The Last Smile
On a Friday afternoon in December 2023, the employees of SmileDirectClub received an email informing them that the company — which had once been valued at $8.9 billion, which had shipped more than two million clear aligners to customers in the United States, Canada, the United Kingdom, Australia, and a half-dozen other countries, which had at its peak employed more than 6,000 people and operated nearly 300 retail locations called SmileShops in Walmarts and CVS stores and strip malls across the American suburban landscape — was ceasing all operations, effective immediately. There would be no severance for most. Customer treatment plans, some mid-course, would be abandoned. The aligners already in the mail would be the last ones. A federal bankruptcy judge in Houston would oversee the liquidation. The stock, which had debuted on the Nasdaq at $23 per share in September 2019, had already been delisted months earlier, trading in its final sessions at fractions of a penny. The enterprise that had promised to democratize orthodontics — to do for teeth what Warby Parker had done for eyeglasses, what Casper had done for mattresses, what every direct-to-consumer brand of the 2010s had promised to do for its respective category — ended not with a pivot or an acquisition or even a dignified wind-down, but with a bankruptcy filing, $900 million in debt, and a warehouse in Antioch, Tennessee full of 3D printers with nowhere to send their output.
The story of SmileDirectClub is not, in the conventional telling, a complicated one. Scrappy disruptor takes on entrenched industry. Incumbents fight back. Disruptor scales too fast, burns too much cash, runs into regulatory walls and clinical controversies, and dies. But that telling obscures something more interesting and more instructive. SmileDirectClub built, from scratch, a vertically integrated manufacturing and clinical infrastructure that was genuinely novel — a telehealth-enabled orthodontic system that eliminated the orthodontist's office entirely, replacing it with a mail-order model supported by remote dental professionals and proprietary 3D printing at industrial scale. The company's failure was not a failure of ambition or even, in certain respects, of execution. It was a failure of category selection, regulatory positioning, and the particular hubris that comes from believing that because incumbents are expensive and inconvenient, they must also be wrong.
By the Numbers
SmileDirectClub at Its Peak
$8.9BPeak market capitalization (September 2019)
$886MRevenue in FY2021 — the high-water mark
1.8M+Aligners shipped through 2022
~300SmileShop retail locations at peak
$1,950Average treatment price (vs. ~$5,000+ for Invisalign)
$900M+Total debt at bankruptcy filing
6,000+Employees at peak (reduced to ~1,800 by end)
$0.001Approximate final share price before delisting
The arc from $8.9 billion to zero took four years. Understanding why requires understanding not just the company's operating model and competitive dynamics, but the deeper architecture of the DTC boom itself — the venture-subsidized consumer surplus, the regulatory arbitrage dressed up as innovation, the assumption that any industry with high margins and low NPS scores was ripe for disruption. SmileDirectClub tested that thesis more aggressively than almost any company of its era. The market's verdict was unambiguous.
Nashville's Teeth
The founding mythology of SmileDirectClub begins where many DTC origin stories do: with a personal grievance transmuted into a business plan. Alex Fenkell and Jordan Katzman, childhood friends in suburban Detroit, were in their mid-twenties in 2014 when they began exploring the idea that clear aligner therapy — the technology Align Technology had commercialized with Invisalign starting in 1997 — could be delivered without the traditional orthodontic office visit. Fenkell, the son of a successful entrepreneur, had worn braces as a teenager and retained the memory of the expense and inconvenience. Katzman came from a family with deeper pockets and sharper business instincts; his stepfather was David Katzman, a Nashville-based serial entrepreneur who had built and sold Healtheon (later WebMD Health) and various other ventures, and who would become SmileDirectClub's chairman, largest individual shareholder, and, in many ways, the strategic brain behind the operation.
The insight was straightforward and, at the time, genuinely compelling. Invisalign charged orthodontists roughly $1,000–$1,500 per case for the aligners themselves. The orthodontist then charged the patient $4,000–$8,000 for the full treatment, with the markup covering the office visits, the impressions, the adjustments, the overhead of maintaining a clinical practice. What if you could cut the orthodontist out entirely — or at least replace the in-person visits with remote monitoring? You could 3D-print your own aligners, ship them directly to the consumer, and charge $1,895 for what competitors charged four times as much. The margin structure, on paper, was beautiful. The consumer value proposition was even better.
