Ecommerce has been growing exponentially, and today, online marketplaces have become an integral part of how people are shopping. The digital environment offers umpteen benefits. It is always convenient to shop from the comfort of one’s home, choose from thousands of products and pay without any hassle, through a few clicks. So, it is not surprising that people are buying everything online, including medicines, once the undisputed domain of neighbourhood medicine shops. Although these companies have entered the Indian market only a few years ago, e-pharmacy seems to be gaining momentum.
As reported by Inc42 Plus, India’s e-health market is expected to reach $10.6 Bn by 2025. Furthermore, the outbreak of the Covid-19 pandemic has pushed people to ditch their local chemists and shop online, triggering the growth of e-pharmacy as never before, and the future looks extremely promising.
Some of the household names in this segment include NetMeds, PharmEasy, Practo and 1mg. Traditional pharmacies such as Apollo, Max Healthcare have also stepped into the digital space, giving a much-needed boost to the country’s healthcare sector.
Market giants have also shown interest in the segment, with Reliance Retail acquiring a majority stake in NetMeds in August 2020 and Amazon launching its own online pharmacy (Amazon Pharmacy) and prescription medicine delivery services last August. 1mg, an online pharmacy started in 2015, is reportedly in talks with Indian and global private investment firms to raise $100 Mn to expand and fend off the competition.
The CFO’s Journey Through Recession And Pandemic
Mayank Gupta, an industry veteran with two decades of experience, joined 1mg in 2020 as the chief financial officer after working in the ecommerce space and with GE for more than a decade. Talking about his career trajectory, Gupta recounts the impact he created in his earlier ventures. “With GE, I did five different stints in India and abroad. As part of our Global Leadership Program, I physically worked in 8-10 countries. My last role was with another startup in the ecommerce logistics space. I helped turn it around and the company saw 3x-4x growth.”
Gupta also talks about 2010, when Wall Street was driving financial decisions globally, and how technology has changed the dynamics since then. Coincidentally, it was also the year when he started his journey as the CFO of GE Transportation. Over the years, he also served as the CFO of GE Aviation and GE Oil and Gas.
The finance professional also discusses the impact of Covid-19 on the sector and seems optimistic about the Indian economy and the industry in spite of a tough 2020. “Given there is a lot of resilience and the core still remains solid, the recession, or whatever you call the current situation, is expected to rebound very fast. At least, all growth forecasts say so. Therefore, by 2022 or after that, a 10%+ growth rate is expected.” According to him, things are starting to look normal and the startup (1mg) is in a high growth trajectory.
Having handled finance operations across industry sectors, Gupta is fully aware of the evolving role of a CFO at a tech-focussed startup. “As the CFO of a mature business, one will have to focus on cash flow, adopting the right path, return on the capital employed, return on equity, leadership development, and growth and profitability. These are the key areas, and you are not spending a lot of time in building processes. Moreover, 15-18% growth is relatively modest for a mature business”
He uses the analogy of large ship-versus-speedboats to explain it better, as in startups, at least 50-70% growth is expected. “In a startup, we may have a morning meeting and we make a decision. By afternoon, it goes to coding and by evening, it is live on our product. The speed is immense. So, the impact you can drive is huge,” he adds.
Why Setting Priorities Is Crucial
For Gupta, decision-making and setting priorities are the key challenges that a CFO has to face in a startup. CFOs in a multinational company have to lay out the top 10 priorities. But a startup has endless possibilities and hence, the decision is around what to do versus what not to do.
“So, as a CFO, I think the challenges become different because we are driving growth. We are probably trying to get profitability, the cash flow is still kind of a later thing, at a maturity stage. We still have to get there. And then, picking up the processes since a lot of work gets done as growth happens and the company expands.. You are continuously trying to upgrade your processes, ERP systems, capabilities and overall risk management,” he adds.
Quizzed about the evolving role of a CFO, Gupta says that the role is no longer limited to accounts, payments and taxation. He is also involved in market expansion, product expansion, geographic expansion and driving growth. He believes that at the end of the day, a CFO has to make sure that the company keeps growing and maturing with time.
Today’s CFOs Are Digitally Savvy
Gupta thinks technology has played a significant role in the evolution of a CFO from a finance head to a business partner. “I think automation and some of the technology tools, bots and data analytics are helping us make decisions and transition faster,” he says, adding that CFOs in tech-focussed startups should take that extra step to understand the product and the technology.
A functional knowledge of the product life cycle and understanding the core propositions of the company can help a CFO plan the year ahead more efficiently. “As an integral part of the strategic road map, a CFO must take part in active discussions around prioritising because there are too many things, and one needs to allocate the capital in a resourceful way, both from growth and profitability standpoints.”
Citing the example of the subscription programmes at 1mg, Gupta highlights the importance of V1.0, or the beta version, how the inputs derived can help identify the areas that need further work and how growth and profitability analyses can help improve those offerings.
This will also help in building pricing and marketing strategies, he says. “I think there is a continuous kind of input trailback, telling us which cohorts drive the highest growth and profitability and how we should keep growing customers and the company on the curve of driving better outcomes (for consumers) and better impact (for the company).” This is especially important as 1mg has recently started a monthly review system to share insights and check metrics so that the company can set priorities, focus on sharper decision-making and drive better outcomes.
Asked about the investment road map of 1mg, Gupta says that the startup aspires to get listed in the long term, just like any other company. He also thinks that a CFO plays a critical role when a company gets listed. In fact, a CFO acts as a custodian of investors, helps them with the right capital allocation and also helps the company stay on the right track. However, it is too early to talk about an IPO as the startup is now focussing growth and profitability, he adds.
“There are a lot of macro tailwinds for startups. So, let us think from an investor’s perspective who is keen on financial outcomes. If growth is solved, how do we drive profitability? I think one key criterion is process robustness — how to have the right processes in place and the talent to drive them, how to automate the processes and ensure their repeatability and so on. It is also important to have a corporate governance framework that must be implemented. So, we are in process to put in place risk assessments, internal audits and a compliance framework. We also make sure that the management and the company remain accountable to what we have committed,” he explains.
According to Gupta, involving shareholders in strategic decisions should work out well. “Although most investors let the founders and the management run the company, we try to proactively reach out to our stakeholders or investors and ask for guidance if we are struggling in any area or doing something new to leverage their network. We ask them to let us know what else we can do, based on their experience or what took place in other portfolio companies. We believe that is a positive relationship. We have a very broad strategic alignment and whenever there are gaps, or we feel that we need some help, we reach out proactively. So that partnership works very, very well.”
Pillars For Efficient Working: Trust And Honesty
The veteran finance professional with two decades of experience firmly suggests keeping an honest and transparent relationship with the stakeholders without surprises. Building a continuous dialogue with the board and keeping board members updated have also worked in his favour. Gupta says that a CFO acts as a sounding board for the company. So, she/he must have a trustworthy relationship with the CEO.
Given that a CFO’s vision is aligned with the company, it is also important to act as an independent advisor and show the mirror to the company, if needed. Gupta feels that the key to strike this balance lies in being original and honest while doing things to enable the growth factor, especially in a tech-focussed startup where most decisions are data-driven.
“A CFO’s role involves initiating a financial debate about the outcome of the decision, implementing a data-driven decision and also deriving insights.I have seen most founders and CEOs stay aligned because they are financially well-aligned. But generally, in a long-term journey, we should build a very good personal relationship with the CEOs and the founders, understand their interest, understand their points of view and where they are coming from. And finally, we have to fully support whatever has been decided through mutual discussions.”