Siddharth of PharmEasy: Disrupting India Healthcare

Hans Tung

Hi, today on the show we have Siddharth Shah, co-founder and CEO of PharmEasy, India’s largest digital health platform. Start with a vision to make health care accessible and affordable to all farmers who supplies medicines to more than 1000 cities and towns in India. The company recently proposed a merger deal with its rival MedLife, creating now India’s newest unicorn.

Madhu Yalamarthi

Siddharth is focused on bringing radical reforms in the healthcare industry with the help of digital technologies. A graduated from DJ Sanghavi College in Mumbai in computer engineering, and he is an alumnus of the Indian Institute of Management Ahmedabad, India’s No.1 college for business school education. Siddharth was raised in Mumbai, India. He is an avid go-karting driver and holds several awards in the national level. Welcome to the show, Siddhartha.

Siddharth Shah

Thank you, Hans and Madhu. It’s a pleasure to be on this show.

Madhu Yalamarthi

First tell us about PharmEasy. What does it do and why is it different than all the other online pharmacies?

Siddharth Shah

So look, I think to understand what’s special about PharmEasy, let’s take a minute to understand what’s special about medicines and pharmacies in India. I think we are amongst the few countries in the world that sell medicines in the form of branded generics. What that means is that doctors don’t prescribe the name of the salt. The doctor will not prescribe that you need to buy a paracetamol. They will actually provide a brand of paracetamol, but 96% of all medicines sold in India are generics which are off patent. So, you have this unique situation where you have 1000 molecules or salts that are sold under 200,000 different brand names. Each pharma company tries to promote its brand names to the doctor and the doctor prescribes a particular name of the brand rather than the name of the salt.

Now, you couple this with the fact that the supply chain in India is extremely fragmented. Unlike the US where you have three large distributors and a couple of large retailers, you have 80,000 distributors and about 800,000 retailers in India. So you couple the fact about the vast prevalence of brands, and massive fragmentation that exists in the industry. And you have a massive issue from a consumer perspective or from a patient’s perspective around availability, affordability and authenticity. What happens is today the pharmacies cannot stock more than 3 to 5000 SKUs in their store given their small scale and fragmentation, and patients can only get up to 50% of all the medicines that they need in a given store. And then they need to go to multiple stores to get all the medicines. The second problem is also around affordability. Because anywhere between 10 to 30% of the price of a drug is actually spent by the pharma companies on the sales reps and on their activities with the doctors. This makes medicines unaffordable to a very large section of the people. And the third part is around authenticity. Given that anybody can register their own brand of genetics and get them contract manufactured. The possibility of pilferage and infiltration of substandard products in the supply chain is pretty high.

So what we are doing effectively is creating a very trusted portal, or a trusted app and a trusted platform where a consumer can come, provide us with a prescription. And he can be assured that we will procure authentic medicines for them from the nearest retail store and deliver it to them at their doorstep. Now, the question is how do we make it authentic? How do we know that it is authentic? That is because we have a significant control over the supply chain. So what we do is that we buy medicines in bulk. And we actually own the largest digital B2B platform in the country as well. And not a lot of people are aware about this. But this platform actually connects 50,000 retailers via 2000 distributors and 1000+pharma manufacturers. So, we actually buy medicines in bulk. We are actually now the second largest private buyer of medicines in India. We buy these medicines in bulk and deliver it to these 50,000 retailers. And there is a sanctity in our supply chain about this process. And it is through these retailers that we then provide the medicines to the customers.

Hans Tung

Very interesting. What made you decide to start PharmEasy in the first place? And how did you decide that this is a problem that you Siddharth wants to solve?

Siddharth Shah

I think this goes back a little bit about to the background about and how I was brought up. My parents are doctors. My dad is a cardiologist. My mother is a pediatrician. My wife is actually an orthodontist. So, I’m the only black sheep in the family. There’s not a doctor.

Hans Tung

I remember this.

Siddharth Shah

So I was kind of feeling left out and I thought, why don’t I give this a chance. But I think going back to my career, I graduated as a computer science engineer, and then I went to my B school at the age of 21. At 22, I was working with Goldman Sachs in the investment banking team. But I realized that that’s something that that doesn’t excite me a lot. So I came back to B school, completed and decided to start my life as an entrepreneur. I think I was inspired. You know, growing up seeing what happens Instead, Dan and Dave are attached with a lot of hospitals, but I thought that the entire outpatient ecosystem in India is very, very broken.

