TJ Parker: Building PillPack, The First E-Commerce Pharmacy, to Amazon's $1B Acquisition | E1022

1. 0:00 – 5:36

   TJ Parker’s Founding Story of PillPack

   1. TPTJ Parker0:00

      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?

   2. HSHarry Stebbings0:06

      (instrumental music) TJ, I am so excited for this. As I said, I feel like I know so much of the PillPack journey from the wonderful Fred Destin. So, thank you so much for joining me today first.

   3. TPTJ Parker0:15

      I am thrilled to be here. This is the first, uh, first public thing I've done in, like, five years. Um, and obviously I owe a ton to Fred as well. He bet on both of us when we were super young. So, thrilled to be here.

   4. HSHarry Stebbings0:27

      Man, I am so grateful that this is the first thing you've done in five years. But I wanna 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.

   5. TPTJ Parker0:41

      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 kind of your classic mom and pop pharmacy. So, I 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, uh, at my dad's pharmacy, so worked behind the counter, helped check people out. Actually, I 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 on the internet as a, as a college student, and 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 s- 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 the, the MIT 100K, which was, like, their business plan competition at the time. Um, and I showed up for the first, uh, for, like, the, the, the, the sort of first meeting with all the students, and they're like, "You don't, you don't go to school here." And I was like, "Nope." And they're like, "I mean, we're not paying you, so if you wanna do some free work, like, I guess that's fine." Um, and then I actually started this thing called Hacking Medicine at MIT with Elliot, my co-founder, um, which was getting just doctors and designers and physicians all together to work on stuff in healthcare. Um, and through that period, kind of like 2005 to 2010, um, my dad had started this totally new pharmacy, um, that was sorting and packaging meds, actually very similar to PillPack. Um, but they were selling into nursing homes and assisted living facilities. It wasn't a consumer business. Um, and so I'd always had this idea, like, could you take this kind of core product but then offer it to consumers and do it in a way that was really kind of design-forward and, and aesthetic? And I think for me, the big challenge was getting the confidence to think I could actually go do that. Like, could I actually raise venture capital? Could I find a real co-founder? Like, just getting, like, the inertia to believe that, that I could do that.

   6. HSHarry Stebbings2:59

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

   7. TPTJ Parker3:03

      Yeah. I mean, I'm a little bit more of a nontraditional 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 100% correct. But it was a wacky background, right? I'm a pharmacist. I'm not, like, a, a, 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'd 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 kind of, 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 was like the fall of 2012. 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, kinda, this is kind of like January of 2013. Um, but I think that it was, for me, it just wasn't an aha moment. It was like, how do we combine, like, my expertise in pharmacy with my interest in design, with my interest in tech? It was like, how do we put all these things together? Um, and it was a very kind of iterative, natural, uh, process in hindsight, right? Obviously, that wasn't intentional going into it. Uh, but it really was the combination of all these things I was doing and I was interested in that, that ultimately became PillPack.

   8. HSHarry Stebbings4:39

      When we hear your background there and the parents' roots in pharmacy and having their pharmacy, your father kind of iterating on that model, it just seems inherently like this founder-market fit. How important, I'm just intrigued, how important do you think founder-market fit is given the lens that you come from and the experience that you have?

   9. TPTJ Parker4:58

      Yeah. I think it's important in the sense that I think it's really important to understand the customer problem. Um, I think it's less important in understanding, like, all of the nuance of the industry and dynamics and other things that are going on. Um, but I do think if you don't deeply understand the customer problem, it's likely you'll build the wrong solution. So, I think that's where we were uniquely... That's where my expertise was unique. I don't think it was that I was a whiz kid on how pharmacy worked. I think it was that I, I'd spent enough time inside the pharmacy, I'd spent enough time in customers' homes that I, I did deeply understand that problem. And I looked at all the solutions that were out there, and I felt like we could offer something that was a lot better.

2. 5:36 – 9:28

   Running From the FBI

   1. TPTJ Parker5:36

   2. HSHarry Stebbings5:37

      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 a function of our histories. And so before we get into the, the journey in entrepreneurship, I do just wanna 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?

   3. TPTJ Parker5:54

      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 2020, uh, for context, there's this company called Surescripts, which is kind of the main broker of data and pharmacy, also controls all the e-prescribing pipes, uh, and may happen to be owned by all of 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 exp- with Surescripts 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.

   4. HSHarry Stebbings6:39

      What was that kind of boogeyman FBI call for? And what were they saying you'd done?

   5. TPTJ Parker6:44

      I think it was to try to paint us as, like, bad actors. I mean, that was kind of a, a theme throughout the journey of PillPack. And in reality, we were doing things that made it way easier for customers, um, but I think it made incumbents uncomfor- ... And we'll get into a bunch of this, I think, later in the podcast. Um, but that was a constant theme of we gotta find some way to paint these guys that are trying to make this better, uh, as, uh, as the opposite.

   6. HSHarry Stebbings7:06

      What else are you running from, TJ, personally?

   7. TPTJ Parker7:09

      Yeah, I think maybe to more seriously answer your question, I, I had this conversation with someone a couple months ago. They made the comment that kind of stuck with me that we're always probably looking for the opposite of, of the environment that we had as a kid to some degree. And I, you know, for me, uh, if you zoom way back, like, my dad grew up with almost nothing and le- worked, worked incredibly hard to become a pharmacist, to, to give us a childhood that was, was way better than his. Um, but it was like a very kind of Leave It to Beaver childhood, right? Very, uh, very predictable, very stable, just very kind of classic. And I think I was always looking for a little more excitement, a little more risk, uh, in my life. And so, I think startups were a great way for me to harness that. Um, but probably, probably led to me being very uncomfortable in, uh, very formulaic, stable environments.

   8. HSHarry Stebbings7:57

      I think one of the reasons the show has done very well, TJ, is because I have a schedule and I say fuck it, and I also just go kind of with my heart. I listen to your predictability and stability there, and I'm very envious of children that have predictable parental guidance and predictable childhoods. And I, I, I don't think I really have one at all, and that structure I didn't have. Um, d- how do you think about your parenting today, having had that predictability? And is that what you want to give them, or not?

   9. TPTJ Parker8:27

      You know, I think for me, it's really about giving them an environment to be kids, is probably the biggest thing. I don't know if it's as much about predictability versus non-predictability. But I think the, the, the thing that we're trying to provide for our kids is the ability to go explore, uh, be kids, to be able to have independence, and to grow independence early, which I did have in my childhood. Like, we, we were the classic '80s, '90s kids that hopped on a bike and took off and came back before dinner. Um, and so I'm trying to, I'm trying to keep that, um, 'cause for me, that was sort of the magic of childhood, was being able to go build forts in the woods and be gone for the whole day. It wasn't, uh, it wasn't sort of, like, my schedule's packed. And I, I wanna make sure I provide that for my kids. And certainly, hopefully, our environment is stable. But it, for me, that's the thing I think about a lot, is how do I, how do I retain a childhood that is, for the most part, now gone for a lot of kids?

   10. HSHarry Stebbings9:18

       I have the most wonderful imagery from US films of kind of jumping on a bike and going around picket fence kind of, uh-

   11. TPTJ Parker9:23

       Yeah.

   12. HSHarry Stebbings9:24

       ... ecosystems. But I wanna move from, like-

   13. TPTJ Parker9:25

       That was definitely my childhood, yeah.

   14. HSHarry Stebbings9:27

       I think great.

3. 9:28 – 13:20

   Get Comfortable With Uncertainty

   1. HSHarry Stebbings9:28

      Um, but I wanna move from the stability to uncertainty, to instability. And you've said-

   2. TPTJ Parker9:33

      Yeah.

   3. HSHarry Stebbings9:33

      ... to me before, "You have to get comfortable in an environment of uncertainty if you want to be a great entrepreneur." Why? And how did you get comfortable in uncertainty?