SmileDirectClub incorporated in 2014, shipped its first aligners in 2015, and by 2016 had attracted enough traction to draw the attention of strategic investors. The most consequential was Align Technology itself, which invested $46.7 million for a 19% stake in January 2016 — a decision that Align's leadership would come to regret with extraordinary intensity.
We're not trying to replace orthodontists. We're trying to reach the 85% of people who need treatment but can't afford it or won't go through the hassle.
The company's early operations were built around a surprisingly physical infrastructure. Customers could either order an impression kit by mail — a $49 box containing putty that the customer would bite into, then mail back — or visit a SmileShop, a retail storefront where a dental technician would perform a 3D scan of the customer's teeth using an iTero or similar intraoral scanner. The scan or impression was then reviewed by a licensed dentist or orthodontist (employed by or contracted with SmileDirectClub's affiliated dental practice, or by partner practices in certain states) who would create a treatment plan. If approved, the full set of aligners — typically 15–30 trays designed to be worn sequentially over four to six months — would be manufactured at SmileDirectClub's own facility and shipped to the customer's door.
This was the model's elegance and its vulnerability. The elegance was cost structure: by manufacturing in-house and eliminating the office visit, SmileDirectClub could offer treatment at roughly 60% less than the going rate. The vulnerability was clinical: orthodontic treatment is not a consumer product. Teeth are embedded in bone. Moving them incorrectly can cause root resorption, bite misalignment, gum recession, and in severe cases, tooth loss. The question of whether a remote dental professional reviewing a scan could safely supervise this process — without ever placing hands in the patient's mouth — would become the central controversy of SmileDirectClub's existence.
The Align Divorce
The relationship between SmileDirectClub and Align Technology deserves its own case study in strategic miscalculation. When Align invested in 2016, the logic was defensive: SmileDirectClub was building a channel that could expand the total addressable market for clear aligners by reaching mild-to-moderate cases that would never walk into an orthodontist's office. Align would supply the aligners (or at least the intellectual property and know-how), SmileDirectClub would supply the distribution, and both would benefit from the expansion.
The partnership unraveled within eighteen months. By mid-2017, SmileDirectClub had begun manufacturing its own aligners using HP's Multi Jet Fusion 3D printers — a direct competitive threat to Align's core manufacturing business. SmileDirectClub was also growing faster than Align had anticipated, and its price point was beginning to exert gravitational pull on the broader aligner market. In October 2017, Align sold its stake for approximately $54 million — a modest profit on the initial investment, but a catastrophic strategic error if SmileDirectClub succeeded. The two companies promptly sued each other. Align alleged patent infringement and trade secret misappropriation. SmileDirectClub countersued, alleging that Align was conspiring with the American Dental Association and state dental boards to restrict SmileDirectClub's ability to operate — an antitrust claim that would become a recurring theme.
The litigation was settled in 2020, with both parties agreeing to drop their claims. But the divorce reshaped both companies' strategies. Align launched its own direct-to-consumer channel (Invisalign Go, and later investments in lower-cost aligner brands), while SmileDirectClub doubled down on vertical integration, bringing virtually every step of the manufacturing process in-house.
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The Align Technology Entanglement
Strategic investment to bitter divorce
2016Align Technology invests $46.7M for 19% stake in SmileDirectClub, supplying aligner technology and clinical know-how.
2017SmileDirectClub begins in-house aligner manufacturing using HP 3D printers. Align sells its stake for ~$54M. Mutual lawsuits filed.
2019Both companies go to war in state legislatures and dental boards. Align's market cap exceeds $25B.
2020Litigation settled. Both parties drop claims. SmileDirectClub's market cap has fallen below $3B.
The Align breakup revealed something fundamental about SmileDirectClub's strategic position. Align had a 20-year head start in aligner technology, hundreds of patents, and deep relationships with the orthodontic community. SmileDirectClub's competitive advantage was not technological superiority — it was distribution arbitrage. The company's moat, such as it was, rested on its willingness to operate in a gray zone between retail and healthcare that Align, constrained by its relationships with dental professionals, could not easily enter. When Align proved willing to fight back — and when the dental profession rallied to Align's defense — that gray zone began to narrow.
