Last fortnight, health tech upstart Practo released Practo Insights showing growth in search queries,  and how healthcare in India is evolving. 

One Plus One Makes Dreams

Like many others, Practo is a case of necessity birthing innovation. 

Back in 2008, when Shashank ND’s father needed a knee surgery, they finalized a specialist in the US. The doctor wanted to check the medical records before giving his opinion; however there was no easy and secure way to get the reports and prescriptions and send them across.

The incident triggered Shashank to discuss it with his friend Abhinav Lal while they were final year computer engineering students at National Institute of Technology, Surathkal in Karnataka.

With the belief that there should be a common platform where patients can write reviews about doctors and help other patients, Shashank & Abhinav setup Naabo Medical Solutions in Bengaluru and started working on their first product.

The two engineering yet-to-graduates called it Turbodoc.

After a gruelling 18-months of looking into every intricate detail to map the idea with their vision, the company launched a business to business (B2B) software service management that gives doctors the ability to organize appointment schedules, track past medical records, provide e-prescriptions and billings. 

In a time pre-internet, when it would be difficult to get anyone online, the young upstart was trying to get doctors online. Doctors, who didn’t have enough time to handle the huge patient load that they had, would need to be convinced to use software. 

Turbodoc hoped that they would get doctors’ time by helping them save time. 

Turbodoc started with being a cost efficient cloud-based healthcare Software-as-a-Service (SaaS) platform (HSP) to deliver healthcare information services with high clinical value and usability.  By May 2009, it had closed its first sale to a doctor in Bangalore. In late 2010, the company rebranded Turbdoc to Practo. 

Practo was ready to disrupt healthcare by making clinic visits cashless, paperless and painless.

Building a Profile of the Market

Practo sought to address the largest market in India’s healthcare industry, one outside the world of Apollo’s.

This market consisted of independent health care practitioners and clinics that are spread across not just the major cities but also the smaller towns in India. These doctors are used to functioning with loads of files and just a receptionist and an assistant. The market was wrought with inefficiencies. 

Large, inefficient, disorganized, as many AJVC readers know, is a recipe for disruption. Practo provided them with an end-to-end practice management software, that electronically managed their appointments, prescriptions, billings, and patient medical records.

It was no surprise then that it received wide acceptance quite quickly and grew exponentially. 

In 2011, with just 2 years of operation, it was already servicing 500 doctors and 500,000 patients. Practo’s war stories tell that the startup functioned out of the co-founders’ house for the first two years with a team of 10 core employees.  

One of the challenges it faced initially was on-boarding famous doctors who were too comfortable with their old systems. However, Practo had a large enough market even outside these top doctors. With India’s low doctor patient ratio, every doctor tends to be oversubscribed and is likely to find Practo’s service compelling.

Practo started out with 4 different plans for the clinics, including a free version with limited features. As a B2B platform, its services were free for patients, but doctors were charged Rs 700 ($10) per month to list on the platform. 

In over a year, the number of doctors associated with it grew 16x to reach 8,000. By 2012, it had serviced over 3MM patients and was managing 10,000 appointments per day.  The rapid adoption of Practo’s platform among doctors led it to raise ~$4MM in a Series A. 

The company was ready to scale, long before the internet became ubiquitous in India. The age in which the startup grew would become influential in its strategy in the future. 

But before that, it would go through a rollercoaster of massive scale. 

Consult Doctors For Good Business Health

While Practo was offering an incredibly useful product, it would need to sell it to more than 200K+ clinics that were all largely offline. 

Contrary to popular advice, Practo adopted a fleet-on-street model to sell its platform to doctors.  The team was forced to do so as it was difficult to sell software over a phone call to private doctors and small clinics who were already overloaded with work. 

Though the FoS model usually results in exorbitant marketing costs and is regarded as a graveyard for an early-stage startup, it worked well for Practo as it succeeded in getting early adopters who then served as its salesmen by recommending the product within the ecosystem. 

In the same year, they started working on a B2C product, a doctor discovery and appointment booking platform for consumers.

Practo Search, its B2C offering, coupled with Practo Ray, as a search engine to make the process even less convoluted. With Practo Ray getting doctors to onboard, Practo Search would allow patients to discover these very doctors. 