One very important thing to understand is that in India, as surprising as it sounds, we do not have any outpatient insurance cover. In simple terms, it means that if you go and visit a doctor, if you buy your medicines, or you get your test done, there is no coverage by any kind of insurance, right? All of this payment is 100% out of pocket. So, people go to a different platform to seek information. They go to a set to a doctor and pay him out of their pocket for consultation. They go to a different laboratory to get their test done, and then buy medicines from these hundreds and thousands of retailers. So the idea originally that I started when I graduate from b-school was a company called dial health. So it had this cool sounding phone number four triple 05 triple zero, almost like a one 800 where you could call and get access to information, get access to consultations get access to tests and get access to medicines. But we soon realize that there really is a massive vacuum in providing of these authentic medicines at affordable rates to patients. And then I would say the smart thing would be to say is that through several pivots, but I think I’ve failed in various attempts in trying to aggregate all of these together. And I realized that just getting demand does not work. And you need to focus on the supply. So, I pivoted from being a platform that connects the patients to actually becoming a chain of retail stores.

But once I ran these retail stores, I realized that retail is extremely fragmented and unless you control the supply chain, you can’t deliver a superior consumer experience, and which is when we pivoted to then owning the supply chain and the B2B piece. So, I actually started as a B2C player, then ran retail stores shut all of those down, decided to become a B2B player, built out a network of 50,000 And retailers that we supplied medicines to. And it’s only when we were confident about that, that we actually reintroduce the B2C player.

So PharmEasy is actually our dial health version 2.0, when we said that now we’ll connect these retailers to customers, and which is why even though we were actually late to the party in other people’s eyes, we are actually the fifth or the sixth online pharmacy that started in India. And a lot of people have actually written us off. But the fact that we’ve been able to come this far is not just because we are great at getting demand. But what’s magic is that we are great in the supplies and I think that’s where we’ve been able to make a significant difference to the consumers life, and also to the life of the retailer today, these 50,000 retailers that work with us. I think we’ve been able to make a significant impact to both of these.

Hans Tung

Most suppliers cannot do B2C. It’s a different mentality, different mindset if we’re calculate unit numbers different ways to make money. Suppliers have cared a lot about these margins. Whereas B2C, you care a lot about scale, and how to burn efficiently, your burn but you’re going to do it efficiently. So it’s a very different skillset. How did you make both work under one roof?

Siddharth Shah

I think a credit for that goes to my co-founders. I’ve been fortunate that the first year that I started my friend from my graduation days, who then actually came to CMU to do his master, and he was working with NetApp. He actually flew down and started dial health with me. In a couple of months, my other friend from graduation has joined me. And the two of these actually became the bedrock of laying out the digital platform with a digital pipe that connects the manufacturers to the distributors and the retailers. And in 2015, like I said, I started my first company in 2012, it actually took us three years to fail and perfect some of these parts. But when we wanted to start PharmEasy in 2015, I was fortunate that two of my very close friends from school. They actually joined me. And then it actually became a team of five enterprising friends who all saw this. The good thing is we’ve actually all grown up in the same zip code, so we’ve all grew up in the same zip code. We all ethnically come from the state of Gujarat. So we were all very close friends first, but I think we divided responsibilities where one focuses more on growing the consumer part, getting the customers, and getting the last mile faced, and the other 2 cofounders focused a lot more on getting the B2B part, in terms of ensuring that we had the warehouses, we had the supply chain, we had the inventory. And I had the good fortune of being the CEO. So I think we divided responsibilities amongst ourselves. And in fact, for a brief period of time, we also brought on two different pools of capital. So we bought on venture capitalists like Bessemer venture partners to come in scaffold to build the consumer part of the business. And we got a couple of private equity funds to help us build out the supply chain. And, look, so we got to hustle, right? I mean, look, we started, we started late, but we had to tap into pools of capital that would refine those respective businesses interesting. So, from 2016 to 18, we actually use different pools of capital to grow these businesses out while they were both joined at the hip. And when we actually became the largest platform in India, it’s when we decided to put both of these together. So we’ve just completed our quote, approved merger process where we’re now a single integrated platform that spans what I would like to call the four key stakeholders in the ecosystem, which is the pharma companies, the pharmacies, the patients and the practitioners. So, we now have a digital platform that is very deeply embedded in the ecosystem and that connects all of these stakeholders together.

