How 1 new DSO plans to grow in a challenging economy

San Francisco-based Cliff Ridge Specialty Partners is poised for further growth this year after making its first acquisition in Washington.

The newly launched orthodontic platform acquired Angolkar4Smiles, which has offices in Seattle and Tukwila, Wash. 

Cliff Ridge Specialty Partners, formerly 49 Mile Ventures, was launched in 2023 to support orthodontists. The company raised ​​$25 million in August to support its growth, which includes expanding in the Pacific Northwest region.

Co-CEOs Ananya Shah and Will MacInnis recently spoke with Becker's about the DSO's plans for growth and what dentists are looking for in a partnership platform.

Editor's note: Responses were lightly edited for clarity and length.

Question: How did you both come to start Cliff Ridge Specialty Partners?

Will MacInnis: Ananya and I have spent many years together working in healthcare. My background is primarily in healthcare investing and banking, and Ananya's background is more in consulting and technology. We worked together at another startup previous to this that was doing practice management for dermatology and ophthalmology. We basically wanted to take the playbook that we had built out in that industry and bring it into another industry. So we spent a lot of time looking at different areas of healthcare and ultimately landed on orthodontics. For us, the mission is twofold. One is building it on the playbook that we've leveraged across different industries in the past, which I would describe as being tech-enabled, to bring a different way of operating into orthodontics. Bucket two is designing a model that truly does leave doctors happy. This is something everyone always talks about, but really aligning incentives, making sure the economic structure makes sense for the doctors and allowing for full clinical autonomy and leaving the clinical decision-making with the doctors is the second key facet of what we're trying to put together.

Q: What made you choose orthodontics as your focus for partnerships?

WM: I think there's the fun answer and the less fun answer. The fun answer is we both had braces growing up. The idea of helping kids and adults improve their smiles and feel more confident in their day-to-day lives is something we're both passionate about. The analytical side to that question would be that we spend a lot of time in healthcare. There are a lot of things about orthodontics as an industry that we think are really exciting right now. The growth of Invisalign as a category is something that's been really exciting. I think an orthodontic-focused DSO, which is what we're trying to build, is something that is kind of a newer concept. There have been dental-focused DSOs that have been around for quite some time, so we're excited to bring a newer model to orthodontists specifically, and we feel that it's something they are looking for and are excited about.

Q: What sets you apart from other DSOs?

WM: I think it's our combined experience working at Silicon Valley-based technology companies in the past. We're bringing a new skill set to the industry. I don't mean to call the industry antiquated, but I will say that I've worked in private equity and I've spent a lot of time working with healthcare companies across the board and I do think there is a huge amount of benefit that can come from using even some basic technology tools. So we're bringing the skill set we've built in other industries and are looking to leverage technology at every step of the way and then design the partnerships we have with doctors to really drive success. A lot of our competitors use a one-size-fits-all model where they say, "Hey, this is the way that we do things. You kind of have to fit within our box," whereas I think we're a little bit more flexible to work with doctors, meet them where they're at, and make bespoke deals to make sure everyone is excited about working as part of our platform.

Q: What kind of technology do you plan to bring into your partner offices?

Ananya Shah: We're not going into practices and telling doctors to use this tool or that tool. Primarily on the marketing side, I would say the strategies we deploy are much more similar to what you would see coming out of an early-stage startup that's doing a lot of growth side tactics and using the tools online to get there. So I would say the technology is more to drive patients to the clinic rather than actually what's happening at the clinic. The early results of that have been positive and we're excited to bring that across the network as we build out.

Q: What made Angolkar4Smiles a good fit as your first acquisition?

WM: We got really excited about the Seattle market first and foremost before we decided to go in and start chatting with doctors. It's the highest-growth major city in the U.S., experiencing a huge population boom and a lot of growth in the local economy. So that was one thing that was very exciting for us. The local competitive dynamics is something we got excited about. Then in our conversations with doctors, we just found a really good fit with Angolkar4Smiles, which is the name of our first acquisition.

