The Inc42 & AWS series — Scaling From 1 To 10 — continues with a deep dive into online medicine delivery and healthtech platform 1mg.
India is a unique market in many ways, but one of the defining characteristics of the economy on a macro level is the dichotomy between urban and rural India. But with Tier 2 cities rising up as startup and innovation hubs thanks to the penetration of the internet, the consumer mindset towards tech in smaller cities and semi-urban towns is also changing drastically.
The internet has come as great leveller in the context of urban-rural divide and some of the sectors where this is most apparent are ecommerce, education, healthcare and consumer services. The internet and mobile data has led to a democratisation of services. Arguably, the most significant problem that internet and technology is solving in rural and semi-urban India is access to healthcare.
Despite the sector’s impressive growth in recent years, in part due to increased investment in tech startups that are solving access to quality healthcare, there’s a skewness between Tier 1 and 2 and below cities in India. As per a report by KPMG and the Organisation of Pharmaceutical Producers of India (OPPI), more than 75% of the country’s pharmacies, around 60% of hospitals and 80% of doctors are currently located in urban areas.
But India’s rising income, increasing health awareness and easier access to finance and insurance are changing the reality in India outside the cities. The IBEF has estimated the Indian healthcare market to be valued at $372 Bn by 2022, and plenty of investments have come through in the past five years into the healthcare sector — especially startups that are trying to bridge the gap between urban and rural India, as well as those that are eliminating the smaller pain points in Tier 2, 3 and 4 cities.
Epharmacies Ride On Ecommerce Wave
In particular, the epharmacy sector has flourished despite regulatory challenges thanks to the same market conditions that propped up ecommerce, grocery delivery and food delivery startups. The shared logistics, transport and supply chain infrastructure for many of these sectors culminated in a tech ecosystem opportunity, which online pharmacies or epharmacies also latched onto.
“We knew the infrastructure was there. So we looked at it from a product point of view. And a lot of it is driven by fundamentally understanding what users needs, and how they discover the needs, answering their healthcare questions. So that’s how we acquired users,” 1mg cofounder and CTO Gaurav Agarwal told Inc42.
The ecommerce boom meant that 1mg could focus purely on building the right product, selection, pricing mechanisms, Agarwal said. And it also helped the company build the right operational systems after separating the identity from parent company Healthkart in 2015. “We wanted to make sure that the stuff that we promised gets delivered to users on time. All of these things contributed a little ways in getting us in.”
Online pharmacy startups such as 1mg, Pharmeasy, Netmeds and Medlife made medicines more easily available in a wider distribution area. On the other end, Practo, Lybrate, Portea, mfine, and DocsApp sprouted up in the telemedicine and diagnostics space to make access to doctors easier. And gradually, healthtech startups have changed the face of Indian healthcare over the past five years.
As per DataLabs by Inc42 estimates, the total capital invested in startups operating in the epharma space between 2015 to H1 2019 is $361 Mn. The total capital inflow in the online pharmacy startups combined makes up around 20% of the total capital invested in the healthtech startup sector of India ($1.77 Bn) in the same time period.
1mg: Changing Healthcare In Tier 2 India
Even though 1mg came on to the scene in April 2015, it had been around in an earlier avatar under health and wellness marketplace Healthkart. It was spun off as a generic drug search business and rebranded from HealthkartPlus to 1mg.
Founded by Prashant Tandon, Agarwal, and Vikas Chauhan, 1mg has three business verticals — pharmaceuticals, labs and doctors. Speaking to Inc42, Agarwal said that more than 70 Mn unique patients from across India accessed its platform last year for these three services, with over 2.5 Bn annual pageviews for the healthcare content, which is a vital aspect of online pharmacies.
In FY 2018, 1mg Technologies reported revenue of INR 39.8 Cr ($5.4 Mn), a 223% jump from the last financial year. Of the total revenue, the epharmacy contributed INR 23.2 Cr ($3.1 Mn) while the diagnostics share was INR 8.8 Cr ($1.1 Mn) in FY18, an increase of 268% and 214% respectively from FY2017. The company had further reported a net loss of INR 88 Cr ($11.9 Mn) in FY2018, which is about a 50% increase from the last financial year.
In June this year, 1mg closed a $70 Mn Series D round from Corisol Holdings and IFC. With other investors such as Sequoia Capital, HBM, Omidyar Network and Kae Capital, 1mg has the momentum in needs to expand the reach of its diagnostic labs to 100 cities in India, and make epharmacy services available in Tier 3 cities as well as villages.