 Madhu Yalamarthi

And just for our viewers, 2016 to 18 is sort of the dry period in Indian fundraising and venture ecosystem. So kudos to you on how you hustled and tapped into a different pool of capital to grow through that and get stronger. But if I look back, take a moment back to when you said about your co-founders. So it’s really hard to say that people don’t scale with companies at the rate as the company grows. And founders themselves take a lot of time to grow. But I’ve been lucky enough to spend a one on one time with each of you, all five of you. And I can see that all of you have scaled. So how have you sort of maintain that trust level and still grow with the company to the level that you are now?

 Siddharth Shah

I think there are three factors that have been really helpful in us working very well as a team. I think the first thing is that all of us know each other before we start work, we’ve all been friends for a very, very long period of time. And we’ve all grew up in the same zip code. In fact, Dharmil and I were together since the time we were four years old. We sat literally on the same bench in school since the time we were four years old. So, we’ve known each other for a very long period of time, and that builds a level of trust. And we’ve known each other outside work. So we know each other’s strengths and weaknesses. And which has allowed us to divide and conquer, each guy looks at their own domain. So each of us is a piece of the puzzle. But together I think it all makes a lot of sense. I think the second thing is because of this inherent trust and the fact that we all complement each other in terms of our strengths. So I know that what I do best is what I’ll have a final say on who or says what Dharmil knows best is what he’ll have a final say on and what he does, but does best he has a final say on right. But we also have a very effective dispute resolution, mechanism internally. So I think most people can come together and work well in good times. And we’ve all seen our ups and downs. But I think, along with the trust, we’ve got a very, very solid codified dispute resolution mechanism. And I think that’s meant that we could have differences of opinion. But it’s never gone to the point where one feels that the other stepping on the toes of the other. So, I would say familiarity, complementarity in terms of skill sets. And I think a very well codified dispute resolution mechanism is what has allowed all of us to grow without being insecure in our respective positions.

Hans Tung

So when they’re dispute disagreements, how do you resolve the differences?

 Siddharth Shah

I think we look at two things. One thing which at least helped us is that I look at myself as the captain of the team, and if I take the analogy, let’s say the captain of the cricket team, I think the captain does not get too bet twice, and neither does the captain get an extra ball. So I don’t get any special privileges. But as the captain, I get a chance to be the arbitrator. So, in the event, there is a disagreement, I get to take the final call, and then everybody accept that, No.1. But more importantly, what we also found is that over a period of time, we’ve all known our respective strengths and weaknesses. So let’s see if it’s a matter related to certain thing, which Dharmil has a higher expertise or it’s related to technology where Hardik has a higher expertise. Even if I may have a conflicting view, I would more likely to go with the guy who’s an expert in that. And still, if he still can’t arrive at a consensus, then I think I have the ability to be the arbitrator and take a final call, and that allows us to all grow in our spaces.

 Hans Tung

Yeah, the key thing is intellectual honesty. You have to be intellectually honest with each other to make the best quality of decision.

 Siddharth Shah

Yes, absolutely. I guess the other way to put intellectual honesty is let’s put it this right. We all know what we are not good at. We’re very honest with ourselves. We will rely on the team. And I think that’s what counts.

 Madhu Yalamarthi

One last follow up on this thread, PharmEasy has grown from a yield, growing from pitching in Mumbai to local investors, to who are esteemed in their own right and their investment philosophy to global investors such as Temasek and another global investors, operations has grown from a small neighborhood in Mumbai to now a nationwide operations. Each vertical has grown a lot on its own. So how have you built that sort of learning engine both among the founders and the broader team as you grew so quickly?

 Siddharth Shah

I think in some sense, this goes back to the fact that, there’s five of us. Each one of us picked up a part of the problem to solve and work really hard at that. And that’s what’s allowed us to focus on growing ourselves. So, in some sense, you can say that we’re all generalists. But internally, each one of us has now actually become a specialist on a certain part of the business. And like I said, all of these fit well in a puzzle. for all of us. And I think as we kept on growing, it wasn’t like the guy who had to build up the network with the retailers was also obsessing around how do you get more consumer engagement and how do you improve customer retention cohorts. There was somebody else focusing on that problem, and there was a significant level of trust that the other guy had. So, to that extent, I think, when each person focused on solving their problem, I think we had, like I said, dedicated pools of capital via a dedicated team solving a certain problem. But I think I had the great joy of seeing all of these pieces coming together. So, to that extent, I played the role of the generalist, whereas I think all of the co-founders have really developed their skillset as specialists trying to solve a certain part of the problem. Whereas obviously, everybody has a vantage point around what the other guy is doing. So, I think that’s allowed all of us to scale, I think that way, the journey is pretty, pretty good for us so far.

