Hinge Health unlikely path to IPO

At digital physical therapy startup Hinge Health, CEO Daniel Perez used to acknowledge hard-working employees with the “Cockroach Award,” a distinction that brought with it a “cockroach squad” t-shirt and a money payout.

References to the insect were abundant at the corporate’s old headquarters in London, where an image of a cockroach was prominently displayed on the wall. For much of Hinge’s 10-year history, the cockroach was the unofficial mascot. Staffers named it Flossy after the viral dance move “the floss.”

Perez relishes the symbolism. In his determination to construct an organization that may push through adversity, he’s encouraged employees to consider themselves like cockroaches, as a consequence of the creature’s grimy resilience and noted ability to survive harsh conditions.

“It was the identity of each individual in the corporate,” said Joshua Sturm, a vp at Hinge from 2019 to 2024 and now chief revenue officer at cancer prevention startup Color Health. “We’re all on this together, and regardless of what happens, we’re going to survive together.”

Perez and his 1,400-person workforce now face the last word test of their mettle. Hinge, which moved from London to San Francisco in 2017, is attempting to go public at a time of such extreme economic uncertainty and market volatility that several firms, including online lender Klarna and ticket marketplace StubHub, have delayed their long-awaited IPOs.

Hinge filed its prospectus on March 10, announcing plans to trade on the Latest York Stock Exchange under the ticker symbol “HNGE.” Three weeks later, President Donald Trump announced a sweeping tariff policy that plunged U.S. markets into turmoil after tariff concerns had already pushed the Nasdaq to its worst quarter since 2022.

But Hinge, led by its 39-year-old co-founder and CEO, appears determined to power through the chaos. Hinge declined to comment or make Perez available for an interview. 

Going public was already going to be a dangerous endeavor for Hinge. The IPO market has been mostly dormant since late 2021, when soaring inflation and rising rates of interest pushed investors out of dangerous assets. Inside digital health, it has been almost completely dead.

Health-tech firms have struggled to adapt to a more muted growth environment following the Covid pandemic, and lots of once promising business models have not panned out as planned.

The starkest example is virtual health company Teladoc, which has a market cap of just over $1 billion lower than five years after buying digital health provider Livongo in a deal that valued the combined firms at $37 billion. Teladoc’s BetterHelp mental health unit has been a very troublesome business as paying users dropped off within the years following the pandemic.

Over time, Hinge’s Cockroach Award transitioned from a monthly prize to a quarterly distinction. The corporate phased it out entirely a few yr ago in preparation for its next public-facing chapter, however the survive-at-all-costs mentality persists, based on current employees. Now, staffers are recognized with the “Movers Awards,” a nod to the corporate’s give attention to movement.

“We’ve many a long time of labor ahead,” Perez wrote in a letter to investors in March. “We hope you join us on this journey.”

CNBC spoke to 13 current and former Hinge employees, investors, and folks near Perez for this story, a few of whom asked to not be named as a way to provide candid commentary.

Hinge uses software to assist patients treat acute musculoskeletal injuries, chronic pain and perform post-surgery rehabilitation remotely. Large employers like Goal and Morgan Stanley cover the prices so their employees can access Hinge’s app-based virtual physical therapy, in addition to its wearable electrical nerve stimulation device called Enso. 

The corporate says its technology may also help users manage pain, cut down health-care costs and reduce the necessity for surgery and opioids. Revenue increased 33% to $390.4 million last yr, while its net loss narrowed to $11.9 million from $108.1 million a yr earlier, based on the prospectus.

Hinge’s roster of clients expanded by 36% last yr to 2,256, and the variety of individual members jumped 44% to over 532,300, the filing said.

In an updated prospectus on Monday, Hinge said revenue in its first quarter climbed 50% to $123.8 million, up from $82.7 million through the same period last yr, and that net income for the period was $17.1 million in comparison with a lack of $26.5 million a yr ago.

Hinge has raised greater than $1 billion from investors including Tiger Global Management and Coatue Management, and it boasted a $6.2 billion valuation as of October 2021, the last time the corporate raised outside funding. The most important institutional shareholders are enterprise firms Insight Partners and Atomico, which own 19% and 15% of the stock, respectively, based on the filing.

