20VC: The Largest Venture Backed D2C Consumer Exit; PillPack: $0-$300M Revenues in 5 Years & The Biggest Lessons Scaling the B2B Business to $300M in 2.5 Years with TJ Parker, Co-Founder @ PillPack

TJ Parker is the co-founder and former CEO of PillPack. TJ Raised over $100M in financing, grew the company to more than 1k employees, and successfully sold the business to Amazon for $1B in 2018. As of last week, TJ was announced as the newest Partner @ Matrix Partners where he will initially focus on health opportunities from concept to series A. In Today's Episode with TJ Parker We Discuss: 1.) From Growing Up in Pharmacies to Selling to Amazon for $1BN: How did TJ seeing the pharmacy industry from his parents lead him to believe there was a $BN company to be built in the space? What does TJ know now that he wishes he had known when he started the company? What does TJ believe he is running from? How does that impact his own style of parenting? 2.) The Truth About Entrepreneurship: Why do the best founders have to get comfortable in an environment of uncertainty? What have been some of TJ's biggest lessons in how to do this? Why does TJ believe the role of the CEO is to set the vision and get out of the way? What roles can only the CEO do? How does TJ approach delegation? What have been some of his core lessons? Does TJ believe being naive is a superpower when starting a company? What do founders need to know vs what do they not need to know when starting a business? 3.) Speed of Execution and Decision-Making: How important does TJ believe speed of execution is for startups today? What can founders do to create a culture of rapid decision-making? What works? What does not? What does TJ believe are 1-2 of the single best and worst decisions he made with PillPack? What are some of the biggest mistakes TJ sees founders make both in speed of execution and then also in decision-making processes? 4.) The Crucible Moments: Lawsuits & Acquisitions: How did an incumbent come days away from shutting down PillPack? How did they save the company? How does TJ deal with those moments of intense stress? How did the Amazon acquisition come to be? Why and how did the prior acquisition fall through? Does TJ regret the sale to Amazon? How was life at Amazon post-acquisition?

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  If I had been working in pharmacy for a decade as an adult, there's no way I would have started PillPack. And so we were 48 hours from going from, I don't know what it was, 100 million in revenue to zero. Probably the worst board meeting we ever had.

• 0:12Harry Stebbings?

  This is 20VC with me, Harry Stebbings, and I've wanted to do this episode in particular for a long time. I'd heard many great tales from David Frankel and Fred Destin about the PillPack journey. And this interview is the first interview that TJ has done in years and comes on the back of his announcement last week that he'll be joining Matrix Partners as their newest partner. Yes, I'm thrilled to welcome TJ Parker to the hot seat. TJ is the co-founder and former CEO of PillPack. TJ raised over 100 million dollars in financing, grew the company to more than 1,000 employees, and successfully sold the business to Amazon for $1 billion in 2018. As mentioned, as of last week, he joined the world of venture, The Dark Side, as a partner with Matrix Partners. But before we dive into the show today, this episode is brought to you by Tegus,

• 0:55Harry Stebbings?

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• 1:38Harry Stebbings?

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• 2:22Harry Stebbings?

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• 2:54Speaker 02

  You have now arrived at your destination.

• 2:57Harry Stebbings?

  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.

• 3:06Speaker 00

  I am thrilled to be here. This is the first public thing I've done in five years. 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.

• 3:14Harry Stebbings?

  And I am so grateful that this is the first thing you've done in five years. But I want to go to PillPack in 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.

• 3:28Speaker 00

  Yeah, so I think if you go way back, like I grew up in New Hampshire in a family that owned and operated a new classic mom and pop pharmacy. So I grew up in and around pharmacy. And I'd worked a ton of different jobs at my dad's pharmacies, worked behind the counter, helped check people out. Actually, was delivering meds to people in their homes and saw that experience. I just knew there was a lot of opportunities to make it better. It was super frustrating. It was really complicated. So I was in pharmacy school in Boston, doing the classic, going down weird rabbit holes in the internet as a college student and buying and selling sneakers, got really obsessed with design, thinking about furniture and architecture. And I was just very interested in kind of aesthetic. And then very separately, got really interested in startups, snuck into MIT and they were super gracious.

• 4:09Speaker 00

  I didn't go to school there, but helped with the MIT 100K, which was like their business plan competition at the time. When I showed up for the sort of first meeting with all the students and they're like, you don't go to school here. And I was like, nope. Like, we're not paying you, so if you want to do some free work, I guess that's fine. And then I actually started this thing called Hacking Medicine at MIT with Elliot, my co-founder, which was getting just doctors and designers and physicians all together to work on stuff in healthcare. And through that period, 2005 to 2010, my dad had started this totally new pharmacy that was sorting and packaging meds, actually very similar to PillPack, but they were selling into nursing homes and assisted living facilities. It wasn't a consumer business. And so I always had this idea, could you take this kind of core product, but then offer it to consumers and do it in a way that was really design forward and aesthetic?

• 4:53Speaker 00

  I think for me, the big challenge was getting the confidence to think I could actually go do that. Could I actually raise venture capital? Could I find a real co-founder? Like, getting the inertia to believe that I could do that.

• 5:03Harry Stebbings?

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

• 5:07Speaker 00

  Yeah, I'm a little bit more of a non-traditional founder, right? I didn't go to an elite school. I didn't have the sort of normal connections that 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 normal entrepreneur in that context. And in hindsight, I think it was my perception and the actual reality, but that was the hurdle for me. I think once I made that jump, from there it was very natural. It was more like a snowball rolling down a hill. 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. And it was like that for sure for me. Yeah, I pitched for the first time at Hacking Medicine, which is an event that we started, so it's wacky, but we won the event, which is very exciting. It gave me the confidence, for better or worse.