Hans Tung

Over the last 7 years, each year, you develop the habit, develop something new in overtime, like you said, become an ecosystem. Can you walk us through some of the key initiatives that you had to be able to do and adjust, and how you ended up having the right person to lead that effort and do good job, and if that person somehow doesn’t get immediately, how do you figure out a way to a scale either with or without the one of the key co-founders?

Siddharth Shah

Not sure, so let me go in the chronology in which each of the co- founders joined. So it all started with Hardik, he took the most courageous step in terms of leaving his job at NetApp and taking a flight coming back to India without knowing what exactly we’re going to do. I guess it was a little easier for me because I was here in India, but he just took a flight back and said, Okay, let’s figure out what we want to do. So he’s been the bedrock in terms of laying out the architecture in terms of what we want to do. And he’s been the driving force around the entire technology. But to give an example, I think, sometime last year, we realized that we don’t know what we don’t know.

And while Hardik is great in terms of understanding architecture, and laying out how the pieces connect well, we now need the next level of domain expertise so far as our technology and product had to scale. And that is where we actually hired a full-time CTO. So he is still a co-founder who focuses his time and energy on technology, we still do have a full time CTO who’s fully empowered to take decisions in that regard. So this is a big example of around how, as co-founders, we’ve also allowed the right domain experts to come and work alongside us,   and ensure that we keep scaling up together.

The next example is, between Dharmil and Dhaval, who both for looking at PharmEasy. It was Dharmil actually looking at the growth and the marketing part, whereas Dhaval was actually looking at the operations of PharmEasy, but actually one and a half year into the journey, we actually realized that they’re not fit for it, and it was actually a very big shift, so Dharmil from looking at marketing and growth, now’s started looking at operations and retailer activations, and so on and so forth and logistics. But as Dhava stop looking at that, and now started looking at retention cohorts and marketing, and so on and so forth, Now, somebody would have called us crazy, right? By the way, our company had raised a Series B round by then, but at that time, we took a conscious call that, “Look, guys, this is not scaling up, right? We’re not able to do justice to this, and we need to swap the roles.” And we actually went ahead and did that. So, I think these are some examples around how we have been honest to ourselves in terms of saying that, how can we do this or not do this, and we’re always challenging and questioning ourselves. And actually, if you look at our growth, it’s kind of been like that. We started as a tech platform and dial health, then focus on a chain of retail stores and supply chain where Harsh came in and played a big role. And then we started again, PharmEasy was dial up version 2.0, where Dharmil and Dhaval came in where Dharmil was looking at the front-end and Dhaval was looking at the operations. You’re under half later, we swap those. And we decided to grow that out. And now in fact, our supply chain is now metamorphosis. The protocol is retail IO. A lot of people don’t know about it, but that’s actually the backend engine that’s powering our supply chain. And that platform is actually now doing north of 320 crores in terms of monthly gmv, just in pharma. And some people have taken the role of becoming just a distributor, some people just become a marketplace, we’ve actually taken the model of becoming a marketplace with an anchor seller. So we have, like I said, about 2,200 distributors and thousand manufacturers that go to 50,000 retailers, but 50% of all supplies done on that platform is done by us where we buy the inventory and we sell the inventory. So that allows a certain level of commitment in terms of turnaround time and availability, because that’s what we realized, it’s the winning secret. Ensuring availability and turnaround time given our failures. So, I think our journey has also been about seeing where things work, where they don’t, and picking the strengths and weaknesses of each team member and augmenting those with a domain expert as we require, and kind of growing in that.

Hans Tung

Your method has become sort of Amazon of his own. And now, Amazon India has launched pharmacy as well. What do you think about that? And is that one of the impetus for you to do the M&A right now as well?

Siddharth Shah

Yes, I think there are two different parts to our thought process around this. The first part is getting MedLife into our ecosystem, it was a great step because between us and MedLife, we are the No.1 and the No.2 player in the digital ecosystem. And we believe that getting them makes a ton of sense because they are strong in certain geographies and their brand is strong in certain parts of the country. And we are strong in certain other parts. So putting them together allows us to be strong on a pan India basis. Number two, it also allows, in some sense the pipe that we laid out around the supplies, we can now choose that much better.