   4. TPTJ Parker9:45

      I think a thing that I believe now that I did not believe during the early part of the PillPack journey, or honestly, probably until the last couple years, is that there are folks that are on the, sort of the extreme ends of this, from a personality standpoint. Like, I think there are folks that truly are, like, much more comfortable in uncertainty than they are when things are, are certain. And I think there's obviously folks way on the other end of that spectrum. And obviously, a lot of folks are more in the middle. Um, but for me, I was way far on the, like, I'm super naturally comfortable, um, in an uncertain environment. It's kind of my happy place. It's not ... So, like, I don't have a lot of tactical advice, um, like, "You gotta meditate, you know, Monday to Friday from 8:00 to 9:00." I didn't, there was not a lot of these mind games that I was trying to play. And so I think the advice I do have is, like, being really honest with yourself about where on that spectrum you are as a human. Because I think if you like certainty and you like predictability and you like, uh, that lifestyle, you'll honestly probably be happier at a big company. And if you like uncertainty, you're gonna be miserable at a big company. Maybe it might make sense to go do something that's a little riskier, um, and less about, like, the tactics of how to, how to sort of manage your psyche.

   5. HSHarry Stebbings10:52

      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?

   6. TPTJ Parker11:16

      Yeah, I think it, 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 different type of role. You know, and, but y- ... 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 As in every, every one of their classes, to go from that reality into a startup, which is r- 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, the sort of perceived glamor of being a founder, rather than the reality of, of that job. And so I, I, I do think it's, it, it ... there is a big, like, founder fit in the gig. And I think being, being sort of super honest with yourself about.... 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.

   7. HSHarry Stebbings12:16

      The, I, I think terrible podcasts like this, uh, glamorize entrepreneurship. And, uh-

   8. TPTJ Parker12:21

      (laughs)

   9. HSHarry Stebbings12:21

      ... if we showed the true brutality of it, no one would ever fucking do it, ever. Um, (laughs) so that's not good for our business. Uh, but I, uh, the other aspect that you said, as well as being an uncomfortable, uh, being comfortable with uncertainty, is that as CEO, you have to set the vision and get out of the way.

   10. TPTJ Parker12:38

       Yeah.

   11. HSHarry Stebbings12:38

       I thought this was interesting. Can you expand on this and your biggest, kind of, lessons on doing this well?

   12. TPTJ Parker12:45

       Yeah, I think this would actually be way harder for me now. Uh, I think, uh, you know, when I started PillPack, I was 26. And I had no (laughs) preconceived notion that I had any idea how to do the tactical jobs better than the folks I was bringing in to do them, right? There was no, there was no way I knew how to, how to acquire customers better. There was no way I knew how to run operations better. There was no way I knew how to be a, a finance lead better than the people I was bringing in. I, the only technical training I had was in pharmacy, which had very little relevance to most of the things that a founder's doing. And so honestly, there was a beauty in, in being young and, and not having experience in this context.

4. 13:20 – 19:00

   How to Hire the Best

   1. TPTJ Parker13:20

   2. HSHarry Stebbings13:20

      How did you bring them in? You're young, you don't know their space better than them. How did you know what good looked like? Why do you think they joined a 26-year-old no offense, who didn't know what good l- looked like and o- only knew pharmacy?

   3. TPTJ Parker13:33

      Yeah. You know, I do think I fo- I was able to focus on the things that I thought I had to be good at, and I was sort of more naturally inclined to be good at, which was things like raising money and setting the vision, and everything external. And we did have a big vision, and it was a clear vision, so there was no muddiness around what we were trying to achieve. And it was, it was, it was a big vision. As far as understanding who was good and not good, I mean, a lot of it was intuition and trying to read people. And I think it's hard to articulate how to, how to manage intuition or how to be better, uh, at reading people. But it was a lot of that. And then, uh, it's plausible that I completely made this stat- statistic up, but at one point, somebody told me that the difference between the worst and the best hiring managers was that, was roughly, like, if you're, if you're a terrible hiring manager, you're right, like, 40% of the time. And if you're an amazing hiring manager, like world-class, you're right, like, 65, maybe 70, 70% of the time. And my takeaway from that was like, "Well, I better be really good at changing my mind if I'm wrong." And that's the only way to get to, like, 90-plus percent is, if you hire someone that's not gonna work out, be really quick at making that call and trying again. Um, and I took that to heart, and I definitely, I definitely behaved that way as we built the team.

   4. HSHarry Stebbings14:41

      I, I totally agree, and I get you. Can I just ask one? Which is like, how do you determine whether someone just needs more time? This is something I struggle with, I think a lot of founders struggle with. People can take a while to get used to new environments, new decision-making structures. How do you determine between, "TJ, enough's enough," and, "Hey, we should give them another two weeks"?

   5. TPTJ Parker15:00

      I mean, I was incredibly impatient. I mean, it's probably my biggest flaw is being pretty impatient. Um, I think for me, like once I, once I was on that trajectory, I made the call. Like, I didn't dilly-dally around these things a whole lot. The only delaying was really because it's hard, right? It's, like, personally difficult to, to do that. But I was very decisive on this stuff. Um, and it, it, I think it came from the fact that I was just generally impatient as a, as a operator.

   6. HSHarry Stebbings15:28

      (laughs) Um, no, I, I totally get it. Y- uh, yeah, listen, I think impatience is really important. I think, uh, and the trouble with Europe is, we're very patient. "Ah, tomorrow, tomorrow-"

   7. TPTJ Parker15:39

      Yeah.

   8. HSHarry Stebbings15:39

      ... "we'll get, we'll get onto the execution."

   9. TPTJ Parker15:41

      Yeah.

   10. HSHarry Stebbings15:41

       But I do find-

   11. TPTJ Parker15:41

       Yeah. Us Americans are quite impatient folk, you know.

   12. HSHarry Stebbings15:43

       Oh my God. Nightmares. Um, uh, but, uh, what I wanna ask is, you m- you mentioned, like, your naivety, bluntly, across many aspects of the business-

   13. TPTJ Parker15:52

       Yeah.

   14. HSHarry Stebbings15:52

       ... when you were starting. Uh, naivety's often said to be, you know, a good thing, a bad thing by others. Is naivety good or not? And if so, why yes or why no?

   15. TPTJ Parker16:03

       Yeah, I always, uh, said that I think Elliot and I were kind of in the perfect place, personally, when we started PillPack, and we got very lucky in that sense. You know, I think we were absolutely not naive about the customer and about the, what the customer needed, what the customer wanted. Um, like, we deeply understood that. But we were incredibly naive about the broader industry dynamics. Um, you know, we had no idea around, you know, incumbents and what they cared about, and why all the things we wanted to do wouldn't actually work. You know, we looked at it and said, "Well, of course we're gonna make an awesome product, and we're gonna make this way better for customers. Um, and we're gonna put it online, and we're gonna acquire customers online. This is gonna be super straightforward." Um, and we were just woefully ignorant about, uh, all the reasons it wouldn't work from an incumbent and industry standpoint. And I honestly think that's kind of the perfect balance. It's like, you gotta understand the customer, but if you understand all the reasons it's not gonna work, you're never gonna start the company. Like, if, if I had been working in pharmacy for a decade as an adult, there's no way I would've started PillPack, because there were very specific reasons it shouldn't have worked. And I think that's where the naivety is really powerful. Uh, if you don't understand the customer, you're, you're hosed, so you can't be naive there. Um, but I think it is important to not know all the reasons that the thing you're trying to do might not work.

   16. HSHarry Stebbings17:15

       O- okay. Help me out as an investor. I meet... Sorry, uh, sounds awful, but I meet naive founders, and I'm like, "Ugh, so naive." When is naivety good and when is it bad? 'Cause it can be bad.

   17. TPTJ Parker17:26

       Yeah. Well, A, I think you have to be a pretty quick study, right? (laughs) You gotta figure this stuff out as you, uh, as you're building the company. So I think a l- 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 gonna stay there, it's probably gonna 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 c- consumer tech investors. Right? We weren't out pitching healthcare investors. I think almost every healthcare investor would've 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 (laughs) a lot of the dynamics at play.

