Thanks Sojung, interesting post. While working with a VC fund, I came across a lot of small companies trying to disrupt this space. The biggest challenge, in my opinion, was the constant battle with maintaining unit economics given high cost of delivery and relatively low average order values. How does PillPack plan to deal with this issue, especially with the competition from larger mail-order pharmacies? I believe drug orders can be characterized into the following two – Type 1. high value chronic disease drugs that are higher in value and lesser in number, and Type 2. lower value generic drugs for acute purposes which are low value. The former category is obviously more favorable with high repeats, higher value orders per delivery and higher opportunity for differentiation through patient service. I’d love to understand whether PillPack might be thinking of customer targeting in a similar way. How are they looking to expand the share of the Type 1 customers, and how large is this market anyway? Will their operating model differ as they try to target these two types of customers?
Very interesting, thanks Kat! At Sequoia, we always spoke about how important it is for the founders to have a significant share in the company (try to dilute them as little as possible). From my understanding, Rocket takes a majority stake and CEOs (/founders) are mostly on a salary and a very small share? For an early stage company, it seems to be much more important for the founders to be extremely invested in both time and capital with a significant potential upside. Also it is important for them to share the long term risk as they take key strategy decisions early on. Do you think Rocket’s model of taking on CEOs who have limited stake in the game, eliminates the advantages of a entrepreneurial young company that is looking to disrupt established setups? I am seeing some of my colleagues from McKinsey lead some Rocket Internet companies with the mindset of ‘running someone else’s company for a while’. Also might the comfort and backup of being part of the Rocket Internet family affects the company culture – make it more sluggish, maybe bureaucratic? Is it true that the penalization for failure is lesser, given some of the elements of the business model you mentioned above?
This is very interesting – thanks Tehsina. As you mentioned, Medical Centers like DFCI focus on research while associated patient care is handled by affiliate hospitals. Hence the shift to in-house patient care with the Sedation Suite seems like a major shift in business (and hence, operating) model. Among other realignment, patient care needs new elements like a different segment of clinical workforce, a focus on lean process, different KPIs and capital requirements.. Do you think it may have been more sustainable and scalable to find a delivery partner (other than BCH) to execute this value-based care idea, and themselves – stick to what they do best? Was there the option of a partner other than BCH for more routine procedures?