Last month, Nasdaq listed Ebix Inc acquired a small company based in Bangalore for $6 mn in cash and $12.5 mn in earnouts after two years.
The buyout of HealthcareMagic, founded by Kunal Sinha , Shekar Sahu and Nitesh Pant, is not the story of an overnight success, but that of painstaking hard work of over 7 years.
For Shekar Sahu the early days of HealthcareMagic when they used to keep bed rolls in the office, work late night, wake up and go straight to work is still fresh in memory.
After selling his first company Techunified to ORG Informatics in 2007, Kunal was looking for his second gig. Along with Shekhar and Nitesh, he started scoping for problems to solve.
Healthcare was a favorite at the time. And the team decided to bridge the information gap between doctors and patients. They started as a listing service for doctors, so that people could find doctors easily. That didn’t work very well.
Back when they started, Internet penetration was low, site traffic was stagnant; this was a very niche market . Shekar recalls that messengers like Yahoo messenger and Gtalk were extremely popular back then. So they decided to offer a chat based service, where customers could chat with a doctor.
This brought them together with Dr. Chakravarthy Mazumdar, who was their only doctor at the time. As traffic began to improve, they slowly began to build a network of doctors and offered a subscription service for second opinions and advisory without prescribing drugs. This is how “Ask a doctor,” one of their popular services was born.
Going Round the Clock
Poor penetration of Internet in India meant that they’d have to look elsewhere for customers. They decide to work 24/7 with an eye on the western markets, where doctors were expensive.
It worked in their favor that their services were cheaper yet effective for foreign customers. Today, nearly 70% of the visitors on the site are not from India and 50% of them are repeat buyers.
Around this time, funds were hard to come by as well. “No one wanted to invest in such a niche market,” recalls Kunal. Lack of funds ruled out marketing spend and it also meant optimizing costs.
B2B offering and Accel Funding
In parallel to their consumer offering, the team saw the potential of the corporate healthcare market. They initially rolled out a “doctor on call” service and acquired customers like Mcafee, TATA, Reliance and BPL by mid 2008.
Kunal, who had previously founded and sold Techunified, continued to show demos and meet VC’s and corporates. In 2009, they received their first round of funding from Accel partners.
The money gave them the much needed boost for expansion. Being early into the market, they had a lot of creative bandwidth, they began to experiment with several offerings depending upon the needs of corporates.
Some of the services such as “Pregnancy and childcare”, “Ask a dietician” , “Ask a counsellor” and “Fix an appointment” emerged out of these interactions.
Talking to their customers constantly helped. Currently they have more than 200 corporate customers who offer HealthcareMagic services to their employees.
Running Out of Money Again
We have had situations where the VC developed cold feet after offering the terms sheet. Months of work just ended abruptly because this market was so niche and unexplored, recalls Kunal.
Customer facing telemedicine, being completely unexplored made it very difficult to raise funds. After the first round, no more funds came in.
We had to convert this challenge into our strength. We became very cash efficient. We could not rely on outside funds, we had no choice but to become lean, continues Kunal.
This has been a blessing for them. Turning EBITDA positive nearly 2.5 years back, they have set up a self-sufficient model. All their spending come out of their earnings. In the world of highly funded startups, this is a breath of fresh air.
Chicken & Egg
The biggest challenge so far has been building the network of doctors and specialists. Doctors weren’t tech savvy and extremely busy people. And then there was the classic chicken & egg situation. Doctors weren’t ready to join without having a huge subscription base; and subscribers weren’t joining because there were not enough doctors.
But today, the company has a network of 15000 doctors and 1000 specialists. We have managed to create a model which is beneficial for doctors and consumers. The content on our site is created purely by doctors, says Shekar.
Learnings and Takeaways
“We exhausted ourselves for one and a half months implementing a system to integrate electronic medical records into our online health care system. We literally had zero response.” But the learning was worth it.
Shekar contrasts it with another experiment to tweet health tips on Twitter. “Within one month we had two lakh followers. Today we have 1.28 mn followers and are the largest healthcare handle on Twitter.”
The key takeaway for them was to keep experimenting and keeping things simple.