The Factory in Tennessee
If SmileDirectClub's consumer-facing brand was pure DTC playbook — Instagram ads, celebrity endorsements, refer-a-friend programs — the operational backbone was something far more unusual. The company built what was, at the time, one of the largest clear aligner manufacturing facilities in the world: a 700,000-square-foot plant in Antioch, Tennessee, a Nashville suburb better known for auto parts distribution than dental technology.
Inside the Antioch facility, SmileDirectClub operated an end-to-end manufacturing system that started with digital treatment plans and ended with individually packaged aligner sets ready for shipment. The heart of the operation was a fleet of HP Multi Jet Fusion 3D printers — at peak, reportedly more than 60 — that produced the dental molds on which the aligners were thermoformed. Each customer's treatment plan required a unique set of molds, and each mold was printed, thermoformed (a clear plastic sheet heated and vacuum-sealed over the mold), trimmed, inspected, labeled, and packaged in a process that combined additive manufacturing with old-fashioned assembly-line discipline.
The scale was impressive. SmileDirectClub claimed to be producing over 50,000 unique aligner molds per day at peak capacity. The company's 2019 S-1 filing noted that it had invested heavily in automation and had driven its aligner manufacturing cost to approximately $200–$300 per full treatment set — a fraction of what it cost Align Technology to produce an Invisalign case, though the comparison was imperfect given differences in case complexity.
But scale created its own problems. The facility's fixed costs were enormous, and utilization rates became the critical variable. When customer acquisition slowed — as it did, dramatically, after the IPO — SmileDirectClub was stuck with a factory designed to serve a demand curve that had flatlined. The operating leverage that was supposed to amplify profitability instead amplified losses.
$8.9 Billion for Thirty Seconds
SmileDirectClub's IPO on September 12, 2019, was the kind of public offering that makes venture capitalists write Medium posts about the democratization of finance and makes short sellers begin sharpening their pencils. The company priced at $23 per share, giving it a fully diluted market capitalization of approximately $8.9 billion. On its first day of trading, the stock fell 28%, closing at $16.67. It was the worst first-day performance for a U.S. IPO of that size in nearly two decades.
The S-1 filing told a story of extraordinary growth and equally extraordinary losses. Revenue had grown from $146 million in 2017 to $423 million in 2018. But the company had never been profitable. Net losses were $75 million in 2017, $75 million in 2018, and were running at $100 million through the first half of 2019. Customer acquisition costs were rising. The average revenue per aligner case was declining slightly as the company pushed financing options (SmilePay, an installment plan at $85/month) that deferred revenue recognition and introduced credit risk.
We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future.
The S-1 also revealed the company's unusual corporate structure. SmileDirectClub, Inc. — the publicly traded entity — was a holding company that owned a controlling interest in SDC Financial LLC, which in turn operated the business. The structure was a variation on the "Up-C" model popular with private-equity-backed IPOs, designed to provide tax benefits to pre-IPO investors (principally the Katzman family and venture investors including Kleiner Perkins and Clayton, Dubilier & Rice) through a tax receivable agreement. This TRA, which obligated the public company to pay pre-IPO holders 85% of certain tax savings, would become a source of investor frustration as the company's losses mounted — it was a mechanism designed for a profitable future that never arrived.
The investor who looked past the losses and saw the opportunity was betting on three things: that the clear aligner market was massive and underpenetrated; that SmileDirectClub's direct-to-consumer model would continue to acquire customers at reasonable cost; and that manufacturing scale would eventually flip the unit economics from loss-making to profitable. All three bets failed.
The Orthodontists' War
The most visceral opposition to SmileDirectClub came not from Align Technology — which, as a fellow corporate entity, waged its war through litigation and lobbying — but from the orthodontic profession itself. The American Association of Orthodontists (AAO) and the American Dental Association (ADA) treated SmileDirectClub as an existential threat to patient safety and professional autonomy, and they fought back with every tool available: state dental board complaints, legislative lobbying, social media campaigns, and an unrelenting drumbeat of clinical horror stories.
