Pharmacy startups: the great filters stopping growth

With all the Theranos drama in recent years, it’s not hard to see why investors, business builders, and even my mom, are skeptical about healthcare and pharmacy startups these days.

When we first start a new business, it’s all about attracting eyeballs to see if the idea holds water in the real world. According to this study 42.6% of healthcare startups in 2015 survived after four years of operating but many failed before they ever found product-market fit. The first great filter of a pharmacy startup.

There’s a theory around extraterrestrial life called the great filter. It’s a theory that argues that we must pass one or more events that will either make our species extinct or advance us to the “next level”.

We can apply the same idea to the world of pharmacy tech startups on the journey from idea to IPO. In this article, you and I will dive into online-based pharmacies and examine some of the real-world challenges the industry faces when growing pharmacy startups.

Pharmacy startups’ great filters of growth

Sometimes a filter can be reaching a certain milestone within a certain timeframe, like reaching profitability or getting a new investment before running out of money, and other times it’s simply reaching a certain milestone altogether, such as product-market fit.

In fact, product-market fit feels kinda obvious since traditional pharmacies have existed since forever and the business model is well-developed: get a good location so foot traffic is taken care of, carry relevant products at tight margins, use marketing budgets donated by pharmaceutical companies and perhaps, eventually, move into white labeling or carrying personal care products and supplements with better margins.

Online-based pharmacy startups tend to follow a similar model, except foot traffic isn’t an option, so we have to find other ways to get attention. That presents its own challenge as it’s common to operate on supermarket-tight margins and that’s an example of a great filter specifically for online pharmacies. 

Another is differentiating too much or not enough, i.e. should you only sell Rx and OTC products or also personal care and convenience products?

It’s tricky to decide which products to stock since the use cases and competition for Rx, OTC, and convenience products are vastly different.

If we, for example, only sell Rx products, we will in some markets barely even compete with other online pharmacies since some patients don’t want to go through the hassle of getting a prescription and then going to an independent pharmacy to fulfill it. If we also offer OTC products, we are competing with other online pharmacies that offer the same delivery range.

On the other hand, if we also carry personal care products (e.g. condoms, supplements, face cream, etc.), we now also compete with health shops selling the same products. That can lead to confusion for the team internally as we are servicing different types of customers and have to get clear on who we’d like to attract more of.

Do pharmacy startups fail because of the wrong growth prescription?

Another filter worth examining is focusing too much energy on small projects that don’t have a big impact on business growth. 

Imagine a lion hunting for food on the savannah. It needs to eat a lot to survive and spends a lot of energy while hunting. In fact, it requires the same amount of energy whether it hunts for mice or an antelope but the difference is that mice don’t contain enough energy for the lion to survive. So even if it gets its prey, it loses and eventually dies a slow, painful, death.

The same idea is true for tech startups with venture backing that aren’t profitable yet. If they don’t get that hockey stick growth we all dream of, or at least are able to show enough growth to land another funding round, the same thing happens.

You might even argue that this filter is the worst one because it can feel misleading as we see wins from our projects in the trenches day-to-day, and think that we are moving forward nicely. It’s a dangerously deceptive illusion that we are working hard on making meaningful progress.

Field report #1: The deceptive conversion rate

To give you an example, I worked on a project around optimizing the website conversion rate to convert more bypassing visitors to become first-time customers. There are usually several different ways to do that, either through driving better quality traffic or optimizing the on-site experience with an easy-to-use flow through the buying process and by adding more marketing collateral like newsletter opt-in widgets or better copywriting.

I usually aim to reach industry performance standards or best practices and move on unless there is an obvious way we can do a much better job than the competitors and benefit hugely from it.

The project came about as an analysis of a website sales funnel and suggested that the conversion rate was low compared to the general industry standard.

Optimizing the website experience and signup flow looked like a good project at first with an opportunity to double the revenue assuming that we could double the conversion rate and fulfill the extra demand.

We dove in to figure out why the conversion rate was low, and through that process discovered that there was no breakdown or sub-segment that was halting behind… except the areas we weren’t shipping to. A great reminder to double-check one’s own work and not compare apples to oranges. When we compared the actual competitive delivery area with sales, the numbers looked strong–better than we had initially thought.

In reality, the conversion rate was actually hovering around the industry standards, meaning that if we had been prioritizing this project we might’ve gained an extra 10-20% boost in revenue. That seems nice on the surface but in an attempt to grow several-fold as is common with tech startups, that would mean that the project would be a failure before we would even begin.

Field report #2: Fulfilling unfilled demand

Another example of a project we canceled was one related to the website on-page search. We found that there were lots of products customers were searching for that we didn’t have in stock and the data showed that users would leave after a search not resulting in not finding the product they were looking for.

pharmacy startups - onsite search example

As shown in this screenshot, the search terms are easy to find on your own site as well. Simply fire up Google Analytics, click ‘behavior’ in the left-side menu bar followed by ‘search terms’.

