The Exchanges

Q Can I ask TJ, I think we're all, despite whatever we kind of project, I think we're all running from something, and we're all the function of our histories, and so before we get into the journey in entrepreneurship, I do just want to touch on this, which is like, what do you think you're running from when you think about kind of all being a functions of our past?

A Yeah, so the folks that have been, uh, been following PillPack over the years will remember this story, but, uh, I think I still might actually be running from the FBI. Uh, so back in twenty-twenty, uh, for context, there's this company called SureScripts, which is kind of the main broker of data in pharmacy, also controls all the e-prescribing pipes, uh, and may happen to be owned by all the incumbents, and, uh, we did this terrible thing, which, uh, we were trying to make it easier for For customers to access their own health data and make it easier for them to choose pharmacies that they wanted to use. We've had multiple public spats with ShareScripts over the years, but in 2020 they decided that the right PR play was to do the boogeyman thing of we've called the FBI. Um, so as far as I know, I might still be running from the FBI.

AI assessment note: “I think I still might actually be running from the FBI.”

Q Why did you not have the confidence, and what gave you that confidence in the end?

A Yeah, I mean, I'm a little bit more of a non-traditional founder, right? I didn't go to, like, an elite school. I didn't, I didn't have the sort of normal connections that, uh, a number of founders do. At least that was my perception. That's probably not a hundred percent correct, but it was a wacky background, right? I'm a pharmacist. I'm not, like, a, uh, a normal entrepreneur in that context. Um, and in hindsight, like, I think it was more my perception than the actual reality, but that was, that was the hurdle for me. Um, I think once I'd Once I made that jump, uh, it was all, from there, it was very natural. It was more like a snowball rolling down a hill. Um, I kinda, I, I think it's a lot like, if you've ever been skydiving, like, Jumping out of the plane is really scary, but like once you're in the air, it's actually pretty chill. Um, and it was like that for sure for me. So we pitched it the first time at like Hacking Medicine, which, uh, is an event that we started, so it's kind of wacky, but we won the event, which is very exciting. It was, it was, uh, it gave me the confidence, uh, for better or worse. Um, this is like the fall of 20 12. I'd been a pharmacist for about six months, so like fresh out of school, and I think within a month or two, we were in, we got into Techstars. Quit my job, kind of, kind of, like, January of 2013. Um, but I think that it was, for me…

AI assessment note: “we won the event, which is very exciting... it gave me the confidence”

Q How do you know when it's going to an acquisition from a partnership in a normal conversation? Do they say, hey, we want to buy you?

A Yeah, usually when they call and say, hey, could we just buy the company? It's pretty clear it moved from, like, a Like, an acquisitive thing. Uh, I, you know, like, I wasn't, like, I wasn't reading the tea leaves at the same time, but, uh, but it was pretty explicit at that point. Um, and, you know, I think we looked, we looked at where we were, and a couple things had happened. One, like, we, we were now, like, a, a, a version of scale, right? Like, a couple hundred million in run rate or something like that. And we had a very good sense of, like, what our economics were, and what it was going to take to build what we really wanted to build. And from that standpoint, like, it was going to be pretty capitally intensive to scale this thing to the extent that we wanted to, right? Like, it was doable. Like, we could have definitely built an independent company, but it was going to be, uh, capitally intensive. Um, and then probably more, uh, importantly, like, when we started to pull back, like, it was a very simple vision, which was just made this as easy as possible for consumers. And I think as we started pulling on that string over the years, like, we had all these incumbent issues and everything else. We were more ambitious, right? Like, we wanted to fix the supply chain. We wanted to fix a bunch of other stuff in the industry, and we had gotten convinced the best way to do t…

AI assessment note: “Yeah, usually when they call and say, hey, could we just buy the company?”

Q Are you panicking at that point? That is a holy shit moment. Are you, how do you keep your cool, like, TJ?

A I like, I have a personality that when things get really intense, like, I get calm, I don't, the opposite doesn't tend to happen. So it was incredibly stressful, but, like, I also felt like I was kind of in my element, and, like, there was, like, an enjoyment, and, like, this is, like, kind of, like, it's, it's, it's a battle, and we're gonna figure it out, and we're, like, we're playing a chess match here, and Uh, certainly was stressed. I certainly was not sleeping well. Um, but at the same time, like, there was, like, a, uh, an enjoyment to it, and obviously when we pulled it off, like, it solidified the business in a way that we couldn't have done in any, any other way. Um, and similarly, like, this is one of those decisions that, like, I think if you were a little too anxious and you wanted to make the decision, like, you would have wanted to get ahead of this one. Like, you would have wanted to, like, ah, we should go do some BD deal with them. Like, let's figure this out. And I was like, nope, none of that felt right, like, it's not gonna work, like, let's just play this out and see how it, see how it plays out, and I don't think there was any other path, uh, to pulling this off than the one we took, um, but you could have also never, like, architected this path, um, it was just building something great for customers, and when it mattered, those customers came and kind o…

AI assessment note: “when things get really intense, like, I get calm”

Q TJ, why on earth did they relent? What, what made them pull back?

