What is the first thing that comes to your mind when I say Varanasi. Hold it. It can be everything but it won’t be a health tech acquisition. But that’s what Delhi NCR-based 1mg saw. Earlier this month, it acquired a small angel-funded company called Dawailelo from the holy city.
If that piques your interest, the first time Arpit Sarin, the co-founder of Dawailelo heard about the potential interest in his company he was stunned. The offer was out of the blue. It all started when Sarin met Prashant Tandon, co-founder and CEO of 1mg at a startup conference in Delhi in January 2017. At the time Sarin was making the transition of shifting base from Varanasi to Delhi. Sarin and Tandon exchanged pleasantries and moved on. But they kept bumping into each other and the more they met, the more Tandon was impressed by him. Soon after 1mg made an offer.
This is not a one-off. 1mg has been on a slew of acquisitions. It has bought four startups across India over the last two years:
“Sometimes you grow organically. But sometimes when you need to make up market share, you need to take an aggressive mergers and acquisition route,” says a highly placed executive close to the company. He asked not to be identified as he was not the official spokesperson for the company.
It is easy to ignore digital health in the glitz of e-commerce and ride-hailing. According to a 2015 report, the domestic pharma retail market grew to Rs 90,000 crore ($14 billion). Wait, yes, this is organised retail, pharmacy market, which means it counts druggists in every neighbourhood and most of them have no presence on the web. Hence, if you talk to 1mg they claim that the market is currently valued at Rs 110,000 crore ($17 billion) and set to grow every year. Because a very small portion is online. The assumption is that there will be a watershed moment when most of these pharmacies will tie up with online marketplaces and become a source of supply. It doesn’t stop here. Some online pharmacies send licensed experts to collect samples of blood and the like at home, others help book appointments with specialist doctors to get second opinions. There is a lot of money to be made and there is a huge market with different strands that are still to be organised.
Venture capital investors can see the opportunity. In 2017, according to Tracxn, the sector has raised over $250 million (approximately Rs 1,600 crore) already. Compared to 2015, during the heydays of fundraising, there were 72 deals, which raised $317.2 million (Rs 2,300 crore approximately). 1mg by itself has raised close to $45 million (Rs 290 crore approximately).