The clinical concerns were not invented. Orthodontic treatment, even for mild cases, involves biomechanical forces applied to living tissue. The risks of unsupervised or poorly supervised treatment include root resorption (shortening of the tooth root), malocclusion (bite problems that can cause TMJ disorders), and in rare cases, tooth devitalization. SmileDirectClub's model — in which a licensed dentist or orthodontist reviewed the initial scan and treatment plan but never physically examined the patient, and in which subsequent monitoring was conducted through the patient submitting photos via a smartphone app every 90 days — was, in the eyes of many practitioners, clinically reckless.
The counterargument, which SmileDirectClub made loudly and often, was that the company treated only mild-to-moderate cases, that its licensed dental professionals were qualified to make clinical judgments from scans, and that the real motivation behind the profession's opposition was economic protectionism. A $1,950 aligner from SmileDirectClub was a $5,000 Invisalign case that an orthodontist didn't get to bill.
Both arguments contained truth, and neither was sufficient. SmileDirectClub's clinical oversight model was genuinely thinner than traditional orthodontic care. And the orthodontic profession's opposition was genuinely motivated, at least in part, by economic self-interest. The tragedy for SmileDirectClub was that in a healthcare context, the regulatory system is designed to resolve such disputes in favor of the incumbents. State dental boards — staffed by practicing dentists and orthodontists — had the power to restrict or prohibit SmileDirectClub's operating model, and many did.
Between 2017 and 2022, SmileDirectClub faced regulatory challenges in more than a dozen states. Some states required that a dentist conduct an in-person examination before prescribing orthodontic treatment, effectively prohibiting SmileDirectClub's teledentistry model. Others imposed advertising restrictions or required that SmileDirectClub operate its SmileShops under the direct supervision of a licensed dentist (rather than using dental technicians supervised remotely). SmileDirectClub fought back with its own lobbying apparatus — spending over $5 million on lobbying between 2019 and 2022 — and filed antitrust complaints with the Federal Trade Commission, alleging that state dental boards were engaging in anticompetitive behavior.
In 2020, the FTC sent letters to multiple state dental boards warning them against imposing restrictions that could limit competition in the teledentistry market. It was a moral victory for SmileDirectClub, but a pyrrhic one. The regulatory patchwork remained, making state-by-state expansion costly and unpredictable, and the clinical controversies — amplified by social media, where dissatisfied customers posted photos of ill-fitting aligners and worsening bites — continued to erode the brand.
The AAO cautions consumers about the potential health risks of companies that sell orthodontic treatment with clear aligners directly to consumers without the direct, ongoing supervision of an orthodontist.
The Pandemic Paradox
COVID-19 should have been SmileDirectClub's moment. The pandemic shut down orthodontic offices nationwide, made in-person healthcare visits risky, and accelerated consumer adoption of telehealth across every medical category. A company whose entire model was built around remote dental care should have emerged from the lockdowns stronger than it entered.
Instead, SmileDirectClub stumbled. The SmileShops — which had become the company's primary customer acquisition channel, accounting for over 70% of new case starts — were forced to close during lockdowns. At-home impression kits, the alternative channel, had always had high abandonment rates (customers found the process messy and intimidating) and produced lower-quality scans than the in-store 3D scanners. Revenue fell from $750 million in FY2019 to $657 million in FY2020, a decline driven almost entirely by the SmileShop closures.
The company pivoted aggressively toward its impression-kit channel and launched a new product — a smartphone-based scanning system using the phone's camera — that was supposed to replace both the SmileShops and the impression kits. The technology never worked well enough to drive meaningful volume. SmileDirectClub also began exploring partnerships with dental practices, effectively reversing years of positioning itself as the anti-dentist alternative.
Revenue rebounded to $886 million in FY2021, the company's all-time high, but the growth was fueled by a combination of pent-up demand, aggressive marketing spend ($400+ million in sales and marketing in 2021), and financing incentives that extended payment terms and increased credit risk. Gross margins, which had been in the low 70s on a percentage basis in the pre-IPO period, compressed to the mid-to-high 60s as manufacturing costs rose and product mix shifted.
The underlying problem was customer acquisition cost. SmileDirectClub had always been a heavy advertiser — the company's marketing spend consistently ran at 40–50% of revenue — but the return on that spend was deteriorating. The easiest customers, the ones who were already interested in clear aligners and simply looking for a cheaper option, had already been reached. Each incremental customer was harder and more expensive to acquire, and the company was simultaneously fighting headwinds from negative press coverage, clinical controversies, and the reopening of orthodontic offices.