A Uh, I mean, I think it was, it was, there was no excuse from a customer standpoint, right? Like, it was all, uh, infighting between businesses. Um, and honestly, like, I should caveat this all now that, like, now that PillPack and Amazon Pharmacy are, like, real players, like, we actually have, we, when I left PillPack in September, we had a great relationship with Express Scripts. Uh, we launched the Prime discount program with them, um, and, and we flipped from, like, this little nit that, Uh, they could just squash to, like, a partner, and so, like, these things sort of have, they run their course, um, but net-net, like, those relationships now are sound and good, and, um, we can now kind of build stuff that ends up being good for customers.

AI assessment note: “we flipped from, like, this little nit that, Uh, they could just squash to, like, a partner”

Q Could you, could you not have been more aggressive and just taken vertical ownership and done the payment processing yourself too?

A And then actually really. It's not just payment processing. It's like all, they're the equivalent of like, You can think about, like, a PBM or honestly kind of a payer in general as, like, the demand aggregator in healthcare, right? Like, they own that demand. They own the employer relationships. Um, they have the Medicare relationships. Like, you would have had, as a startup, you could not have built what they had built, um, unless you're building an entirely different company. You can't do it when we're building the equivalent of a retailer. Like, literally impossible. And so, it's early 2016, um, Express Scripts, uh, sent us a termination notice. Honestly, it looks the same as all the other termination notices we had received. And we had managed quietly and figured out. And we, we reached out to them the same way we did with the others and tried to get a meeting and try to help figure it out. And we had two weeks, right? So termination notice states, like, in two weeks, you can no longer serve Express Scripts customers. Like, you can't process transactions. Uh, for context, they are the largest BBM. So this was, like, 40% of our revenue. Um, and as far as we knew, in two weeks, like, that revenue goes to zero. And so, after, like, we spent a week just Trying to get in touch with somebody, and they were just radio silent, like would not even engage with us. Um, and so we made…

AI assessment note: “as a startup, you could not have built what they had built”

Q But do you think most entrepreneurs today are uncomfortable with uncertainty? I'm giving a data point here, but from our portfolios, which are quite broad and diverse now, um, we've had six founding people from founding teams leave in the last month. I feel there's a real breaking of founder partnerships as times have got hard. Do you think founders are uncomfortable with uncertainty today?

A I think there's, it's plausible that there are a number of founders that, uh, are in the role and might be more comfortable in a different type of, in a different type of role. You know, and, but you have a lot more kind of broad perspective. Mine is very narrow. Um, but I, I sort of have come to terms with the fact that I think it's very hard for like the classic overachiever that sat in the front row every, you know, in every class and always delivered papers on time and always got A's in every, every one of their classes. To go from that reality into a startup, which is honestly like rewards a very different type of behavior and a different type of, of, uh, tactics. Um, and I think there are some folks that got swept up in the sort of perceived glamour of being a founder rather than the reality of, of that job. And so I, I do think it's, it, there is a big like founder fit in the gig. And I think being, being sort of super honest with yourself about, uh, Who you are, and what you, what you really enjoy, and what environments make you happy, um, will probably, is, you know, I think super important.

AI assessment note: “it's plausible that there are a number of founders that... might be more comfortable in a different type of role”

Q Okay, help me out as an investor. I meet, sorry, ah, sounds awful, but I meet naive founders, and I'm like, oh, so naive. When is naivety good, and when is it bad? Because it can be bad.

A Yeah. Well, A, I think you have to be a pretty quick study. You got to figure this stuff out as you, uh, as you're building the company. So I think, I imagine a lot of your job is figuring out how, how able the founder is to roll with things. And so I think if you're just naive and you're going to stay there, it's probably going to be a huge problem. But again, I think it is about like the difference between not totally grokking industry dynamics and, uh, grokking the customer. Um, you know, we took money from exclusively consumer tech investors and We weren't out pitching healthcare investors. I think almost every healthcare investor would have said no, um, because of the fact that, you know, the industry dynamics were the way they were, so the investors were just as naive as us on a lot of the dynamics at play.

AI assessment note: “if you're just naive and you're going to stay there, it's probably going to be a huge problem”

Q Speaking of Yvonne and the timing there, when you think about exec teams, what should we front load first? Why? And how do you think about that?