• 5:51Speaker 00

  This was like the fall of 2012. I'd been a pharmacist for about six months, so like, fresh out of school. I think within a month or two, we were in, we got into Techstars, quit my job. It's kind of like January of 2013. 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? And it was a very kind of iterative, natural process in hindsight, right? Obviously, that wasn't intentional going into it. But it really was the combination of all these things I was doing and I was interested in that ultimately became PillPack.

• 6:22Harry Stebbings?

  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?

• 6:39Speaker 00

  Yeah, I think it's really important to understand the customer problem. 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. But I do think if you don't deeply understand the customer problem, it's likely you'll build the wrong solution. 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'd spent enough time inside the pharmacy, I'd spent enough time in customers' homes, that 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.

• 7:09Harry Stebbings?

  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 journey in entrepreneurship, I do just want to touch on this, which is, what do you think you're running from when you think about all being a functions of our past?

• 7:24Speaker 00

  I had this conversation with someone a couple of months ago that made the comment that kind of stuck with me that we're always probably looking for the opposite of the environment that we had as a kid to some degree. For me, my dad grew up with almost nothing and worked incredibly hard to become a pharmacist, to give us a childhood that was way better than his. But it was like a very kind of leave it to bever childhood, right? Very predictable, very stable, just very classic. And I think I was always looking for a little more excitement, a little more risk in my life. And so I think startups were a great way for me to harness that, but led to me being very uncomfortable in very formulaic, stable environments.

• 7:58Harry Stebbings?

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

• 8:22Speaker 00

  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 the thing that we're trying to provide for our kids is the ability to go explore, be kids, to be able to have independence and to grow independence early, which I did have in my childhood. We were the classic eighties, nineties kids that hopped on a bike and took off and came back before dinner. I'm trying to keep that because for me, that was a magic of childhood was being able To go build forts in the woods and be gone for the whole day. It wasn't like my schedule's packed and I want to make sure I provide that for my kids. And certainly, hopefully, our environment is stable. For me, that's the thing I think about a lot is how do I retain a childhood that is, for the most part, now gone for a lot of kids.

• 9:04Harry Stebbings?

  I have the most wonderful imagery from US films of jumping on a bike and going around picket fence ecosystems.

• 9:10Speaker 00

  That was definitely my childhood.

• 9:12Harry Stebbings?

  I mean, great, but I want to move from the stability to uncertainty, to instability. And you've said 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?

• 9:28Speaker 00

  I think a thing that I believe now that I did not believe during the early part of the PillPack journey, or honestly, probably into the last couple of years, is that there are folks that are on 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 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. I'm super naturally comfortable in an uncertain environment. It's kind of my happy place. 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 that lifestyle, you honestly probably be happier at a big company. And if you like uncertainty, you're going to be miserable at a big company. Maybe it might make sense to go do something that's a little riskier.

• 10:12Harry Stebbings?

  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, 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?

• 10:34Speaker 00

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

• 11:17Speaker 00

  and what environments make you happy is, I think, super important.

• 11:21Harry Stebbings?

  I think terrible podcasts like this glamorize entrepreneurship. And if we showed the true brutality of it, no one would ever fucking do it, ever. So that's not good for our business. But the other aspect that you said, as well as being comfortable with uncertainty, is that as CEO, you have to set the vision and get out of the way. I thought this was interesting. Can you expand on this? And your biggest kind of lessons on doing this?

• 11:44Speaker 00

  Yeah, I think this would actually be way harder for me now. When I started Pilkback, I was 26 and I had no preconceived notion that I had any idea how to do the tactical jobs better than the folks I was bringing in to do them. There was no way I knew 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 finance lead better than the people I was bringing in. The only technical training I had was in pharmacy, which had very little relevance to most of the things that a founder's doing. So honestly, there was a beauty in being young and not having experience in this context.

• 12:13Harry Stebbings?

  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 nerds fans who didn't know what good looked like and only knew pharmacy?

• 12:24Speaker 00

  Yeah, I was able to focus on the things that I thought I had 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. As far as understanding who was good and not good, a lot of it was intuition and trying to read people. And then it's plausible that I completely made this statistic up. But at one point, somebody told me that the difference between the worst and the best hiring managers was roughly like, 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% of the time. And my takeaway from that was like, I better be really good at changing my mind if I'm wrong. And that's the only way to get to 90-plus percent is, if you hire someone that's not going to work out, be really quick at making that call and trying again.

• 13:08Speaker 00

  And I took that to heart and I definitely behaved that way as we built the team.

• 13:11Harry Stebbings?

  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?

• 13:26Speaker 00

  I was incredibly impatient is probably my biggest flaw is being pretty impatient. 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? But I was very decisive on this stuff. I think it came from the fact that I was just generally impatient as an operator.

• 13:44Harry Stebbings?

  No, I totally get it. I think impatience is really important and the trouble with Europe is we're very patient. Ah, tomorrow we'll get on to execution.

• 13:53Speaker 00

  Americans are quite impatient folk, you know?

• 13:55Harry Stebbings?

  Oh my god, nightmares. But what I want to ask is you mentioned like your naivety bluntly across many aspects of the business when you were starting. Naivety is often said to be a good thing, a bad thing by others. Is naivety good or not? And if so, why yes or why no?

• 14:12Speaker 00

  Yeah, I always said that I think Elliot and I were in the perfect place personally when we started PillPack and we got very lucky in that sense. I think we were absolutely not naive about the customer and about what the customer needed, what the customer wanted. Like, we deeply understood that, but we were incredibly naive about the broader industry dynamics. We had no idea around incumbents and what they cared about and why all the things we wanted to do wouldn't actually work. And, you know, we looked at it and said, of course, we're going to make an awesome product. We're going to make this way better for customers. Then we're going to put it online and we're going to acquire customers online. This is going to be super straightforward. Then we were just woefully ignorant about all the reasons it wouldn't work from an incumbent and industry standpoint. And I honestly think that's the perfect balance.

