Jeff Tangney launched his first health-tech start-up, Epocrates, in the middle of the dot-com bubble. While the company survived the crash and eventually went public, the endgame was a disappointing acquisition for less than $300 million.
By the time Tangney started his next venture, Doximity, in 2010, he’d learned a few things: Don’t raise too much money. Don’t burn too much cash. Fix a real problem for doctors.
With Doximity, Tangney created a web service that’s both a professional network — think LinkedIn for doctors — and a secure way for medical experts to communicate and share information with patients and colleagues. It now counts 1.8 million medical pros in the U.S. as users, including over 80% of physicians.
On Thursday, Doximity debuted on the New York Stock Exchange, closing the week with a market cap of almost $10 billion after raising around $500 million in its IPO. Tangney’s stake is worth $2.9 billion.
Those are big numbers especially when you consider that, prior to this week, Doximity never showed up on a “unicorn” list of billion-dollar tech companies. Its last financing round in 2014 valued the company at under $400 million. Tangney said that because Doximity is profitable it still hasn’t touched the $50 million it raised seven years ago.
“I did resist some of the Silicon Valley wisdom of, you need to go big, you need to hire 40 more salespeople and do all these things,” Tangney, 48, said in an interview on Thursday, after ringing the bell at the NYSE.
Doximity CEO on physician social network going public: “Our mission is to help doctors be more productive”
In Doximity’s target market, there’s no point in aiming for rocketship growth, Tangney said. The company generates revenue from drugmakers, who use the site to market treatments to a very targeted audience, and health systems looking to promote content to doctors across the country. It’s also a recruiting tool hospitals and health centers use to fill key jobs.
Tangney recognized early on that he could expand only as rapidly as customer budgets would allow.
“The reality of health care and our clients, who are very staid institutions, a lot of non-profits that have been around for 100 years, is that even if you lean in and hire tons of sales and marketing people, they’re not going to let you grow,” Tangney said.
He’s also not inclined to pay for branding just for the sake of building his profile — another reason why the company has remained largely unknown in Silicon Valley even though it’s headquartered in San Francisco. Doximity’s advertising budget for last fiscal year totaled $2.6 million, or roughly the amount Uber spends on an average day.
Tangney said the best advertising has come from doctors touting the product within their practitioner networks.
Meanwhile, the company generated over $200 million in revenue last fiscal year and produced over $50 million in net income.
Climbing trip at Stanford
Tangney’s journey to Doximity started in the late 1990s while he was living in New York with a trained physician named Richard Fiedotin. From their un-air-conditioned apartment, the pair came up with the idea of creating an app for the Palm Pilot, which had just hit the market, that would allow doctors to get critical information.
Tangney and Fiedotin took that idea with them to Stanford Graduate School of Business, where they met another physician named Tom Lee. The three bonded over the intersection of tech and health care while on a teambuilding climbing trip for students in the program.
In 1998, they started what became Epocrates, and over the next two years raised about $40 million from some of Silicon Valley’s top health investors. As mobile moved to BlackBerry devices and then to iPhones, Epocrates gained traction as a way for doctors to make decisions about prescriptions and patient safety while on the move.
The venture capitalists told Tangney to hire like crazy, so he did. Then came the tech crash and the crisis from the 9/11 terrorist attacks. In 2002, Epocrates was forced to cut a bunch of jobs, Tangney said.
The company held on, but it was a slog. Fiedotin left a few years later, and Lee departed to start One Medical, a chain of primary care clinics that uses technology to improve the patient experience. Tangney stuck around a bit longer, and tried to take Epocrates public. Then came the financial crisis of 2008, and the company had to withdraw its prospectus.
Tangney finally left in late 2009, a year before the eventual IPO and four years before Athenahealth bought the company for $293 million.
“There was a point during the last couple years of my tenure where it felt like we were in this tunnel, marching toward a goal,” Tangney said. “I wasn’t having as much fun. When you’re not in that place of loving what you do, you’re not doing your best work.”
Tangney had spent the past decade selling products to medical centers and talking to doctors about the challenges they faced doing their jobs. He kept those conversations going and learned that communication was a constant point of stress, whether it’s getting in touch with patients, other doctors, administrators or recruiters. In Tangney’s estimation, 80% of communication in the industry “is done via snail mail and fax.”
“Software is indeed eating the world but it kind of choked a little bit on health care,” he said.
Shari Buck had worked with Tangney at Epocrates. She’s one of the first people he approached with the idea of creating a professional network designed for doctors. Buck said she hopped on board “without reservation,” joining as one of the three co-founders, along with Nate Gross, a doctor who is also the founder of health-tech incubator Rock Health.