Given the lack of data on independent doctors, the company sent a team of ground staff who would visit every street and collect information. Mapping out every doctor and clinic in just Bangalore took them 4 months.

Sending out ground staff to rigorously collect detailed information about the doctors they chose to work with was a hurdle that was either make or break for his campaign. 

The company’s adamance on working only with “genuine” doctors made the process even harder but in return it meant that people would be able to trust everything posted on the platform. Refusing to use third-party information on medical conditions proved to be the hallmark of the company, as it resulted in building trustworthy listings. 

With this database, it built a proprietary algorithm that would return a ranking of doctors, based on a host of  factors such as location, specialty, patient feedback, in response to a consumer search query. 

By 2013, it had expanded to 6 major cities in India. It also went global by expanding into Singapore with 10,000+ doctors and 7.5 million unique patients registered with Practo Ray. In Singapore, it became the largest online clinic management software by market share, in just less than 2 years of its launch.

The consumer facing discovery portal saw 30,000 appointments booked on it every month, with traffic growing by 24% MoM.  The combination of B2C and B2B proved to be a great mix, as the two sided marketplace began showing network effects. More patients would help acquire more clinics, and vice versa. 

But how was Practo making money?

Reach for Money

The core of Practo’s strategy is selling a platform to clinics, and it is key to note that the patient is “incidental” from a revenue standpoint. 

Practo used software as a Trojan horse to enter clinics, and allow doctors to list. This allowed the company to operate as a two sided match-maker, helping clinics and patients find each other.

Small clinics would see two problems being solved, efficiency and visibility. The startup would therefore charge for both these, software and premium listings. The company would create Practo Ray for software, and Practo Reach as its ad product. 

You might wonder why Practo would not be big on commissions, and here’s where its strategy would be clever.

Using the feet on street model, Practo would be getting into clinics. Solving the inefficiency for the clinics would help make Practo stick. As doctors got more used to Practo, they were less likely to leave Practo. The more they used Practo, the more detailed their data would get. For a business where historical data is critical, as a patient’s journey depends on it, this would make Practo indispensable.

If you thought Facebook is hard to leave because of your data, think about Practo.

Due to this, even if Practo spent a lot on acquiring these clinics, it would acquire these customers for long. In classic SaaS style, the clinics would have a high lifetime value (LTV), which could justify the customer acquisition cost (CAC). For example, if a clinic stayed for 12 months on a 999 INR plan, the lifetime value would be 12K INR, and the CAC would have to be less than this.

Platforms like these also suffer from “customer leakage”, where patients who found doctors would stop using Practo to find the doctor. Unlike Uber, where you don’t care about who the driver is and will not get his number for all your rides, on Practo you definitely do. It is this very reason Practo never charged the patient, only the business.

In fact, Practo converted a weakness to a strength.

By getting patients on the platform, Practo would attract clinics to list or use their platform. Instead of relying solely on feet on street for acquisition, this demand side network would attract more clinics. 

By 2015, Practo would be ready to explode.

Instant Scale

Practo would end up raising $120MM in quick succession in 2015, to build on its rapidly scaling platform.

2015, as AJVC readers would remember, was the funding glut that would precede the equally painful winter in 2016. By 2015, Practo had more than 10K doctors, 10MM patient records, 7.5MM unique patients and 7MM appointments made every year. 

It launched in Malaysia and Brazil by 2016, and made a spate of acquisitions due to its massive warchest. It would acquire competitors (Qikwell), platforms (FitHo), data analytics firms (Enlightiks). All these were expected to help Practo consolidate its position as the healthtech platform of the country. 

Driven by all this activity, Practo would become a poster boy for Indian startups.

It would become a case study for AWS, talking about how it used AWS as its traffic grew 60x. It planned to expand to 100 cities. It hired senior leadership to help grow the startup. 

Practo realised that the frequency of users using the platform was quite low, given an average person falls ill a few times(<=2) a year only.It would enter e-commerce and start medicine delivery, much earlier than 1mg became a more well known name as an e-pharmacy.  It decided to expand its offerings and venture into chatting with doctors.  

Practo seemed to be on top of the world, and was riding the 2016 drought by snapping up distressed companies.

