demand from OEMs seeking best-in-class solutions that they can white-label or plug into their existing software.
The third company is Dentognostics or Dento, located in Germany, which just entered the US market. They offer a salivary oral fitness test that measures a biomarker called aMMP-8 that identifies collagen breakdown and can help predict the onset of periodontal disease up to 5 years before visible signs and symptoms. Like a COVID test, it is straightforward to administer and may help drive patient compliance with recommended treatments, brushing, flossing, etc. From a clinical and financial standpoint, we’ve seen it result in a significant uptick in hygiene appointments and patient case acceptance after they see the test results. There is also an implant safety angle to this technology, which helps prevent and identify early onset peri-implantitis and avoid implant failure. I would be surprised if Dento’s test is not considered the standard of care within the decade.
Our fourth investment is in Cloud Dentistry, based in Texas, which offers a workforce management platform for temporary labor. This is exciting because it unlocks fractionalized labor pools to capture additional incremental revenue that otherwise would be lost at the practice level. It also helps reduce the demands and costs associated with employee recruitment and retention in identifying and recruiting employees. They are also developing new products that will transform how many DSOs think about their labor. It’s a simple software subscription fee rather than a placement fee whenever you need temporary or permanent labor. We typically see DSOs experience 20% plus cost reductions relative to other labor or staffing platforms. Cloud started in the solo practice market, but as DSOs have begun to look at their solution, it has quickly become a no-brainer.
Our latest investment is in Odne, based in Switzerland. They are an innovative endodontic platform that can expand and improve root canal treatment. Odne has developed multiple devices that allow a root canal to be performed safely, faster, and more effectively. Additionally, their advances in material technology have the potential to make the endodontic market significantly better for both specialists and GPs. They are launching in the US market in early 2024, and we expect meaningful adoption based on our conversations with some of the highest volume root canal treatment performing DSOs.
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Kentucky Morrow, Principal, is a seasoned investment professional with experience in the healthcare, technology, consumer, and industrials sectors. He was previously a Vice President of Investment Banking at England & Company, a middle-market investment bank focused on the healthcare, technology, and industrial sectors. While there, he advised boards of directors and executive teams of leading middle market companies on mergers and acquisitions, raising growth capital, and strategic initiatives. He is a Co-Founder of Ralli, a CPG company focused on alcohol health and wellness. Morrow holds an M.S. degree in Healthcare Management from Johns Hopkins University and a B.A. degree in Economics with a concentration in Finance and Political Science from Emory University. Morrow is a board member of Milk & Bull, a design agency focused on branding for CPG companies. He is on the advisory board of The Alliance for Benzodiazepine Best Practices, a nonprofit focused on evidence-based improvements to prescribing practices.
About Mark Friedman
Mark Friedman is Executive Vice President of Operations and Investments with DIA. Mark has spent most of his career helping build entrepreneurial and later-stage businesses in a variety of industries, including dentistry, healthcare, education, and software. He’s been involved with executive management at two DSOs, Affordable Care and Garden State Dental. Mark is also an active angel investor and is co-founder of RTP Capital Associates; an executive committee member of the RTP Angel Fund; and a board member of the Angel Capital Association. Mark has an MBA from the Fuqua School of Business, Duke University, his bachelor’s degree from the University of Rochester, and is a Certified Financial Planner.
About Kate Orr
Dental Innovation Alliance (DIA)
Dental Innovation Alliance (DIA) is a venture capital firm that funds, advises, and propels the success of early-stage companies building the future of dentistry and health through technology. Its investor base includes executives and experts from some of the largest and most innovative dental support organizations and other dental businesses. DIA has offices in Raleigh-Durham, Nashville, and New York.