• 14:53Speaker 00

  It's like, you got to understand the customer, but if you understand all the reasons it's not going to work, you're never going to start the company. If I had been working in pharmacy for a decade as an adult, there's no way I would have started PillPack because there were very specific reasons it shouldn't have worked. And I think that's where the naivety is really powerful. If you don't understand the customer, you're hosed, so you can't be naive there. But I think important to not know all the reasons that the thing you're trying to do might not work.

• 15:15Harry Stebbings?

  Okay, when is naivety good and when is it bad? Because it can be bad.

• 15:19Speaker 00

  But again, I think it is about like the difference between not totally grocking industry dynamics and grocking the customer. We took money from exclusively consumer tech investors. And we weren't out pitching healthcare investors. I think almost every healthcare investor would have said no because of the fact that the industry dynamics were the way they were. And so the investors were just as naive as us on a lot of the dynamics at play.

• 15:40Harry Stebbings?

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

• 15:46Speaker 00

  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 it was augmenting the things I thought I understood. And it was less about whether they'd say yes or no for me. It was, when you look at the PillPack business, yes, it's a healthcare company, it's a pharmacy. 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. I'd been pretty involved in the 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. 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 to a yes or no.

• 16:26Harry Stebbings?

  Can I ask, you mentioned impatience earlier. 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?

• 16:38Speaker 00

  In this game, it's the only thing that matters, right? It's like, how fast can you figure stuff out? You think about 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.

• 16:50Harry Stebbings?

  What can you do to increase your speed of execution?

• 16:53Speaker 00

  It goes back to hiring great people and mostly getting out of the way and giving them the autonomy to make decisions. 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. 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. If it's even cusp-y on the bigger decisions, they'll be coming to you and you'll be working through it. 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 should feel like they have the autonomy to make the call and go as fast as possible.

• 17:27Harry Stebbings?

  Can you start from a relationship of full trust?

• 17:30Speaker 00

  Yeah, it's funny you ask that. When we were acquired by Amazon, we took all of our internal, the equivalent of Amazon LPs, like leadership principles, right? And we tried to mash them up one to one with what's the equivalent like Amazon one? And they actually like almost all tracked sort of one to one, like customer obsession and all these things were dead on. And the one that was was the exact opposite was we had this leadership principle at PillPack, which was my favorite, which was assume the best. So almost all your best relationships in life are about assuming the best in someone, not assuming the worst. 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 earned trust, which is literally like the opposite leadership principle.

• 18:15Speaker 00

  And I didn't actually think a whole lot of it. Like we just tried, we mapped them. I was like, oh yeah, the same earned trust, assume the best. In hindsight, that is like literally the opposite culture, right? It's assume the worst until you're proven otherwise. We built a culture that assumed the best, that people showed up, we made bets on people, and then we assumed that they were going to execute and that they, and we trusted them.

• 18:33Harry Stebbings?

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

• 18:40Speaker 00

  Yeah, never backfired on us in a meaningful way. Certainly, there was a lot of goodness that came from it. So no, is the short answer, but certainly could have been burned.

• 18:48Harry Stebbings?

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

• 19:05Speaker 00

  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. 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 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 bigger decisions that we made over the course of the business were a byproduct of going on two hour walks three times. Times a week for six months, like we were just batting these things back and forth for a very long time, sort of reticent to make the call.

• 19:48Speaker 00

  And I think that's super important, too. It's like a bifurcation of decision making. If you can change your mind, just make those decisions as fast as humanly possible. Honestly, don't even bring them to me, just like go. And if you're wrong, we'll change your mind and we'll do it the other way. That's totally fine. But if it's something that's irreversible, 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. I think sometimes people make all the decisions in the median instead of bifurcating these things, but I think that's super critical.

• 20:13Harry Stebbings?

  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 exec team and everyone around you was going, oh, TJ, what was the decision that sticks out when I asked that?

• 20:25Speaker 00

  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 going to 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 meetings and try to work through this productively before it blows up in our face? 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. But in reality, we just sat on it. We let it ride, but it ended up becoming like the make or break moment in the company. And I think it was the only way that we could have possibly pulled off what we did pull off.

• 20:59Harry Stebbings?

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

• 21:03Speaker 00

  I think that probably the more useful answer to your question is we made this, certainly at the time, a weird decision that we were only going to 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, that almost no one is actually building for the customer that's, that is using the service. And so we effectively put on blinders to everybody else. We said, everything we're doing is to make this easier for the customer. And if we've got to do weird stuff to make that possible, that's totally fine. We'll do the weird stuff. And if like 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 and it enabled us to build an amazing service.

• 21:48Speaker 00

  We never strayed from is that the only thing we care about as a business is building for that end customer.

• 21:53Harry Stebbings?

  I totally agree with you 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 and 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?

• 22:08Speaker 00

  I think one of the most difficult things as a founder is finding the balance between doing things that don't scale and having 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. And I think we messed up that balance in bringing in a head of finance, bringing in a head of ops at the right time. And it was incredibly painful. We're a deeply operational business and we probably waited nine months to a year longer than we should have to bring in a real operator.

• 22:36Harry Stebbings?

  Well, when you say a real operator, is that an exact team or is that a CFO? What do you mean by that? And what would you advise founders having had that experience and bad decisions?

• 22:44Speaker 00

  Tactically, we started the business, we had a head of ops that I had known for a long time, but was young, hungry, knew the business super well. It was actually the first person I hired. And he scaled that thing to four or 500 people, like zero humans to 500 people or something in operations and was more dedicated to the business and the customer than anyone I've probably ever met. I bet he slept in the pharmacy 40 days in one year and was just able to figure anything out. And that was amazing. That's like the perfect archetype of an early operational leader is that they deeply know the domain, they're happy places not like going and building unnecessary processes, they're happy places, 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

• 23:26Speaker 00

  anymore. Like you have to have the right systems and the right process and all that stuff. And I think he was so good, like we just went too far with that approach. It's a funny story, actually. Probably the worst board meeting we ever had was the board meeting before Yvonne joined. Everything was breaking, but at that board meeting, it was like, oh no, everything is like really breaking. But the problem was that we had hired Yvonne, but she hadn't started yet. So she came to the board meeting. And so it was this hilarious dance between the investors and me and Yvonne where everyone knew it was broken and the investors were pissed, but they didn't want to 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 say all the things we need

• 24:09Speaker 00

  to say in a way that like makes Yvonne excited to 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.