The CareCred Misadventure
In 2021, as the core aligner business plateaued, SmileDirectClub's management — now led by CEO David Katzman, who had replaced the co-founders in the top role — made an increasingly desperate series of strategic bets. The most notable was the launch of SmileDirectClub's own financing platform, branded as CareCred, which the company positioned as a vertical fintech play that could extend beyond dental care into other healthcare categories.
The logic was superficially compelling. SmileDirectClub's SmilePay financing program already provided installment plans to a majority of its customers. Why not build a standalone lending platform that could serve other healthcare providers? The answer, which became painfully obvious, was that SmileDirectClub had no competitive advantage in consumer lending, no expertise in credit underwriting at scale, and no balance sheet to absorb credit losses. The company's existing SmilePay portfolio was already experiencing rising delinquency rates — a 2022 SEC filing revealed that the company had written off approximately $82 million in customer receivables that year.
CareCred was quietly shelved in 2022. But it illustrated a pattern common to DTC companies in distress: the lunge toward platform adjacencies when the core business model is faltering. SmileDirectClub also invested in oral care products (whitening kits, electric toothbrushes, retainers) and international expansion, opening SmileShops in the UK, Australia, Canada, Germany, and several other markets. None of these initiatives generated meaningful revenue or reached profitability.
The Numbers That Told the Truth
The financial trajectory of SmileDirectClub is a study in the difference between revenue growth and value creation. The company generated cumulative revenues of approximately $3 billion between 2017 and 2022. In the same period, it generated cumulative net losses of approximately $1.6 billion and consumed roughly $1.3 billion in cash from operations. The cash burn was financed by a combination of IPO proceeds (approximately $1.1 billion raised in the 2019 offering), subsequent debt issuances (including $750 million in convertible notes in 2021), and asset-backed securitizations of its SmilePay receivables.
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SmileDirectClub Financial Trajectory
Revenue, losses, and the path to insolvency
| Year | Revenue | Net Loss | Marketing Spend | Employees |
|---|
| 2017 | $146M | ($75M) | ~$75M | ~2,000 |
| 2018 | $423M | ($75M) | ~$175M | ~4,000 |
| 2019 | $750M | ($387M) | ~$340M | ~5,500 |
| 2020 |
The 2022 revenue collapse — from $886 million to $474 million, a 46% decline — was the mortal wound. Customer acquisition costs had risen to unsustainable levels, repeat purchase rates were negligible (orthodontic treatment is a one-time purchase for most customers), and the negative press cycle had reached a tipping point. The company cut marketing spend, which reduced losses but also cratered revenue, creating a doom loop. By mid-2023, SmileDirectClub was burning through its remaining cash at approximately $30 million per month with no realistic path to profitability.
The Governance Question
To understand SmileDirectClub's final chapter, you must understand its corporate governance — or, more precisely, the absence of meaningful governance constraints on the Katzman family's control.
David Katzman, through his family's holdings and the dual-class share structure established at the IPO, controlled approximately 59% of the company's voting power throughout its public life. The dual-class structure gave Class B shares (held by pre-IPO investors) ten votes per share, compared to one vote per share for Class A shares (sold to the public). This is common enough in Silicon Valley founder-led companies, but SmileDirectClub was not a Silicon Valley company led by a visionary founder-engineer. It was a Nashville-based consumer healthcare company led by the stepfather of one of the co-founders, a man whose previous ventures had been in digital media and healthcare services, not in clinical dentistry or consumer products.
Katzman's control meant that the board — which included his wife, Susan Katzman, as well as several individuals with close personal or business ties to the family — was effectively an advisory body rather than a governing one. Related-party transactions were significant: the company leased its Antioch manufacturing facility from a Katzman-affiliated entity, and the tax receivable agreement funneled hundreds of millions in potential future tax benefits to pre-IPO holders.
The governance structure also meant that the company's strategic pivots — the push into international markets, the CareCred venture, the decision to maintain high marketing spend even as returns deteriorated — were not subject to the kind of independent board scrutiny that might have imposed discipline. When SmileDirectClub needed to cut costs radically in 2022 and 2023, the cuts came too late and too slowly, hampered by a leadership team that had built the company's identity around growth and was psychologically incapable of managing decline.