   18. HSHarry Stebbings18:07

       Can I ask when you got nos from? Like, like, did you think, like, healthcare investors didn't get it?... and like, they didn't see the future in the way that you did?

   19. TPTJ Parker18:15

       No. It was probably a little different than that. I think I thought I didn't really need the help of healthcare investors. I think I thought I needed the help of consumer investors. And so, sort of augmenting the things I thought I understood, um, and it was less about whether they would say yes or no for me. It was, when you look at the PillPack business, yes, it's a, it's a healthcare company, it's a, it's a pharmacy, um, we interact with payers, we do all the things that healthcare companies need to do, but I at least thought I knew how to do that, you know? Like, I, I'd been pretty involved in this space for a while. And the things I didn't know how to do were how to build a consumer brand, how to acquire customers, how to build world-class kind of consumer tech. Um, and so it was more about augmentation and the people that I wanted to be pushing me on the board, and it was less about getting

5. 19:00 – 24:31

   Why Speed of Execution Is Everything

   1. TPTJ Parker19:00

      to a yes or no.

   2. HSHarry Stebbings19:01

      Can I ask, you mentioned impatience earlier. Um, I think im- as we said, impatience is important because it plays a role in how fast you move and your speed of execution. How important a role does speed of execution play, do you think?

   3. TPTJ Parker19:15

      I mean, in this game, it's kind of the only thing that matters, right? It's like, how fast can you figure stuff out? If you think about the, the game that venture-funded founders are playing, they're taking money and they've got roughly 18 months to figure something out that's really critical to getting to the next round of financing. Um, and so-

   4. HSHarry Stebbings19:31

      What can, what can you do to-

   5. TPTJ Parker19:31

      ... if you can move quickly-

   6. HSHarry Stebbings19:33

      What can you do to increase your speed of execution a bit?

   7. TPTJ Parker19:36

      It goes back to hiring great people and mostly getting out of the way and giving them the autonomy to make decisions. Um, I think it is also being really explicit about which decisions are things that can be changed and need to be made really quickly, and which decisions can't be changed and are really high consequence. Um, and I think if you find the right leaders and you build the right exec team, they'll mostly be able to parse those two things, and they'll certainly be, if it's even cuspy on the, on the bigger decisions, they'll be coming to you and you'll be working through it. Um, but for everything else, like, people should have the autonomy to go. Like, you should be hiring real doers that know how to execute, and then they sh- should feel like they have the autonomy to make the call and, and go as fast as possible.

   8. HSHarry Stebbings20:15

      Do you start from a relationship of full trust?

   9. TPTJ Parker20:18

      Yeah. You know, it's funny you ask that. When we were acquired by Amazon, we, we sort of took all of our internal, th- the equivalent of Amazon LPs, like leadership principles, right? And we tried to match them up kind of one-to-one with what's the equivalent, like, Amazon won. And they actually, like, almost all tracked, uh, sort of one-to-one. Like, customer obsession and all these things were, were kind of dead-on. And the one that was, uh, was the exact opposite was, we had this leadership principle at PillPack, which was my favorite, um, which was assume the best, right? So almost all your best relationships in life are about assuming the best in someone, not, uh, assuming the worst, right? And so if you start from that frame, like, you'll get rid of 90% of conflict by assuming that people are trying to figure it out and everyone's doing their best. Amazon's equivalent was earn trust-

   10. HSHarry Stebbings21:06

       (laughs)

   11. TPTJ Parker21:06

       ... (laughs) which is the opposite leadership principle. And I didn't actually think a whole lot of it. Like, we just tried, we mapped them like, "Oh, yeah, it's kind of the same, earn trust, uh, assume the best." In hindsight, that is, like, literally the opposite culture, right? It's like, it's kind of assume the worst until you're proven otherwise. Um, and so yeah, I, like, we built a culture that assumed the best, that ass- that, that we sh- people showed up, we made bets on people, um, and then we assumed that they were gonna execute and that they, and we trusted them. Like, there was not this environment of, like...

   12. HSHarry Stebbings21:34

       Did you ever make a big fuck-up because of assuming the best? I, I listen to that and I think that's kind of naive. I don't mean it badly. I'm an earn trust.

   13. TPTJ Parker21:43

       Yeah, didn't, you know, it never backfired on us in a, in a meaningful way. Uh, and certainly there was a lot of goodness that came from it. So, no, is the short answer, but certainly could have been burned.

   14. HSHarry Stebbings21:52

       Well, speaking of kind of the goodness that comes from it, you know, ultimately you want to achieve rapid decision-making. In terms of achieving that culture of rapid decision-making, other than, like, assuming the best from day one, what works well in creating a culture of rapid decision-making, and what really messes it up?

   15. TPTJ Parker22:12

       Well, I think if you're making really critical, irreversible decisions rapidly, that will really fuck it up. Like, I think you'll make a lot of really bad decisions. And so, you know, I think for those, like honestly, like, I took as long as, like, humanly possible to make those critical decisions. And honestly, to some extent, to the frustration of my exec team throughout the course of the business. But a lot of times, like, in a, in a very kind of mutually agreeable, productive way. Honestly, like, the best articulation of this out of everyone on my team was Elliot, who's my co-founder, who is amazing. And I'd say, the n- you know, the bigger decisions that we made over the course of the business were a byproduct of going on two-hour walks three times a week for six months. Like, we were, we were just batting these things back and forth for a very long time, sort of reticent to make the call. Um, and I think that's super important too. It's like, it's like a bifurcation of decision-making. It's like, if you can change your mind, just make those decisions as fast and humanly possible. Honestly, don't even bring them to me. Just, like, go. And if you're wrong, we'll change our mind and we'll, we'll do it the other way. That's totally fine. But if it's something that's irreversible, like, we're gonna, we're gonna work this one out until you're so frustrated that you feel so confident that it's the right decision, that we'll know it's the right decision. Um, I think sometimes people, people sort of make all the decisions in the m- in the ma- in the median instead of sort of bifurcating these things, um, and I think that's super critical.

   16. HSHarry Stebbings23:32

       Can you take me to a decision where you decided, "Uh-huh, we need to go slow on this, I need to spend time on this," and the exact team and everyone around you was going, "Ugh, TJ"? What was the decision that sticks out when I ask that?

   17. TPTJ Parker23:45

       I mean, we'll get into this a bit more probably later in the podcast, but we had a number of run-ins with incumbents around our access to their networks over the course of the business. And I think we knew this was gonna be a problem back in, probably like middle of 2014 or something like that. And Elliot and I would just wrestle with nonstop, "Is there a way to get in front of this? Is there a way to, like, get in meetings and, and sort of try to work through this productively before it blows up in our face?" And the, and like, we batted it around nonstop, and I think if you let your anxiety get the best of you, you would have made the call and just done something because you felt like you had to do something about it.Um, and in reality, we just sat on it. We let it, we let it ride. Um, and we'll, we'll get into the details of it later, but it, it ended up becoming, like, the, the make or break moment in the company. And I think it was the only way that we could have possibly,

6. 24:31 – 29:50

   The Best Decision PillPack Ever Made

   1. TPTJ Parker24:31

      uh, pulled off what we did pull off.

   2. HSHarry Stebbings24:33

      What do you think is the single best decision you made with PillPack, and what did you learn from it?