• 24:18Harry Stebbings?

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

• 24:35Speaker 00

  I always think about 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? But what is the bet your investors are making? And do you have the right team to achieve like that single bet, right? Like, you kind of have to put blinders on and be really thoughtful about what that is. So for us, 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. The flyer everyone was taking is can you acquire consumers online for this company? And so the only thing that mattered post that first round of financing was, can we actually acquire customers online for a pharmacy?

• 25:16Speaker 00

  Which, if you jump back to 2013, like, starting a pharmacy is not what starting a pharmacy is today, right? There's Ro and Hims and PillPack and Capsule and Trupill. Like, there's all this great activity in pharmacy. In 2013, there were not pharmacy startups, right? So that was a weird thing to begin with. And so I think that was the bet we were making. 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 ignore that stuff, actually. Let's go find the best 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, to some extent, have to be in reactive mode and less about,

• 26:00Speaker 00

  we're gonna go find like a amazing exec and they're gonna build all this process and this function and be comfortable with this is the only thing I care about for right now. We'll figure that stuff out later.

• 26:09Harry Stebbings?

  I totally agree with you there. I think the hard thing is when it comes to selection, like, who do we decide to have on that team to help us? And you said before, 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?

• 26:26Speaker 00

  So I think it's less about being selfish in the sense Who you're recruiting, it's more be so if a shoe shows up in that weekly meeting that you spend three hours going through the business. Because a good rule of thumb is if you bring your head of HR and your head of legal and your head of finance and your head of ops. And 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 talk. And so do you really want to spend a seventh of your meetings talking about promotions and leveling and HR stuff? Being really thoughtful about who's in that room will determine what are you spending your time in that sort of most critical moment debating?

• 27:07Speaker 00

  So for us, and this honestly wasn't intentional, it was just, it was a byproduct of who was on the team. But by the time we sold the company, we've got a thousand people, we're doing a few hundred million in top line. The entirety of that meeting was me, 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. There was five of us in that meeting. And if you look at who the five were, like you're going to spend eighty five to ninety percent of your time talking about product and growth. The combination of HR, legal, ops, like all the tertiary functions get ten to twenty percent of the time in the meeting. It just made us focus on the things that are ultimately going to drive a startup's success. But a startup is about product and growth.

• 27:51Speaker 00

  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.

• 27:58Harry Stebbings?

  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. 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?

• 28:16Speaker 00

  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 going to have a function. You have a head of engineering, you have a head of design, you have a head of product, you have a head of operations, a head of finance. It's very functional, but it's like the most simplistic, straightforward org design. It's where most companies are going to start. 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 and L. And under that leader, they have ahead of finance, ahead of ops, ahead of product, ahead of tech. And so you end up having like hundreds of these GMs that manage a single P and L and have pockets of each of these functions inside of their business. Maybe somewhat controversially, I think the second you go to a GM focused org, you're not a startup anymore.

• 29:01Speaker 00

  Like you are a big company. Almost all of the downsides of a big company that people bemoan, the amount of HR, the amount of overhead and decision making, like the all the over process ness, I think is all a byproduct of that single decision. 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 unnecessary intellectual exercise to think about going to GM than it is about, than it is actually going to do any good for you. And you can build huge companies that are functional. Apple is like a functional org.

• 29:37Harry Stebbings?

  Yeah, that's my question. I've interviewed functional leaders from Snap and LinkedIn in the last few days. These are big companies and public companies. How should founders determine whether they should run a functional versus a GM led org? What's right for me?

• 29:51Speaker 00

  Yeah, I'm far on this extreme, but I think stick with functional until it's so obvious that it can't possibly work. Then maybe there's an excuse to go to a GM focused org. And certainly if you've got like a manageable number of product lines, I wouldn't even have the conversation. It's just not worth a debate. It is going to make your business worse and it might not do it right away, but it is definitely going to do it on the long term. Yeah, if you think about all the extra process that that creates, right? So if you have a GM focused org, like you now have to do all this work to make sure that all of your N2s are leveled at the same level because one's in this team and one's in that team. And then 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.

• 30:35Speaker 00

  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 with that stuff. Just comes in kind.

• 30:49Harry Stebbings?

  I also feel like you're creating this kind of dysfunctional decision making because you have CEOs on top of CEOs. Your GM who runs that segment isn't actually the ultimate decision maker. They can still get overridden by the CEO up top or the CPO who's ahead of them. And so you create this very strange chasm between power ultimately.

• 31:10Speaker 00

  And you just don't have your best people on every product, right? If you've got your head of product and your head of engine, your head of design, working on every product, they're going to be better. Just like de facto going to be better products.

• 31:20Harry Stebbings?

  Man, you mentioned comp as one of the reasons like it can be challenging. What are some of your biggest lessons on comp and equity? And how it can be used most effectively by founders?

• 31:30Speaker 00

  I didn't appreciate this nearly as much as I probably should have at the time. But incentivizing your team as much as possible on equity ends up being like the biggest lever you have from a cultural 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 going to dramatically change their comp. Like, we bet on people, we gave them a big equity package the day they started 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. There was no point in trying to go carve out some way for you as an individual on that team to win in a way that mattered. And so everything falls out of that. We're going to win or we're going to lose.

• 32:13Speaker 00

  We're all aligned, 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. 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.

• 32:31Harry Stebbings?

  You agree with that in a macro turn though. 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 see that in Europe as well. Do you think that's fair?