Our operating economics become significantly better in terms of our joint procurement, spreading the assets. And also more importantly, we need to understand that we are amongst the very few unique platforms in India. That’s actually not at a conflict between the consumer and the channel. Most e-commerce companies in India face some kind of, I would say dissent from the traditional channel because they believe that they’re being circumnavigated, the uniqueness of our model is that the more we grow, the more our channel partners also grow. It’s the small brick and mortar retailers that grow along with us. And the more demand that we can generate and pass on to our channel, the better it becomes the return and economics for them as well. And the better is their return and economics, the more we can switch our supply chain, so it’s almost like a pack of dominoes, where one leads to the other end. And you get into this virtuous circle around more demand, leading to better utilizing for retailers, leading to better demand on our B2B platform, leading to better procurement and better economics, leading to better profitability, which we can again redeploy to get better service for the consumer. So, I think that’s where we believe that there is a significant advantage of getting MedLife onto our platform.

And I think as far as Amazon is concerned, we humbly believe that it’s a validation of our decision we took years ago, this is indeed an extremely large market, where patients do deserve an extremely good experience. And I’m a firm believer that India is one of the few countries where we are going to overcome whatever limitations that we have in physical infrastructure, through our investments in digital infrastructure. I mean globally people went from unorganized retail to organized retail, to consolidation and to digital, I think in India going from unorganized to digital, right. We don’t have the time to rewire the entire hardware. But if we can make the software worked in a way that it harmonizes, the hardware, I think there’s a lot of growth. And we believe that our model is very well suited to allow deliveries of medicines done in a very timely manner with a high degree of fill rate at a very affordable and compelling price. So, we feel that the entry of Amazon will only create more awareness about the segment. And necessarily, our growth lies not just in the growth of the consumers, but like I said, even with the growth of our retailers and channel partners, because effectively our monetization happens on the B2B supplies, and a taker that we take from the retailers, so we’re hoping that this will allow the entire segment to grow and as it grows, we’ll go along with that.

Madhu Yalamarthi

I guess bigger success comes with biggest competition. Now in addition to Amazon, you have Udaan, you have Reliance, and you have other large companies also coming in. So, if you take a step back and summarize, what is the key competitive moat for PharmEasy family today than everyone else who’s entering?

Siddharth Shah

Let’s take one at a time, I think Reliance is building an extremely massive ecosystem. I believe that we are in a space where there is space for horizontal conglomerates to exist and take a significant part of the market, but healthcare is such a wide and deep subject that there is a significant space for a vertical player focused on healthcare to deliver certain experiences that patients require. So it’s not an either or, we are not, per se competing with Reliance or with Gio right, we’re all going to take a different part of the market and work in a different manner. And I think there is scope and space for a lot of us to coexist. I think as far as Udaan concerned; I think Udaan is focused only on the B2B segment. We believe that our proposition is far more compelling because we are not just B2B, in terms of saying that we will help you with the supplies. But we are also saying we will help you with the supplies and augment your demand. So, we believe that we are one up and one plus on that.

Also, we are not conflicted in any way that we are not the only sellers, given that we work as a marketplace with an anchor seller. We allow the ecosystem to grow along with us. And for us to be able to monetize in several ways in terms of take rates that we take on a B2B marketplace from a third party supplies, a gross margin that we make on our own supplies to the retailers, certain take rates that we can take from the retailers and we also augment the demand. So we believe that we have multiple revenue streams, which allow us to compete very effectively with some of these players. And bear in mind that we are still, as all digital platforms put together ages 3 to 4% of the Indian market, there’s still significant room to grow. And while some people will try and grow at the cost of retailers and the channel, our approach allows us to grow along with them. So, I think there is a tailwind, not just from the perspective that there is digitization happening. There is also tailwind that we are also taking the ecosystem along with us. And that also has a self-propelling effect, because you’re not fighting against people, but you’re fighting with these retailers.