   3. TPTJ Parker24:38

      I mean, it's hard for me not to say that it was starting the company with Elliot. I mean, he- he's been an amazing partner in the PillPack journey. Um, but I think it's hard to learn much from that other than be- it's sort of, like, better to be s- be lucky than smart. Uh, we didn't know each other that well. Like, we had, we had done a couple things together, but we just got incredibly lucky. I think the, probably the more useful answer to your question is, we made this, uh, certainly at the time, a weird decision, that we were only gonna focus on the end customer. Like, we in healthcare, you've got payers, you've got providers, you've got other constituents, you've got the end customer. And honestly, it's the reason that most of healthcare is as fucked up as it is, is that almost no one is actually building for the customer that's, that is using the service. And so, we, we effectively put on blinders to everybody else, um, and said, "Everything we're doing is to make this easier for the customer. And if we gotta do weird stuff to make that possible, um, that's totally fine. We'll do the weird stuff. Um, and if, like, a, a provider or payer is upset about the way we're doing something, but it's better for the customer, sorry. Like, we're, we're building the thing for the customer. We're not actually building it for you." And that ended up being both incredibly critical, um, and it enabled us to build an amazing service. Um, and I think we, we argued about that all the time. Like, we could have gone and got volume from a payer instead. We could have marketed through physicians. Like, there's all sorts of ways we could have built the business. And the thing we never, we never strayed from is that we're... the only thing we care about as a business is building for that end customer.

   4. HSHarry Stebbings26:04

      Okay. I, I totally agree in terms of the importance of that focus, and also what it does for you in terms of product marketing and messaging, having that concentrated end profile. If we think about the flip side, what was the worst decision, where you're like, "Oh, no. That... We fucked up that one."?

   5. TPTJ Parker26:20

      I mean, I think one of the most difficult things as a founder is, is finding the balance between doing things that don't scale and having, uh, less experienced folks just cranking away and figuring things out, versus when it's time to bring in some adults and when it's time to bring in kind of real operators. Um, and I think we messed up that balance in kind of... in bringing in a head of finance, bringing in a head of ops at the right time. And it was incredibly painful, right? We're, we're a deeply operational business. Um, and you know, we, we probably waited nine months to a year longer than we should have to bring in a real operator. Um, and that was just incredibly painful to get-

   6. HSHarry Stebbings26:58

      We- when you say, "A real operator," is that, is that an exec team, or is that a CFO? What do you mean by that, and what would you advise founders, having had that experience and bad decision?

   7. TPTJ Parker27:07

      Yeah. Tangibly, we... It was a CFO, COO, like one human that owned both of those functions that we brought in, uh, this woman Yvonne, who was incredible, um, and really brought the business to a place where it was much more scalable and it was... everything was humming. So, she owned both of those functions, which obviously is, is a bit rare. But tactically, we started the business, we had a, we had a head of ops that, um, I had known for a long time, but was young, hungry, like, knew the business super well. Um, it was actually the first person I hired, uh, in the pharmacy when we started the business. Uh, and he scaled that thing to 400 or 500 people. Like, zero humans to, like, 500 people or something in operations. And, like, was more dedicated to the business and the customer than anyone I've probably ever met. Like, I, I bet he slept in the pharmacy 40 days in one year, uh, in the midst of this kind of scaling process, and was just able to figure anything out, right? Like, if something was going haywire, like, he would find a way to figure it out. And that was amazing. That's, like, the perfect archetype of, like, an early operational leader, is that they deeply know the domain. Their happy place is not, like, going and building unnecessary process. Their happy place is like, "Let's just go figure this thing out." But at some point, that approach breaks, right? At some point, you just get too big. It doesn't work anymore. Like, you have to have the right systems and the right process and all that stuff. And I think he was so good that we, like, we just went too far, uh, with that approach. Uh, it's, it's a funny story, actually. I think the, probably the, the worst, uh, board meeting we ever had was the board meeting before Yvonne joined. Like, everything was kinda breaking, um, but at that board meeting, it was like, "Oh, no, no, no." Like, "Everything is, like, really breaking." Right? And... But the problem was that (laughs) we had hired Yvonne, but she hadn't started yet. Uh, so she came to the board meeting, and so it was this hilarious, like, dance between the investors and me and Yvonne where everyone knew it was broken and the investors were pissed, but they didn't wanna freak out Yvonne because if Yvonne didn't show up, like, we were way more screwed. So, it was just, like, this hilarious, like, emotional dance of how do we, like... How do we say all the things we need to say in a way that, like, makes Yvonne excited to, like, fix all these problems, and not so scared that she runs away? But for sure, that was, like, the most operationally painful moment in the business.

   8. HSHarry Stebbings29:26

      Hey, everyone's left, but that's an opportunity for you to do something great, right? I- I- I'm, I'm, I'm gonna-

   9. TPTJ Parker29:33

      Perfect. You're gonna love it. You're coming into a perfectly well-oiled machine.

   10. HSHarry Stebbings29:38

       I love it when you have, like, a multi-stage fund on the board early and you want them to do the next round, and so you're like, "I know it looks bad, but I see this as an opportunity."

   11. TPTJ Parker29:48

       (laughs) It's an opportunity. It's a great

7. 29:50 – 34:00

   Building Your Exec Team

   1. TPTJ Parker29:50

      arbitrage for you. Gonna be great.

   2. HSHarry Stebbings29:52

      Speaking of Yvonne and the timing there, when you think about exact teams, what should we front load first, why, and how do you think about that?

   3. TPTJ Parker30:02

      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 kinda 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 a product-ish because we had Elliot on the team, and he had built products before. Um, the f- the flyer everyone was taking is, can you acquire consumers online for this company, right? Uh, 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 if you jump back to, like, 2013, like, starting a pharmacy is not what starting a pharmacy is today, right? There's RO and Hims and PillPack and Capsule and Truepill. Like, there's all this great activity in pharmacy. In 2013, there was no, there were not pharmacy startups, right? So, that was a weird thing to begin with. Um, and so I think that was the bet we were making. So, to, to come back to your question, at that moment in time, it would have been weird for us to go hire, like, a really killer CFO and, like, a really amazing head of ops. Like, that would be, like, awesome to build that exec team. It was like, "We can kind of ignore that stuff actually. Let's go, like, let's go buil- like, go find the best, like, folks to help us figure out customer acquisition." And I think you have this journey in any startup, right? So, like, you get customer acquisition working, and then all of a sudden, ops are imploding, and now you gotta go find a really killer operator. And I think you, you to some extent have to be in reactive mode and less about, like, we're gonna go find, like, a, a, s- uh, amazing exec, and they're gonna build all this process and this function and be comfortable with, like, this is the only thing I care about for right now, and we'll f- we'll figure that stuff out later.

   4. HSHarry Stebbings32:00

      I, I, I totally agree with you there. I, I think the, kind of the, the hard thing is kind of when it comes to selection, like, who do we decide to have on that team to help us? And you said before, um, I love this, "Be very selfish about who's on the exec team." What did you mean by be selfish about it, and how do you advise founders on that? (laughs)

   5. TPTJ Parker32:22

      Yeah. I, I, so I think it's less about being selfish in the sense of, like, who you're recruiting. Uh, it's more, like, be selfish who shows up in that weekly meeting that you spend three hours going through the business. Um, because a good rule of thumb is, like, if you bring your head of HR and your head of legal and your head of finance and your head of ops, and, like, if you bring every one of the kind of leaders on the team into that room, you should take the three hours you have and divide it by the number of humans in that room and assume each one of them gets that amount of time to, to talk, right? Uh, and so do you really wanna spend a f- a seventh of your meetings talking about, uh, promotions and leveling and HR stuff? Or do you wanna spend almost all that time talking about growth and product, right? And so, like, being really thoughtful about, like, who's in that room will determine, like, what are you spending your time in that sort of most critical moment debating? So, for us, like, and this honestly wasn't intentional. It was just, it was a byproduct of who was on the team. But our... By the time we sold the company, you know, we've got a thousand people, we're doing a few hundred million in top line. The entirety of that meeting was me; uh, Yvonne, who was COO, CFO, legal, HR, kind of all those functions; Elliot, who was product and tech; Jeff, who was BD and growth; and Colin, who was marketing and design, right? Like, there was five of us in that meeting. And if you look at who the five were, like, you're gonna spend 85 to 90% of your time talking about product and growth. And the combination of HR, legal, ops, like, all the tertiary functions get 10 to 20 perc- like, 20% of the time in the meeting.

