Investors celebrated Eargo’s entrance to the public equity market with gusto this week, sending shares up 87% on its first day of public trading. The smart hearing device maker's stock opened at $36, double its $18 IPO price, and then hit a peak of $43.80. Shares closed at $33.68, up a nifty 87%. Eargo set the initial pricing of its 7.9 million common stock shares at $18 per share, instead of the 6.7 million shares it had initially scheduled to sell at $14 to $16. Buttressed by the strong demand for IPOs, Eargo raised $141 million in its debut on the Nasdaq—not too shabby.
The investor enthusiasm for Eargo is not surprising. As I detailed in my Forbes blog on Eargo back in late 2018, the company approaches the hearing health category with a decidedly different approach than the traditional brick and mortar strip mall distribution model that has characterized the hearing aid market for decades. Eargo’s solutions based offer four big differentiators from others in the market:
- They fit discretely in a person’s ear canal and are nearly impossible to detect;
- They are designed to “float” in the ear canal, firmly in place;
- They deliver very natural sound since they only amplify high-frequencies;
- They are rechargeable, avoiding the cost of expensive and specialized replacement batteries (which can be costly for some legacy hearing aids).
But Eargo’s most disruptive approach to the multi-billion-dollar hearing aid category has little to do with technology or innovation. Eargo deploys a multi-touch, concierge-style sales experience, unlike anything one would find with a traditional hearing aid retailer. Prospective Eargo customers are paired with a Personal Hearing Professional who provides informative tips and insights to guide them through the sales process and maximize the purchase experience. Unlimited support is provided as part of the purchase. These items form a winning success formula that is difficult to challenge. Traditional dealerships are typically small and local, and they have difficulty providing a consistent customer experience across multiple geographies.
While Covid-19 devastated (and continues to affect) retail stores, restaurants, airlines, and hotel industries, Eargo actually experienced growth. Christian Gormsen, Eargo’s CEO, attributes this to the safety benefits of purchasing a hearing aid via Eargo’s telecare model (mentioned earlier). It’s likely that many prospective hearing aid customers shunned in-person clinics due to pandemic safety concerns. Gormsen points out that Eargo’s new mobile app allows its skilled support professionals to temporarily take control of the customer’s smartphone screen to tweak and optimize user settings—all without the user having to leave the comfort and safety of their home.
When questioned about where Eargo will invest the funds raised during its IPO, both Gormsen and the company’s CMO, Shiv Singh, indicated Eargo will continue to invest in brand awareness activities around its multi-touch sales model. During my discussion with Gormsen, it was reassuring to hear something that Eargo will not be doing: trying to compete with traditional brick and mortar merchants by opening Eargo stores or offering its products through traditional retailers. Candidly, it’s refreshing to see a company double down on its baseline strategy and stay committed to its proven business model: delivering a great sales experience through direct contact with the customer.
As I’ve mentioned before in prior blogs , Eargo’s solutions are all about changing people’s lives. The company’s “invisible” solutions eliminate the stigma of wearing a traditional hearing aid and provide hope to those individuals with moderate hearing loss. With an estimated 360 million people suffering from some form of hearing loss (over 5% of the global population), Eargo’s market opportunity is significant, and investors “hear” it knocking loud and clear—pardon the pun.