Hans Tung

When it comes to M&A, it always sounds great in business principles. When it comes to actual practice, we have been enough of them that we know that the ones that succeeds is rare, but when they do work well like Meituan plus Dianping, it ends up from a $4 billion company a time of merger to now 123 billion. So it can work extremely well from it works. But usually in M&A, it’s easier if one side is more dominant than the other. So, there’s a lot of infighting going on when it comes to geographic expansion, it’s easier to say this is run the company A system, that’s run Company B system. And that could work if A is not ready to take over the whole thing because you rather have two operations that can run simultaneously independently of each other first, and then figure out how to integrate later if you try to rush too early. It already ends up falling apart. And that’s why most of mergers don’t work. For that reason, it does work if one can be more dominant, but when one couldn’t be more dominant, it’s actually better to settle for two systems and be able to coexist for a while. How do you think you’ll end up integrating the operation?

Siddharth Shah

I think that again, two parts, the first one is around the leadership. And the second part is around the integration of the operations. I think we’ve had a very engaging dialogue with the team at MedLife. And we’ve all agreed that if there is one set of leadership team that the entire team can look up to, so there aren’t any conflicting instructions. And to that extent, it’s been decided that we will continue in a full-time capacity. And the current set of the top three or four leaders at MeDLife will transition into the role of a senior advisor and then will no longer be associated in any management capacity after the next 6 to 12 months. So to that extent, we’ve already settled the leadership question to ensure that there is coherence in the vision in terms of how we go ahead from here, and I think answering the second part on operations, which is what we want to do in the near foreseeable future. We would like to continue with two independent brands for the consumers. But at the back end, I think the retail network that we have, we believe that augmenting more orders for these retailers might lead to better unit economics for us as well as for them. So we will look at consolidating things like procurement, retailer activations and so on and so forth, which will be value accretive from day one. But we believe that we have to be very thoughtful about putting the consumer hands together. And we are not going to do that in any kind of rush at least for the next 12 to 18 months.

Hans Tung

So, that makes a lot of sense.

Madhu Yalamarthi

Hans, you invested in several category creators which became leaders, and most of your 16 unicorns are category leaders in their own right. Looking at this situation, what advice would you have for similar category creators coming to fight with giants entering the space?

Hans Tung

I think what Siddharth and the team are doing, it’s a very unique one, it’s very difficult to find a team of four or five co-founders that can work efficiently well with each other. It is not easy at all. Most of time you end up having one founder that’s dominant, try to do a lot of things with professional managers and that at its core is very difficult to scale diverse businesses tend to be focused on just one or two at best. But in order to compete against the giant that comes in with different externalities, you got to have ability to fight on multiple fronts and build the ecosystem to compete. The best way to beat a giant that should just be a giant himself, which means you need to have an ecosystem, which means that you have a lot of people who are more like you to work that hard and driven, and have a sense of ownership, but still harmonize into a team effort, that’s why you don’t see a lot of super apps. Even though super apps we talk about it often, and it sounds great in principle, without having the right to execute it is a recipe for failure. That’s what most people end up, just focusing on one or two things to do that well, so we look at somebody like Meituan or somebody like a Bytedance or somebody like a Xiaomi, or in the US even look at something like an Amazon. You need to have a core team of top executives that are driven and work well together. So that is a premise of building the next giant. And I think that Siddharth has that here. So if you guys can continue this process and figure out a way to consolidate the back end and strengthen your B2B economies of scale leverage and advantage, then you can actually allow more different B2C outposts to exist to get consumer more choices at least for the time being. And that’s  actually a very good strategy, if you can pull it off, so we’ll come down to execution, but so far seems like it gets to doing all the right things. Obviously a competitor like Reliance or Amazon are super big, so having the right technology back end to be able to scale accordingly. One thing I’m amazed by Amazon, by Bytedance, by Meituan is the strength of their back end. If the back end is super efficient, and deep. Then you can make changes very quickly and evolve quickly in a compete because against any big players.

Siddharth Shah

I think this is very, very wise advice. And we keep this in mind as we keep going ahead because maybe we’ve learnt it, sometimes on our own hard way. Like I said, in 13 we failed, because we didn’t have the back-end interest at the front end. So it’s more like once bitten, twice shy, but we’ll continue to keep this in mind, and make our back end very strong. And I really believe that the success of where we are is actually because of the team that we have along with us. I don’t think any one of us individually would have been able to achieve that. But what’s happened together is hopefully magical and continues to remain that way in the times to come.

Hans Tung

What Madhu introduced you to me, eight, nine months ago, I was extremely, extremely impressed. We have seen enough unicorns, young team that ends up being unicorns. So, we can see the pattern to see that the early signals, and I walk away feeling very impressed by you and your team.