• 32:46Speaker 00

  They should go work at a big company then. That's fine. That's not the game we're playing. 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.

• 32:58Harry Stebbings?

  Yeah, I want to dive into a couple of elements of the story, which I think are really important. 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?

• 33:17Speaker 00

  Yeah, I talked a little bit about that sort of first bet, right? Where we started the company, we raised about $4 million between two quick rounds right out of the gate. And the bet people were making is that we can acquire customers. Everyone assumed we'll start a pharmacy. They assumed we'll get in network with payers, like all that stuff was a given. So if you jump forward, we started the company in 2013. We raised that round in the middle of 2013 and we launched the product in early 2014. And for folks that were around at that time, the way you acquired customers was buying Facebook ads, like point blank. But that's how every DTC company was scaling. 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 ads turned on 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.

• 34:02Speaker 00

  And out of nowhere, our account got shut off. We got 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. And they told us at the time, like, actually, you can't advertise pharmacies on Facebook. Sorry, like you can't do that. It's a picture of this, right? Like you were 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 backup at that point. And we had us all this back and forth. 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 on Facebook, which is great news. It's now, I don't know, March of 2014 or something.

• 34:43Speaker 00

  And we go, we contact VIPS and like, hey, let me get this accreditation and accuse who we are. And it's like, cool, yeah, here's the process. And they sent us this long like overview of all the things we had to do to get the accreditation. And on average, it takes about 12 months to get this accreditation. We're like, oh God, like we don't have 12 months to figure this out. From a financing standpoint, 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 Excel and he knew the company super well. Obviously, he liked the business and he just knew that this was gonna work. And he took a flyer and he made a bet on PillPack in September of 2014. Before we had any real customer acquisition working, like we were hacking our way to get some customers.

• 35:27Speaker 00

  And the product was working. 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 to our early Facebook folks for this reason. 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.

• 35:43Harry Stebbings?

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

• 35:47Speaker 00

  So we raised that nine million dollar round in September, adds on probably like October or something like that. And I'd say within three weeks, it was a whole different situation. 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 growing. It was that straightforward. And from the back half of 14 through the mid 15, it was just scaling and we raised a 50 million dollar round six months later or something.

• 36:11Harry Stebbings?

  That's nicely, but like nine million dollars, when you didn't really have any customer acquisition going. Did you get an absolutely torrid like structure to that deal, like dilution wise?

• 36:22Speaker 00

  I think the practical answer to your question is we raised like a nine on 30 post or something.

• 36:26Harry Stebbings?

  So no structure, but you got to do what you got to do.

• 36:29Speaker 00

  Yeah, I think that was market ish. This was not 2018, 2019, but it was fine. 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. That's just silly. It worked out great. We raised the round and we moved on. And then we raised around a couple hundred pre nine months later. And so that one was probably way too frothy and the one before was low maybe, but like at the aggregate, it was fine.

• 36:52Harry Stebbings?

  I have to touch on the element that you said earlier, being kind of incumbent responses, incumbents respond in varying ways. I hear there's an interesting story here. How did incumbents respond to you when things started to hum? And take me to that story.

• 37:07Speaker 00

  So I think the place we were woefully naive at PillPack, we founded the company was this, right? We didn't really understand why there were more e-commerce pharmacies. There's all these big winners in pharmacy. There's basically, there was no e-commerce player before PillPack, like that didn't exist, right? CVS and Walgreens, there's PBM owned mail order pharmacies. There's no e-commerce business. That's weird. We should just build this. It'll be great. We're going to build a great customer experience and it's going to be awesome. And there are the things called PBMs, which stand for Pharmacy Benefit Managers. And they, our company is like Express Groups, CVS. Caremark, OptumRx, and they're the equivalent of insurance companies, but only for your prescription drugs. Historically, they were in two different businesses. One was managing your benefits. So how much is your copay? Which pharmacies can you use? How much is your out of pocket? Which medications are covered?

• 37:51Speaker 00

  Like all the things an insurance company does. And then the other half of their business was owning and operating mail order pharmacies. So they did home delivery for consumers. And so obviously, they weren't particularly thrilled about other companies competing with them in that second category, right? They had a captive market on doing home delivery in pharmacy.

• 38:09Harry Stebbings?

  Aren't you fucked? Because if they're the ones who are saying, hey, we'll own the transaction mechanism, we're the insurers of these prescriptions. And we're not going to give PillPack license. Aren't you fucked?

• 38:20Speaker 00

  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. This is idiotic. There's no way.

• 38:30Harry Stebbings?

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

• 38:38Speaker 00

  Oh yeah, I was horribly confident that this would be a non-issue. I've run pharmacies before. You just how you fill out the paperwork, you get in network with the insurance companies, like it's fine. And 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. 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 a network. And then we got our Facebook ads turned on. 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.

• 39:19Speaker 00

  And then things changed quickly, right? Like we get to the middle of 2015, we went from $10 million run rate to $70 million run rate in six months, nine months, like that. Then they started really caring, right? And so now, like, everyone knows who PillPack is. And we got very lucky. We got this guy, Jim Messina, who was Obama's deputy chief of staff, joined our board. And he joined our board explicitly to help us navigate regulatory and incumbent issues like this. And he's very good at this. Through 2015, we got Termination notices from all of the major PBMs, very obviously. And I would say every one of them but Express Scripts, we worked through in a very kind of private, professional way with them. And net-net, we maintained access, we maintained coverage, mostly because we were already serving their customers and their customers liked the product

• 40:04Speaker 00

  and it would have been very painful for them to take it away, was the sort of base of that.

• 40:08Harry Stebbings?

  Do you not have been more aggressive and just taken vertical ownership and done the payment processing yourself too, and then actually really?

• 40:15Speaker 00

  Like, literally impossible, yeah.

• 40:17Harry Stebbings?

  Why?