Our dual class structure has the effect of concentrating voting control with holders of our Class B common stock, which will limit or preclude your ability to influence corporate matters.
The Liquidation
SmileDirectClub filed for Chapter 11 bankruptcy protection in the Southern District of Texas on September 29, 2023. The filing listed assets of $558 million and liabilities of $1.06 billion. The company initially proposed a reorganization plan that would have converted its debt to equity and allowed it to continue operating in a slimmed-down form, focusing on a smaller set of U.S. markets.
The reorganization never happened. In December 2023, the company converted its filing to Chapter 7 — a full liquidation. The reasons were multiple: the company could not stop the cash bleed fast enough to make the reorganization economics work; potential acquirers (including several private equity firms that conducted due diligence) walked away after assessing the regulatory and reputational liabilities; and the customer pipeline, which had been the company's only remaining asset of real value, had dried up entirely as news of the bankruptcy spread.
The liquidation left behind a trail of creditors, abandoned customers, and unanswered questions. An estimated 100,000 customers were mid-treatment when the company ceased operations, with no mechanism to continue or transfer their care. Class-action lawsuits had already been filed on behalf of customers alleging clinical harm. The FDA had received over 1,400 adverse event reports related to SmileDirectClub aligners between 2016 and 2023, including reports of tooth damage, nerve damage, and bite misalignment. Whether these rates were meaningfully different from those of orthodontic treatment generally was a matter of fierce debate — one that the company's closure ensured would never be definitively resolved.
The 3D printers in Antioch were sold at auction. The SmileShop leases were terminated. The HP Multi Jet Fusion machines — the physical manifestation of SmileDirectClub's manufacturing ambition — were purchased by a liquidation firm for pennies on the dollar. The brand itself, the SmileDirectClub name and intellectual property, was acquired in bankruptcy by a group that has made no public announcement of plans to revive it.
What the Wreckage Reveals
SmileDirectClub's failure contains lessons that extend far beyond dentistry. The company was, in many ways, the purest expression of the DTC thesis of the 2010s: that any industry with high incumbent margins, low consumer satisfaction, and a product that could be shipped in a box was ripe for disruption by a venture-backed startup with a strong brand, a digital-first customer acquisition engine, and a willingness to operate in regulatory gray zones until the rules caught up.
The thesis was not entirely wrong. SmileDirectClub did reach millions of consumers who had never seriously considered orthodontic treatment. It did force Align Technology to accelerate its own lower-cost offerings. It did demonstrate that teledentistry — the remote delivery of dental care — was technically feasible at scale. These were real contributions, and they survived the company's death.
But the thesis underestimated several forces that, in combination, proved lethal. The regulatory environment for healthcare is fundamentally different from the regulatory environment for mattresses or eyeglasses. The clinical risks of orthodontic treatment are real, not manufactured by incumbents. Customer acquisition costs in a one-time-purchase category with no recurring revenue are structurally brutal. And the DTC model, which works beautifully when you are selling a commodity product at a lower price with a better brand experience, breaks down when the product is a medical treatment whose quality depends on professional judgment that cannot be easily automated or scaled.
The core question is whether SmileDirectClub is a technology company that happens to sell aligners, or a dental company with a good website. The valuation assumes the former; the business model suggests the latter.
The ghost of SmileDirectClub haunts every subsequent attempt to apply the DTC playbook to healthcare. Hims & Hers, Ro, Cerebral, Done — each has navigated the tension between consumer convenience and clinical rigor differently, with varying degrees of success and controversy. SmileDirectClub was the most ambitious of the lot, and its ambition was precisely what destroyed it. The company didn't just want to sell a healthcare product online. It wanted to build the factory, train the technicians, design the software, underwrite the financing, and fight the regulators — all simultaneously, all with venture capital's impatience and public market investors' quarterly scrutiny.
In the Antioch facility, after the auctions were complete and the machines removed, what remained was the building itself — a vast, empty box in suburban Nashville, its loading docks sealed, its parking lot chain-linked, a monument to the distance between a compelling pitch deck and a sustainable business. The sign out front, white letters on blue, was the last thing to come down. SMILEDIRECTCLUB. The font was friendly. The teeth were always white.