8. 34:00 – 38:31

   Startup vs Enterprise Leadership

   1. TPTJ Parker34:00

      And I think that was super crit- like, it just made us focus on the things that are ultimately gonna drive a startup's success. Obviously, like, long-term, you're a huge company. You do have to give more airtime to, like, these, these other functions. But a startup is about product and growth. Like, that is the only thing that matters. And who on that team shows up, I think, determines what you're focused on as an entire organization.

   2. HSHarry Stebbings34:21

      You mentioned the functional leads there, and you tweeted before about kind of the difference between an org with kind of functional leadership versus an org with kind of GM leadership. Can I as- how do you... Wha- for those that don't know, what's the difference between functional leadership or functional org versus GM org? What's the difference there, first?

   3. TPTJ Parker34:41

      Yeah. So a functional org is roughly what I described, right? So, if you look at the CEO and their exec team, each leader on that team is gonna have a function. So you had a, you have a head of engineering, you had to hav- have a head of design. You have a head of product. You had to have a head of operations, a head of finance. Like, it's, it's very functional. Um, it's sort of like the, the most simplistic, uh, straightforward org design. It's where most companies are gonna start. Um, the, a, a GM-focused org is where most big companies end up, right? So, a GM-focused org is where you've got single-threaded leaders that, in theory, own a P&L, and under that leader, they have a head of finance, a head of ops, a head of product, a head of tech. And so you end up having, like, hundreds of these GMs, um, that manage a single P&L and have sort of pockets of each of these functions inside of their business. Um, and maybe somewhat controversially, I think the second you go to a GM-focused org, you're not a startup anymore. Like, you are a big company. And almost all of the downsides of a big company that people bemoan, uh, the v- the amount of O- HR, the amount of overhead and decision-making, like, the, all the over-processed-ness, I think is all a s- a byproduct of that single decision. Um, and I think you, it, you could not have built a company like Amazon or another large company without doing that. But it has all sorts of negative repercussions. And I think if you're a startup, like, you're so far on the other side of that extreme that I think it's, like, more of a unnecessarily intellectual exercise to think about going to GM than it is about, than it is actually gonna do any good for you. Um, and you can build huge companies that are functional. The Apple is, like, a functional org. Um, so...

   4. HSHarry Stebbings36:21

      Yeah, that's my question. Like, I've interviewed, you know, leaders, functional leaders, from Snap and LinkedIn in the last few days. These are big companies and public companies.

   5. TPTJ Parker36:30

      Yeah.

   6. HSHarry Stebbings36:30

      I would still say they very much run functional orgs. How should founders determine-

   7. TPTJ Parker36:35

      Yeah.

   8. HSHarry Stebbings36:35

      ... whether they should run a functional versus a GM-led org? What's right for me?

   9. TPTJ Parker36:40

      Yeah. I mean, I'm for on this extreme, but I think stick with functional until it's, like, so obvious that it's just not, can't possibly work.... that maybe there's an excuse to go to a, a GM-focused org. Uh, and certainly if they've got, like, a manageable number of product lines, I wouldn't even, like, have the conversation. Like, it's just not worth the debate. Uh, it is-

   10. HSHarry Stebbings36:58

       Yeah.

   11. TPTJ Parker36:58

       ... going to make your business worse. And it might not do it right away, but it is definitely gonna do it on the long term.

   12. HSHarry Stebbings37:02

       I totally agree. I, I, GM-led is just, um, it feels very formalized and too structured to me, I have to admit. I- I'm like a rabble-

   13. TPTJ Parker37:10

       Yeah, uh, it's honestly-

   14. HSHarry Stebbings37:10

       ... against the noise.

   15. TPTJ Parker37:10

       ... not even the f- it's not the formalized. It's, like, if you think about, like, all the things that, that, all the extra process that that creates, right? So, like, if you have a GM-focused org, like, you now have to do all this work to make sure that, like, all of your eng twos are leveled at the same level, because one's on this team and one's on that team, and they don't talk at all, and they have no idea what the other team's doing. And so, if they transfer from this team to that team, you have to make sure that they're both as competent, and you have to make sure that everyone's compensation is identical across 15 different businesses for the same level. It is what creates, like, an enormous amount of HR work, an enormous amount of, like, overhead, because you're trying to do all these weird backflips to make sure that there's consistency in the business, instead of just having a whole org of engineers and a whole org of designers where that stuff just comes in kind.

   16. HSHarry Stebbings37:57

       I, I also feel like you're creating this kind of dysfunctional decision-making, 'cause you have kind of CEOs on top of CEOs. Like, you know, your, your GM-

   17. TPTJ Parker38:05

       Yeah.

   18. HSHarry Stebbings38:05

       ... who runs that segment isn't actually the ultimate decision-maker. They can still get overridden by, you know, the CEO up top or the CPO who's ahead of them, who's just in the... And so you create this very strange chasm between power, ultimately.

   19. TPTJ Parker38:22

       Yep. And you just don't have your best people on every product, right? Like, if you've got your head of product and your head of eng and your head of design working on every product, they're going to

9. 38:31 – 40:33

   Cash vs Equity in Hiring

   1. TPTJ Parker38:31

      be better. Just, like, de facto going to be better products.

   2. HSHarry Stebbings38:34

      Man, you mentioned comp as one of the reasons, like, it can be challenging. What are some of your biggest lessons on-

   3. TPTJ Parker38:39

      Yeah. (laughs)

   4. HSHarry Stebbings38:40

      ... on comp and equity, and how could, it can be used most effectively by founders?

   5. TPTJ Parker38:45

      I didn't appreciate this nearly as much as I probably should have at the time, um, but incentivizing your team as much as possible on equity ends up being, like, the biggest lever you have from a cultural standpoint. Obviously, it's a lever from an economic standpoint, but if you take kind of PillPack pre-acquisition versus PillPack as part of a big organization, PillPack pre-acquisition, like, I don't think I ever once had a conversation about leveling someone or promoting someone in a meaningful way that was gonna dramatically change their comp. Like, we bet on people, we gave them a big equity package the day they started, um, and we expected them to deliver on that equity package. And so, like, everyone either won as a team or we lost as a team. Like, there was no point in trying to go carve out some way for you as an individual in that team to win in a way that mattered. Um, and so everything kind of falls out of that. Like, we, we're gonna win or we're gonna lose. We're all aligned c- like, from an economic standpoint. You get to be a big enough company, even if it's technically equity and it's, it's stock, um, it is rational to care far more about, like, your own career pathing and the next promotion and all of those things than it is to care about winning or losing. And so, it is, like, the biggest lever a startup has culturally, um, and I'd, I, I appreciate that, but I don't-

   6. HSHarry Stebbings40:00

      You, you were touting that per turn, though.

   7. TPTJ Parker40:01

      Yeah.

   8. HSHarry Stebbings40:01

      And what I mean by that is, like, bluntly, what I see now today in particular, people want cash. When times get tougher, they want cash. Equity, not so much. I th- I see that in Europe as well. Do you think that's fair, or no, you're wrong?

   9. TPTJ Parker40:16

      They should go work at, they should go work at a big company, then. (laughs) Like, that's fine. Like, that's not the game we're playing. Like, I, I, like, startups are about, like, pulling something off that's incredibly difficult and everyone doing incredibly well if you pull it off, and that's not cash. So, it's just a different game.

   10. HSHarry Stebbings40:32

       Yeah. I get

10. 40:33 – 47:00

    Overcoming Early Problems at PillPack

    1. HSHarry Stebbings40:33

       you. I get you. Um, I, I wanna dive into a couple of elements of the story, uh, which I think are really important. Like, as we said before, it's very easy to look at PillPack and think, "Oh, all up and to the right, billion-dollar sale, life is good." There's always early hiccups. What were the single biggest early hiccups you really remember and stick out to you?