• 40:17Speaker 00

  It's not just payment processing, they're the equivalent of, you can think about a PBM or honestly a payer in general as like the demand aggregator in healthcare. They own that demand, they own the employer relationships, they have the Medicare relationships. As a startup, you could not have built what they had built, unless you're building an entirely different company, you can't do it when we're building the equivalent of a retailer, like, literally impossible.

• 40:37Harry Stebbings?

  So what happened then?

• 40:39Speaker 00

  So early 2016, Express Scripts sent us a termination notice, honestly looks the same as all the other termination notices we had received, and we had managed quietly and figured out. And we reached out to them the same way we did with the others and tried to get a meeting and try to help figure it out. We had two weeks, right? So the termination notice states like, in two weeks, you can no longer serve Express Scripts customers, like you can't process transactions. For context, they are the largest PBM, so this was like 40% of our revenue. And as far as we knew, in two weeks, like, that revenue goes to zero. We spent a week just trying to get in touch with somebody and they were just radio silent, would not even engage with us. And so we made the pretty aggressive decision to start a public war. And so Colin Rainey, who had started like three days before, designed a full explainer

• 41:22Speaker 00

  video that had talked about what a PBM is, what they do, why this matters. And then 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. And these weren't like, oh, like it'd be so sad to lose PillPack, I love the packaging. It was like, if we lose PillPack, like I'm gonna have to put my mom into a home and we don't really know actually what we're gonna do. And it was 1,500 of these, right? And so we built a whole website, fixpharmacy.com, had all the customer testimonials on it, had the explainer video, the customer video, and then we had all this wonky stuff for regulators if they wanted to drill into what was going on. And Then we just did a massive PR blitz. So we launched the site. I think we had forty articles in two hours.

• 42:02Speaker 00

  And we leaned super heavy on this actually is going to be really bad for these customers. This isn't like a David and Goliath. Like hopefully one of the businesses wins and one loses. This is going to be super bad for the customers that are using this service. And then we ran a regulatory process and tried to do what we could do. And I think within twenty-four hours, Express was at the table. And then it gets even crazier. So we're now like, what's five days later? We've got two days to get this contract fixed. Now it is a business negotiation. We're trying to find a path forward with Express scripts. I don't think anyone's heard this story ever, but Elliot and I were sitting in a conference room with Colin. I'm sitting on my laptop. We're like the war room, right? We've got all the site design on the walls. It's just like a classic war room. I get an email from like the equivalent of our GPO from all of the other PBMs. Like you have a like a GPO type thing that sits between you.

• 42:46Speaker 00

  And they're like, hey, like we sell this express scripts. This seems bad. Like actually we're going to kick you out too. And so we were forty-eight hours from going from, I don't know what it was, a hundred million in revenue to zero, like zero. We had to now both, I have to go figure out how to fix the express scripts thing. And we got to go figure out how to like fix all of the other contracts like at the exact same time. And so I'm sitting there, I get the email, like I don't say anything. I just turn the computer around to Elliot. Who looks at it, we say nothing for probably three minutes and Colin's sitting like, hey guys, like what's going on? The two of us walk out and I'm like, Elliot, you gotta figure out this GPO thing. I don't know how we're going to deal with that, but you gotta figure it out. And I was like, I'll figure out express scripts and we'll figure it out. And by Friday night, that was the end for both. Elliot had found a new GPO.

• 43:28Speaker 00

  Done all the tech work and administrative work to flip into it. And I had signed a new contract with Express scripts. And we had not lost a single contract and we had solidified ourselves like publicly. As a company that was going to exist in the space like in perpetuity. So it was as live or die as you're ever going to see. And yeah, that was what that sort of make it moment for the business.

• 43:46Harry Stebbings?

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

• 43:52Speaker 00

  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 I also felt like I was in my element. There was like an enjoyment. It's a battle and we're going to figure it out and we're like, we're playing a chess match here. And certainly was stressed, certainly was not sleeping well. But at the same time, like there was like a, an enjoyment to it. And when, well, obviously when we pulled it off, like it solidified the business in a way that we couldn't have done in any other way. And similarly, like this is one of those decisions that like, I think if you were a little too anxious and you want to make the decision, like you would have wanted to get ahead of this one. Like you would have wanted to like, ah, we should go do some BD deal with them. Like, let's figure this out. And I was like, nope, none of that felt right. It's not going to work. Let's just play this out and see how it plays out.

• 44:34Speaker 00

  And I don't think there was any other path to pulling this off than the one we took. But you could have also never like architected this path. It was just building something great for customers. And when it mattered, those customers came and defended the access that they had.

• 44:47Harry Stebbings?

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

• 44:50Speaker 00

  There was no excuse from a customer standpoint, right? Like it was all in fighting between businesses.

• 44:56Harry Stebbings?

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

• 45:12Speaker 00

  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 when we started the company, we just bought everything off the shelf, right? And over time, we're ripping components out and ripping components out. But by early 2017, we had rebuilt and ripped out all of the underlying tech that powered the pharmacy. And we had this moment where like picked our heads up and we're like, what should we do now that we've done that, right? Almost all our resources have been focused on that for the longest time. And we had this idea of like, could we offer our infrastructure up to other participants, right? So could be another startup that needs to launch a pharmacy experience. Actually, Ro launched on our infrastructure. And as part of that, we were meeting with all the large retailers and other potential customers to build on top of that, right?

• 45:55Speaker 00

  And one of those large retailers went from a very commercial conversation to an acquisitive conversation like relatively quickly.

• 46:02Harry Stebbings?

  How do you know when it's going to an acquisition from a partnership in a normal conversation?