It began 2017 very well, closing another $55MM of funding. More than 20% of its largely B2B revenue came from international markets. With 60MM+ users, 200K+ doctors and 10K+ hospitals, the company planned to get into health insurance and get deeper into its own markets.

But the year long self imposed silence prior to its 2017 fundraise would be a guide to its coming future.

A Drive into Trouble?

They say, the death of most large startups is not due to starvation, but indigestion. 

As Practo rapidly expanded into many countries, services, offerings, like most young companies it would start to get spread too thin. There would be unverified  claims that the company would plan to keep raising capital, but was unable to do so. 

Its losses would expand rapidly, growing to $30MM in 2017, from $10MM in 2016. It would be led by the expansion of a team by more than 2x. Revenue would only grow by 20%. 

Within a year of its fundraising, people began to speculate Practo was in trouble. Practo would go unusually quiet after its 2017 fundraise, and not publish information or detailed press releases.

The silence would only add to the noise. 

Practo, though, would quietly try to move towards a more full stack solution in its approach. In 2018, moving it launched Practo Trinity, which works as a one-of-its-kind solution and covers outpatient expenses of users. In parallel, news of employee churn and “fire sales” of its acquisitions would trickle in. 

But the silence always doesn’t imply death by indigestion, but could indicate a business getting to better health.

Ray of Hope

Practo had a history of being quiet in good times, and it was in perceived “bad times”

But the underlying metrics of the company remained robust. It is not necessary to only rely on public news sources to gauge a company’s health, as its metrics show.  

In 2019, it was the most visited healthcare website in the country, attracting more than 16MM+ visitors consistently every month.  Decades of building a brand had resulted in high quality search traffic, and Practo was miles ahead of other upstarts in 1mg in driving organic traffic - more than 85% of its traffic was purely organic. 

For a company so well indexed on Google, it hardly needed to shout about its presence online.

To understand why Practo could afford to not “shout about its presence”, one must rewind to Practo’s business model. Patients were “incidental”, the key was businesses. After having acquired so many clinics, who would remain on Practo if the product remained robust, it needed to keep building a better product to keep them happy.

In essence, Practo is a tech company and not a marketing company.

Its shift to be more quiet and build could also do with reduced fundraising ambitions. What could be interpreted as not being able to raise money, could also be a choice to not raise money. The company, instead of raising equity, has gone the route of venture debt.

While venture capital dilutes founders, as they have to give up equity for capital, debt allows them to simply raise a loan. Equity is the most expensive form of capital, and the founders preferred debt. 

Choosing to go the debt route suggests the founders are confident about their ability to pay it back. 

Other markers such as number of employees, which remain ~1,500 per LinkedIn, were estimated to be costing the company ~$30MM. That the company has not raised massive amounts of capital after 2017 indicates a well established team, enough cash in the bank, and potentially an “uncool” startup strategy.

The strategy of profitability over growth. 

Pro in Profitability

Practo has built a universe of products to enable it get to profitability sooner.

It launched Prime, a free service designed to ensure that a patient has a seamless experience visiting doctors offline. It has been built to ensure that visitors in hospitals, clinics have an exceptional one-of-a-kind experience. Practo joined the league of tech companies offering credit cards with a partnership with RBL Bank. The health-centric credit card, RBL Bank Practo Plus, is powered by Mastercard.

By 2019 end, 200MM people had used Practo, with over 200K doctors on the platform.

Assuming even 50% of these paid the basic INR 999 ($12/month), or $144 annual, it would be a healthy $15MM revenue run rate business. With its many additional services and expansion to massive hospitals, one would expect the revenue would be closer to $30MM. 

As we elaborated upon earlier, one must view Practo as a technology company building software, rather than a marketing company. 

SaaS companies usually get revenue multiples of 10-15x, and that would put Practo at a valuation of $300MM. It is slightly higher than the $250MM it has raised, but as the company continues to sell its high quality product in other markets, the valuation will only rise. 

With their founder meeting the Prime Minister in August just late last year, it is more likely than not that Practo is building quietly. The company’s model allows it to stop running on the growth treadmill to raise capital and stay alive. 

Started more than a decade ago, Practo could be the technology company truly simplifying Indian healthcare.

Written by: Abhinav, Rohan, Saloni and Aviral