Madhu Yalamarthi

And to add to that, I was lucky enough to spend quite a bit of extensive time with your team on the ground and see the operations. Hans and I spend a lot of our time looking globally at different B2B models at the forefront across India, US and Latin America, and other parts of the world. Your operations and the operations efficiency is one of the best, definitely top five logistics and operations models. Even better is a business model around how you’re spinning off your internal technology of retail IO or like your procurement your technology out to others and make that a competitive moat. I think we record that as an example to other companies to look at and how the evolution of B2B could happen. So kudos to that of constant learning, and constant building, and in constant evolving.

Siddharth Shah

Actually, I’m glad you actually brought this out. Because I would say this is one of our key decisions. Because we built actually the technology to cater only to our back end, and from our back end to the retailers. In many ways, it was actually a gut call, saying that, should we open out our technology and let others also ride the wave with us? I think we were really skeptical around saying that, hey, are we giving away our IP to a ton of people? and what if those people then use our IP and we lose our advantage? But I think it’s that same momentum, which has helped us, because it’s that same IP that started scaling up, that got us these manufacturers, these distributors and these retailers, and I think it’s that same IP which is now powering the entire back end. And that back end then engaging more retailers for us, which is giving us more strength at the front end. So, I’d say that, when we took that decision, it was a big decision. For us, and we honestly didn’t know which way to turn out. Ultimately it came to a gut call. But I’m glad that it turned out well, and we believe this is actually now one of our biggest modes. Our network is actually one of our biggest modes, not just the consumer base, because there are a couple of apps, and I think a lot of other people are competitors who have a lot more consumers at the front end. But they’re not able to convert the consumers into a transaction. And they’re not able to get the consumer experience that you’d want to scale these up. But I think our success lies in the fact that we’ve used this network as a moat and that mode has really helped deliver superior customer experience.

Hans Tung

If you look at it, that’s how Shopify ends up being such a massive outcome, and you have elements of that now.

Siddharth Shah

Absolutely. I think Shopify was actually one of the key examples apart from a few others that we actually thought, we thought that if this works well, this could actually take us to the next orbit. But in 2017, we were doing a monthly revenue across all our platforms, I would say not more than 30 to 35 crores a month . And now actually, even prior to the middle of acquisition, we actually grew from the 30 crores to like a foreigner core number and MedLife will be not a 500 crores. And I think that transformation from being a pharmacy to the ecosystem has been, in large part due to our opening up of our platforms to all the stakeholders in the system.

Hans Tung

Amazon’s example that most American founders point to, or Apple, they are very close system an open somewhat, but mostly very close control everything. But if you look at experience of Shopify and Alibaba, both don’t take inventory. They try to build an ecosystem so other people can succeed in that people succeed, they have so many people working in your favor, your ecosystem becomes a huge network effect and then turns into a flywheel. So it’s very different philosophy, but in the long run, both can work. You just have to choose what fits your traits of DNA. But sounds like the fact that you have five co-founders that can work well together, you have more of an open DNA already. So, you’re playing to your strength.

Siddharth Shah

It seems absolutely right. I think we’ve found our DNA, we found what works for us and, and one of the things we found out again, is that I think, especially in the west side, people can play a certain segment of the pharma supply market. I mean, you already have three large distributors, you have retailers, and then on top of that, you have the pmbs, the payers, and you also have the telemedicine guy. So, each segment or each layer of the healthcare ecosystem can also create large multi- billion-dollar outcomes. I think in India, given the fact that most of this is unorganized, we also creating an ecosystem approach which allow us to actually straddle the entire space. And that will allow us over a period of time to create far more value for ourselves. And also rather than trying to fight each guy at each level, how can we propel their strengths, and use that as our strength? And I think that’s an approach that’s really worked for us.

Madhu Yalamarthi

Switching gears slightly and bringing it to here now. COVID-19 has sort of upended the whole country in the world, and especially healthcare has accelerated. So how is the experience running the company during COVID? And how is that fundamentally changed your business?