• 46:08Speaker 00

  Yeah, usually when they call and say, hey, could we just buy the company? It's, it's pretty clear. It moved from like a, a commercial. An acquisitive thing. I wasn't reading the tea leaves at the same time, but it was pretty explicit at that point. And I think we looked at where we were and a couple of things had happened. One, like we were now like 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 what our economics were and what it was going to take to build what we really wanted to build. And from that standpoint, like it was going to be pretty capital intensive to scale this thing to the extent that we wanted to, right? Like it was doable, like we could have definitely built an independent company, but it was going to be capital intensive. And then probably more importantly, like when we started to pull back, like it was a very simple vision, which is just make this as easy as possible for consumers. And I think as we started pulling on that string over the years, like we had all these incumbent issues and everything else.

• 46:54Speaker 00

  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 shoppable, like e-commerce experience. And a bunch of stuff falls out of that ultimately reshapes the dynamics. And so the combination of those two things, like the best place to do that is at a large retailer that already exists. And so it was pretty straightforward and we made the decision, assuming that the terms came to a place that made sense, that we would probably sell the company in like the back half of 2017.

• 47:22Harry Stebbings?

  Okay. So you decided that you're going to sell a company in the back half of 2017 and it needs a lot of cash to get it to the scale that you think it can be. There's a process to run. How did you think about running that process? You mentioned there the early interest. I'm sure there was many other interested parties. How did you run that process? And what was that decision-making on ultimate acquirer?

• 47:41Speaker 00

  That same initial kind of retailer that had thought they 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 the lead horse and it was probably the right fit and the best option. And so this is early 2018 and we had, I don't know, six months of runway in the bank or something. And so normally that's when I would have raised around, right? Like you'd raise 18 months, you'd then probably raise when you've got six months of runway left, something like that. And so we had started a fundraising process in January of 18. And then within a few weeks of that going, we got to terms with a potential acquirer and we assumed we were going to sell the company to that acquirer. And 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.

• 48:23Speaker 00

  Like announcing like this thing is done like definitive agreement done and it hits a snitch or it hits a snag and it's gonna get delayed. The whole board thinks we're selling the company in three days. I think we're selling the company in three days. And now it's not gonna be three days. It's gonna be some unknown amount of time. And now instead of having 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've perfectly timed it. I had to tell the board, obviously, as I get a phone call Thursday night, I tell the board on a Friday morning. I picked back up the fundraiser, like I'm flying to San Francisco Monday morning. I'm going to New York on Wednesday. And then maybe I'll go to see if I can get a meeting in Seattle with some other potential acquirer by the end of the week. And that's what I did. So I got on a plane and I went back and met with all the potential funders, not acquirers and told them what happened.

• 49:06Speaker 00

  I thankfully like we'd shared all our numbers in December, January, and we'd beat all those numbers in like April or whatever this was. And that's better than if we had missed them for sure. And it was kind of like, we're up for anything. We'll figure something out here, but we don't have a ton of time. So let's just be creative. Then I had the meeting with the company in Seattle and it was definitely the best pitch in my life. And at that point, I knew we were selling the company to Amazon. Like all of our vision around what to do with pharmacy and how to make it shoppable and all those things, we were just super aligned. And at that point, I knew we were gonna sell the company to Amazon and ultimately we did. And it was a great outcome.

• 49:36Harry Stebbings?

  How do you come to a price? What does that look like in terms of that negotiation process?

• 49:41Speaker 00

  Yeah, it's a dance. By the end, yeah, I sat on the phone and said, I want a billion. And that's definitely what happened. But getting to the first deal was a dance and it was about where the different companies valued, where the investors positions, 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. And so that was more of a dance. By the time I 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. And they hit a billion and we were done.

• 50:09Harry Stebbings?

  When you have a deal like that, and you can tell me if I'm answering too many questions. Is it like a billion and you get the cash? Is it like a billion and earn outs? How do deals get structured?

• 50:19Speaker 00

  So we had three potential buyers. Each structure was different, whether they bought the whole thing or most of the thing, or whether it was all upfront or there's some earn out. And there were varying degrees of those things. But I would say by and large, every deal is gonna have some of the money upfront and some earn out. 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. So I would say like for entrepreneurs, that moment from announcement to close is a relatively stressful period of time.

• 50:46Harry Stebbings?

  It's also weird though, because your friends think you're loaded and you're like, no, no, I don't actually have any money.

• 50:52Speaker 00

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

• 51:03Harry Stebbings?

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

• 51:13Speaker 00

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

• 51:39Harry Stebbings?

  Where were you? Were you at home? Were you in the office? Were you with your wife?

• 51:43Speaker 00

  I actually don't even remember. I don't remember crazily. 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.

• 51:50Harry Stebbings?

  I've heard quite a few people say, bizarre, you're a weird bloke, TJ. I'd be like, I was here, I remember my heart rate, my temperature, but that's why I'm a VC.

• 52:00Speaker 00

  At that point, it was like such a given. It was gonna happen. I don't remember.

• 52:03Harry Stebbings?

  I love that. Can I ask, I've heard people say like, it's kind of a shame. Like TJ's a 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?

• 52:17Speaker 00

  No, I really don't. That might be true. It's not, I'm not saying that's not possible. But when we set out to start PoPak, like, we just wanted to make pharmacy better. That was the ambition. And when we sold the company to Amazon, like, I deeply wanted to build like a shoppable pharmacy experience, and we did that. The thing we built and the work we did at Amazon, 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 and really happy about. And economically, like, I don't ever look back and wish I had kept going. And it could have been so much bigger and so much better. Just super happy with the outcome.

• 52:49Harry Stebbings?

  Two things. We always hear money doesn't make you happy. Money doesn't make you happy. Does money make you happy, TJ?

• 52:55Speaker 00

  Time makes me really happy and money provides you a lot of extra time. So I'm pretty happy. It's hard to parse, like, when I started. The company had no family, no kids, none of that. And now I've got three little kids and an amazing family and super happy with where we live. So I'm super happy. I don't know how much of it's the money or the time or neither. And it's just the family, but I'm quite happy at the moment. No regrets for me.

• 53:16Harry Stebbings?

  Can I ask you, what's been the most lavish purchase since TJ?

