Founder Collective

@foundercollective

5 Lessons from PillPack's Sale to Amazon

June 28th 2018

By David Frankel, Managing Partner

When we led PillPack’s seed round in 2013, I knew from personal experience how taxing it could be to help a family member manage multiple medications. Five years later, I can barely manage my excitement for co-founders TJ Parker, Elliot Cohen, and the rest of the PillPack team in the wake of their acquisition by Amazon.

PillPack’s value is clear to its many patients, and the countless number of pills they’ve dispensed is a testament to the quality of their offering, but I wanted to share a few thoughts about what has made the company so special.

1. True Founder/Market Fit is a Super Power

The concept of founder/market fit is thrown around loosely in VC circles, but in PillPack’s case, it is honestly difficult to imagine another pair of founders successfully navigating the unique challenges presented by building the pharmacy of the future.

PillPack Co-founders TJ Parker and Elliot Cohen. Photo: Boston Globe

TJ Parker is a second generation pharmacist (and entrepreneur) who learned his ABCs thumbing through his father’s copy of The Physician’s Desk Reference. Unlike most people who spend their days dispensing statins, TJ is a design fanatic — a fact that expresses itself in everything from the design of PillPack’s office to his personal fashion choices — ask yourself how many pharmacists share their Japanese sneaker advice with you?

Who do you pair with a pill-slinging design polymath? Elliot Cohen is a computer scientist by trade, earned an MBA from MIT, and possesses a penchant for offbeat poetry festivals. When people think of PillPack, it’s the trademark packaging that comes to mind. However, this indispensable pill dispensing solution is only possible because Elliot wrangled spaghetti code from an array of legacy systems into something that PillPack’s customers think of as delightful.

The pair fits seamlessly. TJ cherishes beautiful design but has the bearing of a doctor. Elliot combines the soul of a poet with a knack for code. The combination proved to be the prescription for an ailing pharmacy business.

2. Great Products are Built on Boring Foundations

Few healthcare products look good or work well. Many startups have tried to bring better offerings to this moribund market and almost all have failed. Even Apple has only been able to advance in fits and starts. PillPack’s success in bringing beautiful and scalable solutions to a stagnant market is due in large part to the willingness of its founders to engage with the unattractive parts of their business.

Brainstorming creative packaging concepts with a marketing team is fun. Burning a weekend traveling to appear before an obscure pharmacy licensing board, less so. There’s an elephant’s graveyard filled with entrepreneurs who developed compelling medical brands and dynamic demos but were unwilling to contend with the soul-crushing regulation on the product side.

Elliot Cohen in the PillPack office circa 2016

Many more have failed by solving obscure technical problems with aplomb, but without thinking about how to make them resonate with users. PillPack is the rare company willing to endure the drudge work of earning pharmacy accreditation in 50 states while sweating the details of the smallest consumer touchpoints.

3. The Most Important Design Is the Org Chart

TJ and Elliot haven’t been alone on this journey. In fact, it’s the enthusiasm with which they’ve added and embraced experienced talent in critical areas that has allowed them to scale.

Once the low-hanging fruit of customer acquisition through social media started to plateau, the founders knew they needed to develop new channels and they recruited Chief Business Officer Geoff Swindle to bring his experience with direct marketing to grow the top line.

Bain Operating Partner and former Gymboree COO Yvonne Hao joined as COO/CFO to help augment the bottom line by tightening financial management practices.

PillPack invested in a beautiful office, but spent more time designing an impeccable org chart. Photos: VentureFizz

Colin Raney, who incubated PillPack as the Managing Director of IDEO Boston, joined the team to lead design/product and to ensure the voice of the customer was never forgotten. We held our very first board meetings in the IDEO offices and Colin’s design sympatico with TJ was a joy to behold from the beginning.

When PillPack was facing an existential threat from an industry behemoth, TJ leveraged a relationship with Jim Messina, President Obama’s former Deputy Chief of Staff, as well as Larry Summers, the former Treasury Secretary to provide advice on how to win the highest stakes negotiation in the company’s history.

PillPack has the making of an unstable compound. A small army of pharmacists (and robots) in New Hampshire. A cadre of designers and coders in Cambridge. Call centers full of inside salespeople in Utah. Scaling any of these unique cultures is difficult. Doing all three in concert is nearly impossible. It’s a credit to the team that they were able to turn a volatile mix into a cure for some of the most persistent problems in the healthcare delivery.

4. Don’t Overdose on Capital

From the outside, it would seem PillPack led a charmed startup life. The brilliance of the concept was recognized with design awards from its early days. TJ and Elliot were feted as founders by Forbes. But behind the scenes, the company has been subject to the ups and downs that beset every successful startup.

In the early days, Facebook shut off PillPack’s ability to advertise as the social giant worked through its policies regarding pharmaceutical advertising. That momentary inconvenience seemed like nothing a year and a half later when one of the biggest suppliers in the industry threatened to shut off PillPack’s access to medication — in perpetuity. Deft decision making by the management team and execution from the entire organization helped them overcome these and many other challenges.

Despite those external challenges, PillPack never struggled to raise money. Their vision and progress made for a compelling pitch. It would have been reasonably easy to keep growing independently by raising more money. But as with drugs, the size of the dose really matters.

I think of this acquisition like a staged rocket launch. The venture phase helped the company reach heights no other pharma retailer has broached in decades. The resources of Amazon will help the company achieve escape velocity and positively impact the lives of millions.

5. Mission Matters

Funding announcements and celebrations of acquisitions are rarely interesting to those not involved in the deal, but one generally applicable lesson to remember is that your mission matters.

PillPack is an ecommerce startup. It’s not a charity. But every employee knows their day’s efforts are being spent helping seniors live more independent lives and helping young people manage chronic conditions without limitation. It’s the kind of product that allows TJ and Elliot to convince key people to leave plum jobs to join their robotic apothecary. It’s highly reminiscent of Steve Jobs legendary statement to John Sculley: “Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?”

Mission is almost impossible to fake. From the time they met while co-leading a program for healthcare startups at MIT to the present, a desire to help people live longer, healthier, and more full lives animate these two entrepreneurs. In a world where founders flit from theme to theme, TJ and Elliot set out on a mission and have succeeded beyond all expectation.

Finally ….

The story of the last five years has been that of bricks and mortar retailers frantically trying to play catch-up with Amazon. By acquiring PillPack, Amazon is now firmly attacking another quarter trillion dollars of TAM. Bezos is a tenacious competitor and has just added the most compelling consumer pharmacy to enter the game since CVS was founded in 1963.

TJ Parker understands the pharma business in his bones, has impeccable product sensibilities, and now has the backing of the most successful retail entrepreneur in history.

Expect some real healthcare reform ahead.

More by Founder Collective

More Related Stories