Perez and Gabriel Mecklenburg, Hinge’s executive chairman, began the corporate in 2014. The pair met while they were each pursuing PhDs within the U.K. — Perez on the University of Oxford and Mecklenburg at Imperial College London. They were distracted students, based on Perez’s twin brother, David. 

By the point they launched Hinge, Perez and Mecklenburg had already co-founded two other ventures together. One was the Oxbridge Biotech Roundtable, a company that connected academics and industry experts. The opposite was Marblar, which worked to commercialize academic mental property.

Perez took a leave of absence from Oxford while working on Marblar and never returned. His brother wasn’t a fan of the choice initially.

“I gave him terrible advice,” said David Perez, a graduate of Yale Law School and partner at Perkins Coie in Seattle. “I used to be like, ‘I feel you are an idiot, I feel you need to give attention to your PhD. Only an idiot wouldn’t finish a PhD at Oxford.'” 

The twins have two older siblings. Their mother immigrated from Cuba in 1968, followed 12 years later by their father. Their parents met in Miami, got married after just three dates, and are still together after greater than 40 years. 

The family moved from Miami to Salt Lake City, Utah, in 1990. Perez’s mother was a substitute teacher and his father worked at restaurants as a dishwasher and busboy. David Perez said their father “worked across the clock” and used to call out orders in his sleep. 

“It wasn’t lots of money, I feel combined they made about $19,000 a yr,” David Perez said. “But they stitched it together and raised 4 kids.” 

The dual boys were competitive, particularly when it got here to academics and playing basketball within the driveway. David said his brother got “great grades” and all the time had an inclination toward science and medicine, graduating from highschool at age 16 after which starting college at Westminster University, a small liberal arts school in Utah.

“I swear,” David Perez said, “there have been times where the one punishment that my mom could issue that may have the sting was restricting our ability to do homework.”

Employees say Perez is a voracious reader, often ending two to 4 books a month. That features books about business and leadership, a crucial source of data on condition that Hinge was his first real job. He’s a fan of “The Innovator’s Prescription,” by Clayton Christensen and others, “Crossing the Chasm,” by Geoffrey Moore and “The Long Fix,” by Dr. Vivian Lee.

He also likes his staffers to read. Executives will often prepare to debate chapters from a book of their meetings. 

“I’d come home and there’d be a package from Dan, and it is a book,” said Sturm, who led partnerships and recent market development at Hinge. “That was just the norm.”

Sturm, who has worked within the health-care and advantages space for around 30 years, said Hinge was very deliberate with hiring, so there wasn’t lots of turnover amongst senior executives. He said Hinge’s recruitment process was the toughest he’s ever experienced. 

One other “Dan-ism,” as Sturm called it, is Hinge’s philosophy around writing. Perez has employees write memos, typically as much as six pages long, as an alternative of preparing slide decks or other materials ahead of meetings. Perez was inspired by an identical practice at Amazon, based on current and former employees, and sees it as a technique to force employees to think through what they wish to say as an alternative of hiding behind bullet points.

Hinge’s memo culture will be an adjustment, particularly for brand spanking new employees. Sturm said he thought the practice was “insane” at first, but ultimately got here to understand it and said it improved his pitches.

“If you type of sit back, you go, ‘You recognize actually, he wasn’t incorrect,'” Sturm said. 

Hinge has come a great distance since enterprise firm Atomico led the $8 million Series A investment in 2017. The London-based firm said in a blog post on the time that it was “extremely impressed by Daniel and Gabriel, and their determination to tackle an enormous problem in society.”

Carolina Brochado led the round, though she left Atomico a yr later and now works at investment firm EQT Group. She said that getting Hinge to the brink of an IPO was a “one in one million likelihood,” but noted that the corporate has managed to construct a large business in digital health despite having so many odds stacked against it.

“Numerous learnings along the best way, in fact, like an enormous tech correction in the center,” Brochado said in an interview. “However it really is one in all those rare examples of just an unlimited market that was under penetrated.”

For David Perez, whose firm now serves as Hinge’s outside counsel, watching the startup grow has been “fascinating,” he said.

“I’m a partner at a significant law firm,” he said, “and I’m only the second most successful twin. But I feel I’m okay with that.”

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