    2. TPTJ Parker40:54

       Yeah, I talked a little bit about that sort of first bet, right? Like, we're, we, we started the company, we raised about $4 million between two quick rounds right out of the c- right out of the gate. Um, and the bet people were making is that we can acquire customers. Like, everyone assumed we'll start a pharmacy. They assumed we'll get in e- in network with payers. Like, all that stuff was a given. Uh, so if you jump forward, we ra- we started the company in 2013. Um, we raised that round kind of middle of 2013, um, and we launched the product in early 2014. Um, and for folks that were around at that time, like, the way you acquired customers was buying Facebook ads. Like, point blank. Li- that's how every DTC company was scaling. Uh, and so we assumed, like, we're gonna do the same thing. We're gonna buy Facebook ads and, like, hopefully the economics work, and hopefully we can acquire customers in this category. And we launched, we got our ad, uh, our ads turned on, and I think within... And they were working, right? Like, we were acquiring customers at a number that was lower than we promised, and we're like, "Oh my God, it's working. This is great." And out of nowhere, our account got shut off. We got, like, suspended from Facebook ads. And we're like, "Uh, this is not good. Uh," and you know, their wonderful customer service was very helpful, as you can imagine, um, and they told us at the time, like, actually, you can't advertise pharmacies on Facebook. Like, sorry, like, y- you can't do that. And so picture this, right? Like, here we're a new e-commerce pharmacy. Like, we're gonna build an amazing digital experience, and you lose, like, the single digital channel that every company is building their business on the back of at that, at that point. Uh, and so, and we had this, all this back and forth, uh, and finally we got them to agree that if we got this thing called VIPS, which was like this, which was this accreditation for online pharmacies, that then we could advertise, uh, on Facebook, which is great. Great news. It's now, like, I don't know, March 2014 or something. Um, and we go, we contact VIPS. We're like, "Hey, we need to get this accreditation," and y- like, here's who we are. And VIPS is like, "Cool, yeah. Here's the process." And they sent us this long, like, overview of all the, the things we had to do to get the accreditation, and like, on average it takes about 12 months to get this accreditation.... we're like, "Oh, God," like, we don't- we don't- (laughs) we don't have 12 months to figure this out. Um, and so, you know, I think from a financing standpoint, uh, we got incredibly lucky because, and this is not usually a lucky turn of events, but Fred at the time had been at Accomplice, which was a fund in Boston, and led the series A from there. Fred left Accomplice and went to Accel, and he knew the company super well. Obviously, he- he liked the business, and he just knew that this was gonna work. Um, and he took a flyer and he- he made a bet on- on PillPack in September of 2014, before we had any real customer acquisition working. Like, we were, yeah, you know, we were- we were hacking our way to get some customers and the product was working. Um, he- he then led the round in 20- in the kind of back half of 2014. We also let in the folks from Slow Ventures into that round, too, our early Facebook folks, for this reason. Um, we got VIPS probably September/October of 2014, so a bit faster than normal, but it still took six or eight months or something like that. Um, and then within a matter of weeks, we had our account.

    3. HSHarry Stebbings43:53

       Once you got it, was Facebook as impactful as you thought it would be to customer acquisition?

    4. TPTJ Parker43:57

       Yeah, so we- we turned ... So we raised that $9 million round in September. Ads on in the, probably like October or something like that. And I'd say within like three weeks, it was a whole different situation. Like, we turned the account on, customers were signing up at a CAC that we were happy with, and we just started turning the knob and the business started grow- ... Like, it was that straightforward. Um, and from like the back half of '14 through the middle of '15, it was just like, it was just scaling. And we raised a $50 million round six months later or something, uh, 'cause it was just going at that point.

    5. HSHarry Stebbings44:28

       I mean this nicely, but like $9 million when you didn't really have any customer acquisition going, did you get an absolutely torrid, like, structure to that deal?

    6. TPTJ Parker44:39

       No.

    7. HSHarry Stebbings44:39

       Like dilution-wise? As an investor, that must have been brutal. (laughs)

    8. TPTJ Parker44:43

       I think the practical answer to your question is we raised like a nine on 30 post or something, with no structure.

    9. HSHarry Stebbings44:50

       Got you. Okay. So-

    10. TPTJ Parker44:52

        So like-

    11. HSHarry Stebbings44:52

        ... so kind of like no structure, but-

    12. TPTJ Parker44:54

        Yeah. 2015.

    13. HSHarry Stebbings44:55

        ... you gotta do what you gotta do.

    14. TPTJ Parker44:56

        And I think like that was market-ish. This was not 2018, 2019. Uh, but it was fine. Like, you know, like I've never once looked back and been like, "Oh my God, I got so diluted, like I could have so much more money right now." Uh, like that's just silly. Like it- it worked out great. We raised a round and we moved on, and then we raised a round, uh, I don't know, couple hundred pre nine months later. And so that those things, that one was probably way too frothy and the one before was- was low maybe, I guess. But like at the aggregate, it was fine.

    15. HSHarry Stebbings45:27

        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 V1's and the early product designs? What do you know now that you wish you'd known when you were doing them?

    16. TPTJ Parker45:43

        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 2013 land, 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 ca- I just liked it. I cared about it. I thought it was cool. Um, and we- we actually hired IDEO, um, and worked with them. We- 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 p- 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, I think. 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, which I think is taken at- at face now, but I think in 2013,

11. 47:00 – 57:50

    Epic Battles With Pharmacy Incumbents

    1. TPTJ Parker47:00

       that was not, uh, that was not as common.

    2. HSHarry Stebbings47:03

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

    3. TPTJ Parker47:22

       Yeah.

    4. HSHarry Stebbings47:22

       I didn't know this, so tell me more.

    5. TPTJ Parker47:23

       Yeah. Um, 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- at PillPack when we founded the company was this, right? We didn't really understand why there weren't more e-commerce co- 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, we're like, "That's weird. Like, we should just build this. This will be great. Uh, we'll build a great customer experience and it's gonna b- it's gonna be awesome." And there are these things called PBMs, um, which stand for pharmacy benefit managers, um, and they are companies like Express Scripts, 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 co-pay? 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 delivery for consumers. Uh, and so obviously they weren't particularly thrilled about other companies competing with them in that second category, right? They had a- a captive market on doing home delivery in pharmacy, and this is the single reason-

    6. HSHarry Stebbings48:48

       Aren't you fucked? (laughs) 'Cause like if they're the ones who are saying, "Hey, we'll own the- the transaction mechanism, we're the insurers of these prescriptions."And we're not gonna give PillPack license. Aren't you fucked?

    7. TPTJ Parker49:00

       Yes. Yes, you are fucked. This is why I say you would have never started this company if you knew how the industry dynamics work. It's why no healthcare investor would have invested in this company, right? This is idiotic, where itThere's no way these guys are gonna let you in their network. Like, th-

    8. HSHarry Stebbings49:12

       But I- I- I'm a tech investor, and respectfully, I- like, that's likely the most cool thing. The cool supply side can't engage 'cause it cannibalizes their own business.

    9. TPTJ Parker49:21

       Oh, yeah. I was- I was horribly confident that this would be a non-issue. Like, oh, like, I- I'm- I've run pharmacies before. You just, how you fill out the paperwork to get in network with the insurance companies. Like, it's fine, and, like, that's actually what we did. Like, we started a pharmacy, and we got in network with all the insurance companies, and it was totally fine, right? So like 2013, '14, first half of 2015, like, we were in network as a small little independent pharmacy, like any other independent pharmacy, and they didn't care, right? Like, why would they care? We're doing, like, very small amounts of volume. They didn't even know who we were, frankly. We filled out, like, very administrative paperwork to get in network. And then-

    10. HSHarry Stebbings49:57

        What changed?

    11. TPTJ Parker49:58

        ... we got our Facebook ads turned on (laughs) and the company started scaling and started growing really quickly. And of course, they see every transaction that you process because they are the transaction processor. Um, and then things changed quickly, right? Like, we get to the middle of 2015, we went from, I don't know, $10 million run rate to like a $70 million run rate in like six months, nine months, something like that. And then they started really caring, right? And so now, like, everyone knows who PillPack is. Uh, and we got very lucky. We got this guy, Jim Messina, who was Obama's Deputy Chief of Staff, uh, joined our board, and he joined our board especially to help us navigate regulatory and incumbent issues like this, and he's very good at this. And through 2015, uh, we got termination notices from all of the major PBMs, right? Very obviously.