The company’s CEO Tandon said the Series D would help the company get comprehensive coverage across India in terms of supply chain, logistics and infrastructure, which would help it achieve this penetration outside the major metros and Tier 1 cities. And to get there it is also looking to invest in building its data science team for new products such as a digital doctor and AI-powered health bots. To solve access and availability of medicines, 1mg went to the core of AI models to find the solutions, Agarwal claimed
“AI is a poorly easily understood these days — everyone says they are using AI. But we are going beyond that. We were clear that this technology could change healthcare,” Agarwal said about the company’s plans to use artificial intelligence models to improve its services.
Agarwal and his engineering team had to understand how AI models work — the math behind it, as he puts it. “So today, even though our AI and machine learning team is small, we have over 12 projects live in our production systems that use AI and ML models.” He added that it’s not just about finding a model from the internet, plugging in the 1mg data, but fundamentally understanding the math and how mathematical models involved actually give 1mg the gain and value it needs.
Scaling Up 1mg For The Big League
“We use AI today in improving user conversions; we use AI to streamline delivery times and the logistics of that; We use AI in doctor consults; We use AI in disease progression models, so it’s quite an array of use-cases for us”
Of course, it had to start from somewhere, and Agarwal recounted this journey saying how far the technology team has come and the increasing degree of sophistication in this team’s approach as 1mg scaled up.
“You know, at every stage in the scale, the challenges are very different. So for instance, when we started 1mg, we had a very monolithic infrastructure and we rebuilt that whole thing to actually work on a microservices architecture. That gave us a certain amount of speed of development, scalability, stability, etc, that that we were able to leverage and go through much, much faster when it comes to technology and product offerings.”
He added that even though the team has grown, there’s always been an effort to evaluate new technologies that can be used to automate parts of the operations or streamline the infrastructure. “We have a small team, which is called the platform team, which keeps investigating what new things are coming on the market, and how could they be beneficial for us,” Agarwal added to emphasise how 1mg scaled up as a platform.
Agarwal barely paused as he looked back at the journey, but there is one moment where he breaks off from the narrative, and pointedly makes a statement about cloud computing, saying that anyone serious about using technology and all its various arms has to leverage cloud from day zero or even before beginning. That’s something 1mg didn’t do, but it did start using Amazon Web Services at a fairly early stage, he told us.
“We used to be hosted on a private data centre. And there was a spate of DDOS attacks on companies and because they were targeted, 1mg infrastructure was also affected. So we decided overnight to actually move to cloud infrastructure, which was more robust and reliable. And our decision was correct.”
Before AWS, 1mg’s scalability was dependent on third party and bargaining. Even though it was able to get better pricing, according to Agarwal, using a private data centre was not the best fit in terms of flexibility, and the speed at which it wanted to scale up for new services. “It was way better with a technology platform like AWS, and it’s not just about scalability. But our uptimes are upwards of 99.99%. A lot of that is backed by AWS capabilities, and you know their database service or the load balancers and the auto scaling support and spot instances, which helps keep the unit cost low. It helps a lot with business continuity, and the ability for the business to innovate.”
But Agarwal was quick to add that it’s not just about innovation, but also data security. “We are very clear that patient data, patient safety and privacy is our top priority. We actually have a very large medical affairs team — around 40 people today.”
A Culture Of Ownership
While it’s a sales-driven business, it’s not just about the numbers for Agarwal. He stressed that the culture at 1mg blends accountability with empathy to get the team ready for the challenges.
Of course, stories from India’s growth stage startups paint a picture of unachievable targets and long working hours. How much of that is true for 1mg? “We were clear that 1mg is going to be a five-days-a-week place. I value my work life as much as I value my personal life. We said that we will not measure people on how many hours they have spent in the office, but on how much they deliver.”
At the same time, there’s a sense of ownership that the company tries to infuse into its employees. Agarwal went on to elaborate that even though 1mg works with third-party partners such as pharma companies, it does not share any user data with third-parties, but instead gives access to the users to conduct surveys, take feedback etc, which actually informs companies about deficiencies in their products or package design and more.
The dedicated medical affairs team is responsible for all patient safety, patient protocols, that 1mg operates within. This includes dispensation of medicines, content listing, lab test protocols, which are defined, audited and reviewed independent of the business. So the team is not driven by the business goals, Agarwal added.
This philosophy of ownership of processes is one of the core values of 1mg. “We decided early on the core values that would drive us. Ownership is very important because it teaches responsibility. But at the same time, here at 1mg, hierarchy does not matter, the functional groups don’t matter — because with ownership comes accountability.”