• 53:19Speaker 00

  I had extensive taste, but I'm not going to go through a laundry list of things I bought. Probably the most, technically the most lavish is we bought this, we bought like a 12 acre farm in the middle of Park City, which we're building. My wife is building like an amazing farm here. We're going to have a bunch of animals and a bunch of fresh produce in the backyard. And it's a practical, but quite lavish purchase and one that I'm excited to to build.

• 53:37Harry Stebbings?

  When you look at your Twitter, it seems like Amazon maybe wasn't what it seemed. Is that an unfair response? And do you think your negativity online fairly reflects the experience?

• 53:48Speaker 00

  I think the negativity is probably a little overstated. When we sold the company to Amazon, my goal was to build and launch pharmacy on dot com and make all those like very non-data driven, like nuanced decisions, like intuitive decisions to get that thing off the ground and then hand it off to an Amazonian that knows how to turn the crank and really build like a scaled business in a way that I honestly just don't. I don't think Amazon is any worse than any other big company, but it is a big company. And it comes with all the trappings of a big company. And I think for me, given like the very beginning of our conversation where it was like, do you like stability? And are you comfortable with authority? And do you like predictableness or not? I am so far on this extreme that honestly, like, I don't think I would be super successful at any big company. I'm a startup guy.

• 54:30Speaker 00

  And so, no, like functionally thrilled it'll be built and Amazon is a big company.

• 54:34Harry Stebbings?

  So a quick fire round, following what we just said there, what's the single best thing about being in Amazon?

• 54:40Speaker 00

  Exactly how happy it's made me to now not be at Amazon.

• 54:44Harry Stebbings?

  I love that one. Listen, next one, what do others not know to be true?

• 54:49Speaker 00

  That I think that customers are ultimately going to shop healthcare like they shop everything else. And that until that happens, like healthcare is going to remain as fucked up as it is right now.

• 54:57Harry Stebbings?

  What's the biggest advice on effective board management?

• 55:00Speaker 00

  I think just be a normal human, create normal relationships with your investors and your board members. Text them, call them when things are good and bad, get breakfast, make David Tish buy you sushi. Like do all the things that you do and create relationships in the rest of your life. With your investors and your board members and it'll probably be fine.

• 55:15Harry Stebbings?

  What's the strongest belief you had, which turned out to be wrong?

• 55:19Speaker 00

  I used to think that people could like float between different types of companies and jobs pretty seamlessly and it would be fine. And per some of the earlier conversations, I think that like you should really optimize through what your personality is best at. The likelihood that you're both really successful and really happy in a huge company and then also overly successful and really happy in a startup is unlikely. And so I think I've changed my tune on that one.

• 55:40Harry Stebbings?

  Who's the single most impactful angel of the PillPack journey?

• 55:44Speaker 00

  I think you gotta give it to the first person that ever bet on you, which for us is Katie Ray and Zentu. And Katie was the one that was running Techstars and we got into Techstars, like she bet on us before anybody else. And so it's hard for me to not give that, that kudos to Katie.

• 55:58Harry Stebbings?

  What would you most like to change about the world of venture?

• 56:00Speaker 00

  I'd really like for 20-somethings that have never built a business to stop like pontificating on how to build a business. Just kidding.

• 56:07Harry Stebbings?

  TJ, my friend.

• 56:07Speaker 00

  My, my son's name is Harry. It's named after you. I love you. I'm just kidding.

• 56:11Harry Stebbings?

  I, I love it. This is what people think about me and I'm like, do you know what TJ? And it is the most frustrating thing for me, which is like people who think that, which I totally understand from the outside. But it's like, you don't see two 10 million a year revenue businesses with 80% margins.

• 56:26Speaker 00

  I don't know. I bought some really terrible business with 20% margins. So you're better than me. Yeah.

• 56:31Harry Stebbings?

  I'm not saying that, but it's, it's perception and reality and tell me, my friend, you can have one board member. Who's the best and why them?

• 56:39Speaker 00

  I gotta give that one to Elliot Cohen. He was definitely my best board member. We were always perfectly aligned.

• 56:44Harry Stebbings?

  What about another board member that's not a founder?

• 56:47Speaker 00

  Right. This is rapid fire. There's not time for, to go deep on any of these questions here.

• 56:51Harry Stebbings?

  Don't tell me what to go deep on in my rapid fire. Oh, I love it. Okay. You know what? I'm going to let you off on that. We're going to do TJ in 2033.

• 57:00Speaker 00

  Hopefully get the opportunity to keep being involved in building things that make people's lives better. I think it was super rewarding to build PillPack. I'm still young. It got a lot more in me. So hopefully still building and helping build things that, that make people's lives better.

• 57:12Harry Stebbings?

  TJ, I love this. You sass master. That is brilliant. Honestly, I love doing this. I'm so touched that you, you chose to do this as your first thing, speaking publicly. Seriously, it really meant a lot to me. And so thank you so much, my friend.

• 57:26Speaker 00

  Of course. It was my pleasure.

• 57:29Harry Stebbings?

  I mean, the sass at the end there, can you believe the cheek? I absolutely love that with TJ. What a fantastic guest to have on the show. Huge thanks to him for joining what was his first interview in many years. If you want to see more from us behind the scenes, of course you can on YouTube by searching for 20 VC. But before we leave you today, this episode is brought to you by Tegus, the go to research destination for bold investing. Tegus curates expert insights, analysis and financial data to give you powerful perspective for your investment decisions. With lightning fast access to over 60,000 transcripts across 20,000 companies, you'll discover a wealth of unique insights to fuel your fundamental research, gain perspectives, synthesize information, model outcomes and ultimately make better decisions. All on Tegus.

• 58:13Harry Stebbings?

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• 58:58Harry Stebbings?

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• 59:40Harry Stebbings?

  As always, I so appreciate your support and I cannot wait to bring you an incredible 20 sales episode on Wednesday with Rich Liu at Everlaw.