    12. HSHarry Stebbings50:47

        Hm.

    13. TPTJ Parker50:48

        And I would say every one of them but Express Scripts we worked through in a very kind of private, uh, professional way with them. And then net, we maintained access, we maintained coverage, um, mostly because we were already serving their customers and their customers liked the product, and it would've been very painful for them to take it away was the sort of base of that. But then early 20-

    14. HSHarry Stebbings51:11

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

    15. TPTJ Parker51:17

        Impossible. Like, literally impossible. Yeah.

    16. HSHarry Stebbings51:19

        And then actually really removed them from...

    17. TPTJ Parker51:20

        It's not just payment processing.

    18. HSHarry Stebbings51:21

        Why?

    19. TPTJ Parker51:21

        It's like all- it- they're- they're- 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've had- it- y- 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 at- when we were 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 tried 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're the largest PBM, 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- we- 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 the pretty aggressive decision to start a public war. And so Colin Raney, who had started, like, three days before, I think he was on a cross-country flight, uh, designed, like, a full, uh, explainer video that had talked about what a PBM is, what they do, why this matters. Uh, and then we, we filmed a customer testimonial of one of our customers, and I think within two days had 1,400 or 1,500, like, customer testimonials. Um, and these weren't like, "Oh, like, it'd be so sad to lose PillPack. Like, I love the packaging." It was like, "If we lose PillPack, like, I'm gonna have to put my mom into a home, and, like, we don't really know actually what we're gonna do." Um, and it was 1,500 of these, right? Um, and so we built a whole website, uh, fixpharmacy.com. Had all the customer testimonials on it. Had the explainer video, the customer video, um, and then we had all this, like, wonky stuff for regulators if they wanted to, like, drill into what was going on. And then we just did a massive PR blitz. So we launched the site. I think we had 40 articles in, like, two hours, um, and we leaned super heavy on, like, "This actually is gonna be really bad for these customers." Like, "This isn't, like, a David and Goliath, like, hopefully one of the businesses wins and one loses. Like, this is gonna be super bad for- for the customers that are using this service." (clears throat) And, uh, and then we ran a- like, a regulatory, uh, process and tried to do what we could do, um, and I think within 24 hours, Express Scripts was at the table. And then it gets even crazier. So we're now, like... I don't know, it's like a- it's like five days later, and we've got two days to get this contract fixed. And like now it's- now it is a business negotiation where we're trying to find a path forward with Express Scripts. Um, I don't think anyone's heard this story ever, um, but Elliott and I are sitting in a conference room, uh, with Colin, um, who again is pretty new to the space. I'm sitting on my laptop. We're in, like, the war room, right? We've got all the site design on the walls. Like, this is just, like, a classic war room. And I get an email from, like, the equivalent of our GPO for, like, all of the other PBMs. Like, you kind of have a- like a GPO-y type thing that sits between you. And they're like, "Hey, like we saw this Express Scripts stuff. Like, this seems bad. Like, actually, like, we're gonna kick you out too." Uh, and so we were 48 hours from going from like, I don't know what it was, 100 million in revenue to zero. Like, zero. We have to now both- I have to go figure out how to, like, fix the Express Scripts thing, and Elliott- I- a- and we gotta go figure out how to, like, fix all of the other contracts, like, at the exact same time. Uh, and so I'm sitting there. I get the email. Like, I don't say anything. I just, like, turn the computer around to Elliott, who looks at it and is just like... We- we say nothing for probably, like, three minutes, and Colin's sitting there like, "Hey, guys." Like, "Wh- wh- what's going on?"Uh, the two of us walk out, and I'm like, "Elliot, like, you gotta figure out this GPO thing. Like, I don't know how we're gonna deal with that, but you gotta figure it out." And I was like, "I'll figure out Express Scripts, and, like, we'll figure it out." And by Friday night, which was the kind of, that was the end for both, uh, Elliot had found a new GPO, done all the tech work and administrative work to flip into it, and I had signed a new contract with Express Scripts. Um, and we had, like, we had not lost a single contract, and we had solidified ourselves, like, publicly as a company that was going to exist in this space, like, in perpetuity. Um, so it was definitely a, it was as live or die as you're ever gonna see. And yeah, it was sort of, that was what that, sort of make it moment for the, for the business.

    20. HSHarry Stebbings55:50

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

    21. TPTJ Parker55:56

        I, like, I, 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 when w- obviously when we pulled it off, like, it solidified the business in a way that we couldn't have done in any oth- 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've wanted to get ahead of this one. Like, you would've 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, w- it's not gonna work. Like, let's just play this out and see how it ha- 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 of defended the, the access that they had.

    22. HSHarry Stebbings57:08

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

    23. TPTJ Parker57:12

        Uh, I mean, I think it was, it, 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 a, 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 it, and w- we flipped from, like, this little nit that, uh, they could just squash to, like, a partner. And so, like, these things sort of ha- they run their course. Um, but net-net, like, those relationships now are sound and good, and, um, we can now

12. 57:50 – 1:04:46

    Details on $1B Amazon Acquisition

    1. TPTJ Parker57:50

       kind of build stuff that, that ends up being good for customers.

    2. HSHarry Stebbings57:53

       I, I, you mentioned Amazon now. I, I have to ask. You know, in 2018, I think it was, uh, Amazon, you know, reportedly, uh, attempt to acquire, and successfully do, um, for a very large number. Talk to me about the decision-making process there. That comes in. What's the decision-making like, and how did you get to the deal?

    3. TPTJ Parker58:14

       Yeah, so if you zoom back to that moment, I think it was, like, mid-2017, early 2017 probably, we had just finished overhauling, like, all the software that powered the pharmacy. So, we lo- when we started the company, we just bought everything off the shelf, right? And over time, we're sort of ripping components out and ripping components out. Um, and by early 2017, we had rebuilt, um, and ripped out all of the underlying tech, um, and that powered the pharmacy. Um, and we had this moment where we, like, kind of picked our heads up, and we're like, "What should we, what should we do now that we've done that," right? Almost all our resources would have been focused on that for the longest time. Um, and we had this idea, like, could we offer our infrastructure up to other participants, right? So, could be another startup that needs to launch a pharmacy experience, actually relaunched on our infrastructure. Um, and we were offering, like, this as, like, a fulfilled by Amazon kind of B2B business based on the fact that we had the tech, the insurance contracts, the licensing, like, the infrastructure. Um, and as part of that, we were meeting with all the large retailers and other potential customers to build on top of that, right? And one of those large retailers went from, like, a very commercial, uh, r- uh, conversation to an acquisitive conversation, like, relatively quickly. And by kind of fall of 2017, that had-

    4. HSHarry Stebbings59:27

       How do you know when it's going to an ac- acquisition from a partnership in a normal conversation? Do they say, "Hey, we wanna buy you"?

    5. TPTJ Parker59:34

       Yeah, usually when they call and say, "Hey, could we just buy the company?" Just, it's pretty clear it moved from, like, a, a commercial (laughs) thing to, like, an acquisitive thing. Uh, I, you know, like, it 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 c- 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 gonna take to build what we really wanted to build. Uh, and from that standpoint, like, it was gonna 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 gonna be, uh, capitally intensive. Um, and then probably more, uh, importantly, like, when we started PillPack, like, it was a very simple vision, which was just make this 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 that was to make pharmacy a shopp- shoppable, like, e-commerce experience, and a bunch of stuff falls out of that that ultimately re- reshapes the, the dynamics. Um, and so the combination of those two things, like, the best place to do that is at a large retailer that already exists. Um, and so it was, it was pretty straightforward, and, uh, we made the decision, assuming that the, the terms came to a place that made sense, that we would probably sell the company in, like, the back half of 2017.