A I always think about, like, each round for a classic venture-backed company as trying to be super crisp about the thing you're trying to prove on that round of financing, right? So, like, obviously, like, your first round of financing, you're doing a bunch of stuff. Like, you gotta build a product de novo, you gotta sort of pseudo-build operations, you gotta build all the components, but, like, what is the bet your investors are making, and do you have the right team to achieve, like, that single bet, right? Like, you kind of have to put blinders on and be really, really thoughtful about what that is. So, for us, we, We raised the first round of financing. Like, it was taken on face value that, like, I knew how to open a pharmacy. I knew roughly what the economics were because we were in a similar business before. I knew how to build the product-ish because we had Elliot on the team, and he had built products before. Um, the, the flyer everyone was taking is, can you acquire consumers online for this company, right? And so the only thing that mattered, uh, sort of post that first round of financing was, can we actually acquire customers online for a pharmacy? Which, You jump back to, like, 2013, like, starting a pharmacy is not what starting a pharmacy is today, right? There's Rho, and HIMSS, and PillPack, and Capsule, and TruPill, like, there's all this great activity in pharm…

AI assessment note: “do you have the right team to achieve, like, that single bet, right?”

Q Can I ask, I heard so many things from Fred about, bluntly, your process of design for the first physical products. When you go back to that, what are your biggest lessons from the V-ones and the early product designs? What do you know now that you wish you'd known when you were doing them?

A Yeah, I think the thing that we definitely did right that I feel really good about was, was actually deeply caring about the physicality of the product. I, I think it's hard to put yourself back in, uh, but at the time, like, there wasn't a lot of these, like, well-designed CPG consumer businesses that existed, and the only reason we cared so much about it was that I, I just, I just liked it. I cared about it. I thought it was cool. Um, and we, We actually hired IDEO and worked with them. We camped out with them for the first three or four months of the product design process, and they did all of the work with us on the physicality of that product. Obviously, the, the, the sort of physical packaging, the, uh, the packets themselves were, were already, the functionality was designed, but all the energy went into how do we make this as simple and beautiful and pleasant an experience as possible. And honestly, the The physical product today, which is now almost a decade later, is exactly the same as it was when we designed it the first time around. Um, and so it's really stood the test of time. It's, it's right back there. It's a permanent dispenser. Um, but I'm super proud of it, and I'm proud of the thing we designed before we were even, uh, before we even launched the product, and I think it's a place where you, it's really important to punch above your weight as a startup, whi…

AI assessment note: “the thing that we definitely did right that I feel really good about”

Q I, I, you mentioned punching above your weight. I have to touch on the element you said earlier, being kind of incumbent responses. Incumbents respond in varying ways. I hear there's an interesting story here. How did incumbents respond to you when things started to hum? And take me to that story. I'm intrigued. I don't know the answer here. I don't know this, so tell me more.

A Yeah, so I'll try to keep this, uh, as, as, uh, understandable and non-wonky as possible, but Apologies if I get in the weeds a little bit here. So, I think the place we were woefully naive at PillPack when we founded the company was this, right? We didn't really understand why there were more e-commerce, like e-commerce pharmacies, like every other category. There's all these big winners in pharmacy. There's basically, there was no e-commerce player before PillPack. Like, they didn't exist, right? There's CVS and Walgreens. There's PBM-owned mail order pharmacies. There's no e-commerce business. Uh, well, that's weird. Like, we should just build this. This will be great. Uh, we're gonna build a great customer experience, and it's gonna, it's gonna be awesome. And there are the things called PBMs, um, which stand for Pharmacy Benefit Managers, um, and they are companies like Express Groups, uh, CVS Caremark, OptumRx, um, and they're kind of the equivalent of insurance companies, but only for your prescription drugs, and historically they were in two different businesses. One was managing your benefits, so how much is your copay, which pharmacies can you use, how much is your out-of-pocket, which medications are covered, like all the things an insurance company does. And then the other half of their business, uh, was owning and operating mail order pharmacies. So they did home d…

AI assessment note: “obviously they weren't particularly thrilled about other companies competing with them in that second category”

Q But do you think most entrepreneurs today are uncomfortable with uncertainty? I'm giving a data point here, but from our portfolios, which are quite broad and diverse now, um, we've had six founding people from founding teams leave in the last month. I feel there's a real breaking of founder partnerships as times have got hard. Do you think founders are uncomfortable with uncertainty today?

