America’s dysfunctional healthcare system is in need of disruption. DocGo is riding that trend all the way to the bank, helped by the boom in special-purpose acquisition companies. The company also known as Ambulnz, essentially Uber with stethoscopes, announced a merger on Tuesday with a SPAC called Motion Acquisition that will bring it to market with a $1.1 billion valuation and some $200 million of cash to spend. DocGo is a good idea, but that doesn’t mean it’s a good investment. That’s a line that SPACs tend to blur.
DocGo’s fleet of medics on wheels can transport patients to appointments and perform simple procedures in the home like vaccinations. Like Uber Technologies’ rides, its ambulances can be efficiently directed to where they’re needed with minimum downtime. Unlike Uber, drivers are trained paramedics and technicians, and patients don’t summon the service themselves – their healthcare providers do.
That’s a welcome innovation for people who need to get to their dialysis appointment on time, for example. Making the case for investors is harder. DocGo only launched in 2016 and loses money. Unlike Uber, its drivers are mostly on the payroll, which gives a layer of fixed cost that rideshare firms are doing their best to avoid. Uber’s revenue is also 100 times bigger. There’s plenty of indirect competition, too, from healthcare startups like Amwell and Hims & Hers Health, the latter also a SPAC mergee.
In some ways, DocGo is bucking some bad SPAC trends. It expects to make a profit in 2022; compare that with genetic testing outfit 23andMe, which doesn’t expect to end the red ink before 2025. And while its pitch to investors comes with the usual guff about its “total addressable market,” the $95 billion that DocGo touts is modest compared with the near-$500 billion that Hims & Hers covets. Even its valuation is relatively modest: 6 times this year’s expected revenue, in line with Uber.
The problem is that DocGo, like so many SPAC targets, is coming to market troublingly early. Thanks to SPACs, companies that would normally go through teething troubles in private are ending up in public hands before their business models are proven. It’s as if the venture capital machine is wearing its insides on the outside. No medic, or patient, wants to see that.