    6. HSHarry Stebbings1:01:04

       Okay, so you decide that you're gonna sell the company in the back half of 2017. It needs a lot of cash to get it to the scale that you think it can be, and then it's like, okay, there's a process to run.How did you think about running that process? You mentioned the, the early interest. I'm sure there was many other p- interested parties. How did you run that process, and what was that decision-making on ultimate acquirer?

    7. TPTJ Parker1:01:25

       Yeah. So we, uh, and I th- you know, I think this was somewhat public, uh, in the middle of the process, but that same initial kind of retailer that had flatly wanted to buy the company got to terms that we were comfortable with, and we spent some time with other acquirers, but it was clear that they were, they were the lead horse, and it was probably the right fit, and the, the best option. Um, and so we were ... This is kind of early 2018, um, and we had, I don't know, six months of runway in the bank or something. Um, and so normally, that's when I would have raised a round, right? Like, you'd raise 18 months, you'd then probably raise when you've got six months of runway left, something like that. Um, and so we had started a fundraising process in January of '18, um, and then within a few weeks of that going, we got to terms with a potential acquirer, and we assumed we were gonna sell the company to that acquirer. And so, we shut down the fundraising process. We sort of full steam ahead on getting the deal done. Honestly, we were days, like not weeks from being done, like announcing. Uh, like this thing is done, like definitive agreement, like done. Uh, and it hits a snitch, or it hits a snag, and it's gonna get delayed. Um, and so now, like, the whole board thinks we're selling the company in, like, three days. I think we're selling the company in, like, three days. Um, and now it's not gonna be three days. It's gonna be some unknown amount of time. And now, instead of having, like, six months of money in the bank, I've got two months maybe? 'Cause like we're selling the company in three days, like I had two months of money is great. You perfectly timed it. Um, and so, uh, I had to tell the board, obviously, uh, so I got a phone call on a Thursday night, and I told the board on a Friday morning. Um, and we've now gotta go ... I sort of picked back up the fundraise, so like, I'm flying to San Francisco Monday morning. I'm going to New York on Wednesday, and then maybe I'll go out and see if I can get a, a meeting in Seattle with some other potential acquirer, uh, by the end of the week. Uh, and that's what I did. So, I got on a plane, and I went back and met with all the potential, uh, funders, not acquirers, and told them what happened. I thankfully, like we'd shared all our numbers in like December, January, and we beat all those numbers (laughs) in now like m- April or whatever this was. And so like that's better than if we had missed them, uh, for sure. And it was kind of like, you know, we're up for anything. Like, we'll figure something out here, like but we don't have a ton of time, so let's just like be creative. Um, then I had the meeting with, uh, the company in Seattle, and it was definitely the best pitch of my life, and, uh, we were just mano a mano, and I, I think I, at that point I knew we were selling the company to Amazon. Like, all of our, uh, vision around what to do with pharmacy and how to make it shoppable and all those things, we were just super aligned, um, at that point. You know, I knew we were gonna sell the company to Amazon and ultimately we did, and, and, uh, it was a great outcome.

    8. HSHarry Stebbings1:04:02

       How do you come ... Sorry. I'm so naïve. How do you come to a price? Do you sit across the table and be like, "I want a billion," and they're like, "Okay. Great. Good for, good for you." I ... How, what does that look like in terms of that negotiation process?

    9. TPTJ Parker1:04:18

       It's a dance. By the end, like yeah, I sat on the phone and said, "I want a billion." That, that's definitely what happened. But, you know, getting to the, the first deal was just a, was a dance, and it was about where

    10. NANarrator1:04:27

        (laughs)

    11. TPTJ Parker1:04:27

        ... different companies valued, where the investors' positions, like what's an economic outcome that's good for everybody? And if we can't get there, we're just not gonna do a deal. It's not like we had to sell the company. We could have raised another round and kept going. Um, and so that was more of a dance. By the time it got to doing the deal with Amazon, like ultimately it was a phone call that was like, "If you hit a billion, we're done."

13. 1:04:46 – 1:08:16

    How TJ Parker’s Life Changed Post Acquisition

    1. TPTJ Parker1:04:46

       Um, and they hit a billion, and we were done. But, you know, that's the byproduct of lots-

    2. HSHarry Stebbings1:04:51

       Can I just follow ... I'm, I'm, I'm ni- I'm naïve again. When, when you have a deal like that, and you can tell me if I'm asking too many questions, is it like a billion and you get the cash? Is it like a billion and earnouts? How do deals get structured?

    3. TPTJ Parker1:05:02

       Yeah. I mean, they're all different. Even like, so we had three potential buyers. Uh, each structure was different, whether they bought the whole thing or most of the thing, or whether it was all up front or is there some earnout, and there were varying degrees of those things. Um, but I would say by and large, every deal is gonna have some of the money up front and some in earnout. Um, and so I think we announced in June. No money then, because like you haven't closed yet. There's this whole, like, regulatory process and everything that takes some time. Um, so I would say like for entrepreneurs, that moment from announcement to close is, is a relatively stressful, uh, period of time. Uh, but I think we announced in June. We closed-

    4. HSHarry Stebbings1:05:37

       It's also weird though, 'cause your friends think you're loaded, and you're like, "No, no, I don't actually have any money." Like ... (laughs)

    5. TPTJ Parker1:05:43

       Yeah. Well, you're definitely not loaded yet. There's plenty of deals that blow up in, uh, in closing, not typically for diligence, but more for, uh, for government oversight reasons. Um, but then we close in September. Then yes, like a lot of money hits your bank account, uh, in order of magnitude more money than not.

    6. HSHarry Stebbings1:05:59

       Does 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, uh, in the garden with the kids? Where were you when you saw it hit?

    7. TPTJ Parker1:06:11

       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 then when it 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 like ...

    8. HSHarry Stebbings1:06:44

       Where were you? Were you at home?

    9. TPTJ Parker1:06:46

       I actually don't even re-

    10. HSHarry Stebbings1:06:46

        Were you in the office? Were you with your wife?

    11. TPTJ Parker1:06:47

        I don't remember, crazily. Uh, I certainly remember where I was when we announced the deal, but I don't know where I was when we, when the money hit the account.

    12. HSHarry Stebbings1:06:55

        I've heard quite a few people saying I- I've (laughs) bizarre and you're a weird bloke, TJ. Uh, I'd be like, "I was here. I remember my heart rate, my temperature."

    13. TPTJ Parker1:07:04

        At that point it was like-

    14. HSHarry Stebbings1:07:05

        But that's why I'm a VC in the US because-

    15. TPTJ Parker1:07:05

        ... such a given it was gonna happen. I, uh, yeah, I, I don't remember.

    16. HSHarry Stebbings1:07:08

        Can I ask? I've, I've heard people say like, "It's kind of a shame. Like, TJ's a g- once-in-a-generation founder."The company could have been 20, 30 billion reinventing healthcare on its own. Do you have any regrets about selling?

    17. TPTJ Parker1:07:22

        No, I really don't. I mean, that might be true, it's not ... Like, I'm not saying that that's not possible, but, you know, we set out to, like, start PillPack, like, we just wanted to make pharmacy better. Like, that was the ambition. Uh, and when we sold the company to Amazon, like, I deeply wanted to build, like, a shoppable pharmacy experience, and we did that. Like, we built and launched Amazon Pharmacy, and that's humming along, and I'm super proud of that work. Um, we also were able to build and launch Amazon Clinic, which is like a 3P marketplace for telemedicine providers, and there's lots of other stuff that I think will be a byproduct of our thinking and what we've built at Amazon. To say nothing of the fact that the thing we built and the work we did at Amazon, it's now, it's the only big tech company that's actually providing healthcare and doing real things in healthcare. And so, that's a legacy that I'm super proud of, um, and really happy about. And economically, like, I don't ever look back and, and wish I had kept going and how it could have been so much bigger and so much better. I'm just super happy with the outcome.

Episode duration: 1:13:40