Siddharth Shah

I think COVID has accelerated the path towards digitization around the world, but especially in India, I would say that some of the measures announced by our government to control the spread of the disease, but absolutely well thought of, and were necessary to control any collateral damage that happened in the country. But one of the corollaries of that was the first 30 days starting end of March, and going up to April, people were kind of held up within their homes, and people only ventured out of their homes for essential services. Now what that meant is obviously pharma was one of the essential services that was allowed to remain completely open. But within that, I think each level of the ecosystem that I described the pharma company, the pharmacy, the patient and the practitioner, all of these started seeing significant changes in their behavior patterns. Doctors were very reluctant to see patients that were not having COVID in person, they would rather see them digitally. The chance of doctors meeting the pharma reps and the connection hands between the practitioner and the pharma company absolutely broke off. The patients were also worried around about venturing out from their homes and would rather rely on an app that would get them the medicines delivered at their home. And even the pharmacies wanted to limit their interactions with the pharma companies distributors right. Typically in India, you will have a sales guy who have like a sales lead, who will visit store to store get the orders delivered there, people would want even this to go digital. In India, a large part of the payments happens in cash, people wanted these payments to become digital. So what we saw is that each leg of our ecosystem, namely retail IO that connects these pharma companies with the pharmacies saw a massive traction because people wanted to transact digitally. The platforms that connected the patients to the pharmacies saw a massive bump up. We’ve also created one of the leading EMR platforms in India. It’s used by 6000 doctors in India, which also saw a massive uptake because patients now wanted to engage digitally with the doctors. So I think that COVID has seen a massive tailwind in our sector. And I think people are now understanding how all of these things come together. And I think the biggest example is that our Prime Minister Narendra Modi, on the 15th of August has actually announced a national digital health mission where each person will have a digital health ID, and allow them to engage digitally with various people in the ecosystem. And we believe that with the impetus of the government on Digital India, the National digital health mission, and ecosystem like us will greatly benefit both the people and the policies of the country, and in turn, also create significant value for ourselves.

Hans Tung

You guys start off doing this after college, you did not work at many other firms. Before that, our usual advice for fresh grads is to go work for a venture backed company first to learn experience, build a network for three, five years before trying to do something your own. If you can do this over again, with yourself done this way, then what advice would you have for people who want to be their own founder after college?

Siddharth Shah

I don’t think I would have changed anything in my life. I mean, not to say that it’s all been perfect, but I think I would say the first year and a half of the failures that we saw, actually were the biggest lessons for our success. When you work in venture backed companies, I think most venture backed companies are trying to change things. And when they’re trying to change things, it’s basically experimentation at its best, where you will have a certain hypothesis, you will try out things, maybe some will succeed, and a lot will fail. But what you learn is what not to do and how to iterate very rapidly. And I think that’s why it’s recommended to go to venture backed companies. I think I had the good fortune of failing by myself. The only thing is obviously it costs us money. Because till 2016 our venture was bootstrapped, and to a large extent actually funded by my father. He was kind enough to provide some seed capital to us, and also backed by the capital of some of the co- founders, right. So, I’d say have you failed whereas would not have been very happy because we failed at our expense. But I think what any venture backed company allows you is the ability to fail a trade experiment and move it right. And I think we could do that by ourselves. And we’re very lucky that we could do that. But I would say that there’s nothing better than trying, experimenting and failing by yourself, whether by yourself or by being an early employee of venture backed company.

Madhu Yalamarthi

Great. Onto rapid fire questions. First one, if you could spend a day in someone else’s shoes, whose would they be and why?

Siddharth Shah

I’d love to be in the shoes of Sachin and Binny Bansal because I think to a large extent, they’ve inspired the entire internet ecosystem in India, and I’d love to be there when they were there in 2007.

Madhu Yalamarthi

Who is the entrepreneur you admire the most and why?

Siddharth Shah

I’ll again go with Sachin and Binny Bansal. Because I think they’ve actually created a category. They were a small company that could actually take on a behemoth. It was a David versus Goliath. And they showed that you could create a large outcome in an Indian manner. I think the features that they brought around cash on delivery returns, so on and so forth are all very Indian features. And I think, while everybody appreciates what you see, externally, I think there is ton of innovation that they brought in, and that’s why I admired them a lot.

Madhu Yalamarthi

And they inspired a generation of Indians and future generations to come.

Madhu Yalamarthi

What is an investment, financial or non-financial you’ve made in the past year, that gave you the biggest return?

Siddharth Shah

I think the biggest non-financial investment that’s kind of given me the best returns is just going and talking to a lot of successful entrepreneurs from other sectors. I think that’s something that’s given me a significant headway. I’m a little reticent by nature, but what I’ve done is tried and carved out times, especially every week, a couple of hours to just go out and talk to people around all the fields, just to try and get a sense of what’s happening in other areas and, and hopefully get inspired by those.

Madhu Yalamarthi

Thank you so much for being on our show.