AS: The big thing for me was just the excitement of the doctor partner. [Dr. Raj Angolkar] Has a lot of pull in the Seattle area and has been practicing for a really long time and has seen trends come and go [and] seen DSOs come and go in and out of his practice. We are looking for early partners who are excited about a startup mentality than a plug-and-play model, and Raj was the perfect fit for that.

Q: What are your plans for expansion this year?

WM: We're trying to be a little bit more focused in the way that we are growing and scaling. Our goal is to build regional density in a small number of markets for the next six to 18 months. So Seattle will of course be a core market of ours. We'll probably pick one or two more core markets that we'll look to design partnerships in, and I would expect that hopefully by the end of the summer, we should have one or two more additional announcements to be made.

Q: Do you plan to open de novo offices as well?

WM: That would be the second leg of the growth strategy, so that is definitely going to be a core part of what we're doing. I think out of the gate, just getting our legs under us, acquisition just makes a little bit more sense to get the platform from what we like to call zero to one. In the background, we're building out a de novo playbook that we're excited to deploy. There are a lot of things we like about the de novo opportunity in some of the markets we're looking at. I would say probably not this year, but next year that will become a part of the story.

Q: Is it nerve-racking to be a startup organization in a challenging economy?

WM: If you look at the way acquisitions were funded over the past six to 8 to 10 years, it looked very different than things do today. That was driven in large part by the low-interest rate environment we were operating in. A lot of our competitors pushed capital structures to a position that may have been a little bit unsustainable and we're now seeing a pullback across the industry, not because deal-making has become less common or doctors are less interested in selling, but [folks are] just dealing with shoring up their balance sheets and basically just refinancing and making sure that their cap structures make sense. 

We're very lucky to have entered the market when we did. We actually raised our funds amid a high-interest rate environment and are looking to over-equitize in our first couple of deals. The key difference between us and the way our competitors have been financing deals is we're not looking to max out leverage when it comes to funding deals. This has happened elsewhere throughout healthcare for many years, but people oftentimes like to push the envelope on taking on as much leverage as possible and it's times like this when interest rates change that it comes back to bite people. So we're looking to take a more balanced approach to investing and putting in as much equity as we feel is the right amount. And using debt but not in an aggressive way.

AS: Our deals generally look very similar to partnerships with doctors. So they are strong and big owners of the clinic, which has been great for us in this initial deal and we'll continue to do it. It just aligns incentives and helps us out and I think that is the structure we really like. The second thing is generally we are pretty selective with who we buy. We've had a ton of conversations and are going to continue being selective. To that end, we're not slowing anything down. We're excited to go full steam ahead. We will be selective and we will structure deals with good partners that are excited to grow.

Q: What are dentists looking for in a partnership platform?

WM: First and foremost, they are looking for a partner who is going to carry on the ethos and legacy they've built within their practice. You're talking about doctors who have been building their businesses for anywhere from 10 to 40 years. They have staff who have been with them for a long period of time. They have patients who they saw as children who are now adults sending them their kids. They have reputations in the community that are tied directly to their name and their family. They're looking for someone who can maintain, if not build on the quality they've built in their practice. Beyond that, I think they're typically, depending on what stage of career they're in, they're usually excited about the prospect of someone coming in and taking some of the back office functions off their hands, introducing new technology, deploying marketing tools to get additional patients in the door. I think those are the key ones.

AS: Simply put, It's protect my brand, protect my staff and then grow my practice. Don't come in here and shake everything up. I've been operating this thing for a long time. I know what I'm doing. So I think what we try to do is just be additive. We have our set of things we need to implement. Generally, it's not let's change this process or this process, but let's try to be additive across getting more patients in the door, making sure the staff is taken care of, making sure we're hearing what the staff and what the doctor needs and making those changes when it's reasonable for us to do so. Generally, I feel like in the hundreds of conversations I've had with pediatric dentists and orthodontists now, it's make sure my staff and my brand are taken care of and make sure we're getting more patients in the door, and that's what we try to do.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.