What started as a B-school project, is now one of India’s newest unicorns. API Holdings-owned PharmEasy became the first Indian e-pharmacy to enter the club in April when it raised $300 million in June from investors, including Kotak Mahindra Bank, Temasek, TPG, and Prosus. Over the years, PharmEasy has moved beyond e-pharmacy and distribution, with a variety of services, including telehealth and diagnostics. In May, it acquired Medlife, a provider of medicines, diagnostics, and e-consultation services, making it the country’s largest online pharmacy player. A month later, API Holdings bought a 66.1% stake in Thyrocare, a diagnostics firm listed on the BSE.
Siddharth Shah: It started as a B-school project at IIM-Ahmedabad. I was part of a workshop to be undertaken by Professor Anil Gupta, where one had to present a business plan. Professor Gupta insisted that I incorporate a company while I was on campus. So, I started Dial Health. You could call on ‘40005000’ to get access to any medicine, information, or consultation.
Dial Health was started by Hardik (Dedhia) and me in June 2012. Hardik had come back to India from Carnegie Mellon after his masters and was working with NetApp. A few months after we started we realised it wasn’t going well, and pivoted from being an online pharmacy to a chain of retail stores called Dial Health Medical. Soon we realised that an average retail store can only house 3,000-4,000 products, vis-a-vis 1.5-2 lakh brands in the market. The only way to have all the products is to either increase the size of the store, or create an ecosystem where the supply chain is consolidated. We launched Ascent Health, which was a distribution business. Once that became successful, we relaunched our consumer business in the name of PharmEasy as a subsidiary of Ascent Health. By that time, there were three co-founders — me, Harsh (Parekh) and Hardik (Dedhia). As far as PharmEasy was concerned, two other co-founders joined us — Dharmil (Sheth) and Dhaval (Shah). Dharmil was my closest friend from school and Dhaval was my close friend from junior college.
Raising capital wasn’t easy. You had to rely on people to raise money. My father pledged 95% of his net worth into what I was doing. We mortgaged our home to make it happen.
Make Or Break Moment
The first was when we shut down Dialhealth.com and started Ascent Health. Within one year we were the talk of the town. People were delivering medicines in 48-72 hours, we did it in four. In 12 months, we went from nothing to `8-9 crore of revenue a month. The second was when we launched PharmEasy. Within seven days, we were seeing more than 100 orders a day. The third was when, during Covid, we were made a part of BMC’s war room. Our software was used by Kasturba Medical College to manage the entire patient medical record.
The Business Model
We started with the online model, which did not work because we only had demand, and not supply. To get the supplies, we opened a chain of stores, but realised they were not making sense and went into the backend. Since we had a strong backend, we went back towards creating a very good frontend, and that’s when PharmEasy was born.
We realised a big problem in India is self-medication. The only way to manage that was to ensure that if anybody wanted to self medicate, (we would) get them to speak to a doctor. So we started working with third-party players, but soon realised that nobody had a solution at scale. That was when our telemedicine platform was launched.
We created an EMR solution, which became a digital record holder. A very large percentage of our consumers in outpatient healthcare needed consultation, treatment, and diagnostic tests. We partnered with Thyrocare. Today, we have 90,000 retail partners.
The digitisation of the ecosystem remains the biggest challenge and opportunity. The second is self medication. Building technology solutions to tackle these are the biggest challenges.
The teams we create are in some ways an extension of your own culture. You can get people who are like you, and who will be your yes men. Or you can say I am going to build out a team only based on merit and ruthless professionalism. We have tried hard to maintain a balance between the two.
It is important to be transparent with investors. If you treat their money like your own, they understand. There will be good times, and not-so-good times. In good times, don’t be arrogant... try to think of investors as partners.
Marketing & Sales Lessons
Your product will grow if there is genuine value in it. Till September-October 2018, we did not spend a single rupee on TV ads. It was only word of mouth or basic performance marketing. When you have a good product, marketing will act as an amplifier. The best way to kill your company is to have a bad product and then market it. It’s important to first find the product-market fit, get growth through referrals, word of mouth or user love, and then look at investing in scaling up like crazy.
When Did You Think You Had Arrived?
After we launched PharmEasy and were seeing more than 100 orders a day within seven days. Suddenly WhatsApp messages started going viral, saying this is it, you use this to save on medicines. We knew that we had hit on something big.
Riding Through Toughest Times
In 2014, we had term sheets from three prospective partners. We went with the guy who was offering the highest value, rather than with someone who would have been a good partner. The transaction did not happen and we were going to lose all the money. For a few months, we did not have money to even pay interest.
The second time was when some (people) with vested interests came after us and harassed and threatened Dharmil and my parents. That was followed by vandalism at our places, some of our people were beaten up.
Accessible and affordable outpatient healthcare partners are what we are after now. We are also looking at an IPO within the next year.