A I think there's, it's plausible that there are a number of founders that, uh, are in the role and might be more comfortable in a different type of, in a different type of role. You know, and, but you have a lot more kind of broad perspective. Mine is very narrow. Um, but I, I sort of have come to terms with the fact that I think it's very hard for like the classic overachiever that sat in the front row every, you know, in every class and always delivered papers on time and always got A's in every, every one of their classes. To go from that reality into a startup, which is honestly like rewards a very different type of behavior and a different type of, of, uh, tactics. Um, and I think there are some folks that got swept up in the sort of perceived glamour of being a founder rather than the reality of, of that job. And so I, I do think it's, it, there is a big like founder fit in the gig. And I think being, being sort of super honest with yourself about, uh, Who you are, and what you, what you really enjoy, and what environments make you happy, um, will probably, is, you know, I think super important.

AI assessment note: “swept up in the sort of perceived glamour of being a founder”

Q Ben, I am so grateful that this is the first thing you've done in five years, but I want to go to PillPack and that kind of founding aha moment. Obviously, we see the incredible journey today, and we see the exit, but in terms of that founding moment, what was that aha founding moment for you? Take me there.

A Yeah, so I think if you, if you go way back, like, I grew up in New Hampshire in a family that owned and operated a new classic mom-and-pop pharmacy, so grew up in and around pharmacy, um, and, you know, I actually started school as a business major and pretty quickly realized that it was, I thought it was important to have a technical background, like some specific expertise, and so switched to pharmacy, but as you can imagine, I never had ambitions to work, like, behind the counter at a, at a CVS. Um, just knew there was lots of opportunity in and around pharmacy. Um, and I'd done every, I'd worked a ton of different jobs at my dad's pharmacy, so worked behind the counter, helped check people out, actually was delivering meds to people in their homes and saw that experience. Um, I just knew there was a lot of opportunities to make it better. It was super frustrating. It was really complicated. Um, so I was in pharmacy school in Boston, um, and doing the classic going down weird rabbit holes in the internet as a, as a college student and I was buying and selling sneakers, got really obsessed with design, thinking about furniture and architecture, and was just very interested in kind of aesthetic, um, and then very separately got really interested in startups, so, um, kind of snuck into MIT, and they were super gracious. I didn't, I didn't go to school there, um, but helped run…

AI assessment note: “if you go way back, like, I grew up in New Hampshire”

Q TJ, why on earth did they relent? What, what made them pull back?

A Uh, I mean, I think it was, it was, there was no excuse from a customer standpoint, right? Like, it was all, uh, infighting between businesses. Um, and honestly, like, I should caveat this all now that, like, now that PillPack and Amazon Pharmacy are, like, real players, like, we actually have, we, when I left PillPack in September, we had a great relationship with Express Scripts. Uh, we launched the Prime discount program with them, um, and, and we flipped from, like, this little nit that, Uh, they could just squash to, like, a partner, and so, like, these things sort of have, they run their course, um, but net-net, like, those relationships now are sound and good, and, um, we can now kind of build stuff that ends up being good for customers.

AI assessment note: “flipped from, like, this little nit that, Uh, they could just squash to, like, a partner”

Q Did it hit your bank account in one go? And can you just take me to the moment when you saw your bank account? Like, were you on a, in the garden with the kids? Where were you when you saw it hit?

A For me, the moment that was more, like, uh, endearing was, like, was telling the team, which is the same exact time, right? Like, uh, no, that isn't the same time. That's later. Okay. So we told the team. That was better. Uh, my dad was there. My mom was there. Like, all of the companies that traded, uh, in pharmacy in the public markets dropped by, like, 15% in, like, three minutes. Uh, so it was the very, that moment was honestly, for me, was, like, was better than when the money hit my account. Like, it was just, like, such a moment. Um, and the money hit my account, it was just a lot of refreshing, like it is anytime lots of money hits your account. Um, and then it was.

AI assessment note: “For me, the moment that was more, like, uh, endearing was, like, was telling the team”

Q Did it hit your bank account in one go? And can you just take me to the moment when you saw your bank account? Like, were you on a, in the garden with the kids? Where were you when you saw it hit?

A For me, the moment that was more, like, uh, endearing was, like, was telling the team, which is the same exact time, right? Like, uh, no, that isn't the same time. That's later. Okay. So we told the team. That was better. Uh, my dad was there. My mom was there. Like, all of the companies that traded, uh, in pharmacy in the public markets dropped by, like, 15% in, like, three minutes. Uh, so it was the very, that moment was honestly, for me, was, like, was better than when the money hit my account. Like, it was just, like, such a moment. Um, and the money hit my account, it was just a lot of refreshing, like it is anytime lots of money hits your account. Um, and then it was.

AI assessment note: “that moment was honestly, for me, was, like, was better than when the money hit”