Before letting the surprise get to us, we calculated what difference it would make to the bottom line if we could fulfill the demand and discovered that until the business was generating a lot more interest, we’d only add another 10% or so in extra revenue by adding all these extra products to the portfolio.

It’s a lot of extra work adding new products to the inventory since there weren’t any products that stood out as better performing than the rest.

The thing with growth projects is that there are certain stages where some projects are worth the energy and other stages that are a better fit for other projects. In fact, that’s often the case with pharmacy digital marketing projects as they tend to bring a better return the better the economics of scale are for the business. 

In both field examples, the impact would be, say, a 10% increase in revenue whereas when the business is bigger, that might automatically become 20% as it scales well with the business.

The psychology of growing pharmacy startups

Up until now, we’ve been talking about tangible filters and projects that can mess with business growth. It’s certainly important but there’s another side of the coin. Something I’ve found to make an even bigger difference.

Just like when I finally figured out how to advance my career and discovered that the tactics I had been focusing on weren’t the big picture, there is a bigger growth lever for pharmacy startups: our own psychology.

To do a good job at work, most of us need the right balance of feeling like we are almost at the deep end mixed with a bit of “I can figure this out”-attitude.

When we’ve found the right fit and things are going well, another problem occurs: evolving the stories we tell ourselves about the identity we’ve created for ourselves in our existing role, so it doesn’t hold us back.

For example, I was once working as a Facebook advertiser and saw it as a part of my identity. It held me back from working on bigger, more impactful projects because I had trouble letting the idea of myself go.

Every great company consists of great teams, and every great team is made up of great individuals, so in order to build something impactful we need great people. Shocking, I know. 

The challenge comes when we are not ready to be as adaptable as we need to for the company to grow — sometimes the bottleneck is personal growth in the individual. I guess that’s why we often see different types of people excel at different stages of the business. Those that were there at the infancy might leave as the company becomes more established, while it attracts another type of employee instead.

Besides letting go of our existing identity and role, I’ve also noticed these challenges with fast growth:

  • Thinking big and avoiding projects without enough impact
  • A dilemma between wanting to move fast and not wanting to be annoying to other team members
  • Group think
  • Avoiding brute forcing things that doesn’t work

The psychology of switching focus from small wins to big wins is in line with the filter of working on projects with too little impact as described before. At times, it feels challenging and overwhelming to hand off the projects we find easy in order to take on projects we are not skilled at, and perhaps we don’t even know how to do well. 

We’ll make mistakes and feel stupid but that’s just the first step of learning something new. Soon enough we’ll feel more confident with these new projects and it’ll be easier the second time we go through the process.

It’s easy to stay with what we know — what’s safe — instead of the new uncomfortable stuff.

Wanting to move fast but also not annoy other team members

Another bottleneck with growth is the dilemma between wanting to move fast but at the same time not wanting to be annoying to other team members. At times, it creates this weird internal conflict where we might not push as much as we wanted to because we don’t want to piss off our team members and be thought of as stressed rather than calm and in control.

It’s tough because we can’t expect all of our teammates to have the same ambition and excitement as we do and even if they do, they might be occupied by something else when we want their help.

It comes down to being impatient with ourselves but patient with others while being assertive enough to ask for what we want. Many of us (myself included) have never been taught how to be assertive. In fact, we’ve probably only seen lots of ways not to do it. 


Do you know that feeling of sending a group message asking a certain team for help, and then wait…

A few hours go by… Nothing. 

A day goes by… Still nothing.

You can even see that several of the team members saw your message but didn’t respond as you grow increasingly impatient and frustrated about a simple, quick, question.

That’s one example of groupthink: everyone thinks someone else will take the responsibility. Ultimately, no one does and so the question goes unanswered until you ask again. Imagine the number of times this happens throughout a normal week across different teams.

Brute forcing

Sometimes we get so excited about a new idea that we are stubborn to the point of trying to brute force an idea that clearly isn’t getting traction.

Often, it’s probably equal part the ego of wanting to be right and equal part professional curiosity of wanting the idea to work out.

I’ve found that it’s a sign that perhaps this isn’t the way it’s supposed to be. If your Facebook ads still return a horrible return after weeks or months of optimization, perhaps it’s just that the product isn’t a good fit for the Facebook targeting configurations available.

Growth is a tricky concept and there are certain levers that make a bigger impact than others. Interestingly, the tactical ones tend to be the most tangible ones and the ones with the least impact.

That is followed by business strategy, human capital and development. Something that is truly challenging for a business to instill in its employees.


  • Using the theory of a great filter to explain why we haven’t met any aliens from space yet can also be used to look at the challenges pharmacy startups have when pushing the business from idea to IPO
  • Some of these filters are tangible business problems like working on projects with a too small impact, whereas others are personal growth oriented within each team member
  • Many of these filters (bottlenecks) comes from the day-to-day collaboration between team members and are almost invisible to the naked eye

By Aske

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