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Gazi Raffan on how BanglaMeds got acquired by Chaldal, Chaldal’s pharmacy ambition, and business of online pharmacy (Part I)

Gazi Raffan is the founder and CEO of BanglaMeds, a fully-owned subsidiary of Chaldal. Founded in 2017, BanglaMeds is one of the earliest players in the vertical. The company was fully acquired by Chaldal in 2021, Bangladesh’s largest online grocery startup, in a cash and stock deal. Mr. Raffan joined Chaldal as the CEO of BanglaMeds after the deal. BanglaMeds continues to operate as a fully-owned independent subsidiary of Chaldal. 

In this fascinating interview with Mr. Raffan, we talk about the acquisition of BanglaMeds by Chaldal, Chaldal’s online medicine delivery ambition, the secrets of the online pharmacy business, and much more. 

This was a much longer interview, so we had to divide it into two parts. This is part one. Return mid-next week for the final installment. Enjoy! 

Ruhul Kader: Thank you for agreeing to this interview. BanglaMeds was founded in 2017. You had an excellent run between 2019 and 2020 and the following year you got acquired by Chaldal. Can you tell us more about your acquisition by Chaldal and the journey that led up to that? 

Gazi Raffan: I have known Waseem Alim bhai since 2019. We met once and were in touch. I first spoke with him about BanglaMeds in January 2020 but we hadn’t discussed acquisition. In November 2020, Waseem bhai reached out to tell me that Chaldal was thinking about starting a pharmacy section and was considering acquiring an existing company instead of doing it from scratch. 

Acquisition is a common thing in almost all prominent markets including Silicon Valley and India. Startups routinely get acquired by the bigger players. But it was and is not the case in our market yet. I appreciate the fact that Waseem bhai thought like that. 

Chaldal could have easily launched an online medicine business, which most companies usually do in Bangladesh. But Waseem bhai not only thought about finding a better strategic approach to doing it, but also he thought about what would be best for the entire startup ecosystem. 

We started the discussion in 2020 and the acquisition was eventually finalized in November 2021. We were paid in cash and Chaldal shares. 

I can proudly say that BanglaMeds is one of the first tech companies in Bangladesh that have had a complete exit, which means every single investor got a positive return on their investment.

Every startup founder dreams of a meaningful exit. We have been lucky to make it happen at this stage of our ecosystem. The entire credit goes to our team for pulling it off.

Ruhul: Can you tell us more about behind the scene events such as the conversation and negotiation you had and the whole experience of it? 

Gazi Raffan: As I mentioned before, Chaldal was considering starting an online pharmacy and they thought that acquiring BanglaMeds made better sense strategically than doing it from the scratch. 

Waseem bhai wanted to set a precedent in the industry and start a culture of acquisition in Bangladesh, which would benefit the overall startup ecosystem of Bangladesh. 

Moreover, BanglaMeds has a pharmacy license. The process of getting a pharmacy license is quite complex and takes time. It made sense from that perspective for Chaldal as well. 

Gazi Raffan: Waseem bhai once told me, “I do not want to kill the entrepreneur in you”. The best thing about the acquisition was that he never pressured me to sell the company or to make any decision. It was a mutual decision. Every decision was made to benefit both parties and create a win-win situation. 

Although getting an online pharmacy license may be difficult, many people are running online pharmacies in Bangladesh. Some are with the proper license and others without it. For Chaldal, it would not have been difficult to navigate the licensing process if they wanted. But Waseem bhai didn’t take advantage of the situation and he guided me instead. 

We collaboratively decided that I would join Chaldal as an employee after the acquisition and run BanglaMeds. So the acquisition ended in a win-win situation for both BanglaMeds and Chaldal.

As I said, I am grateful to our group CEO Waseem Alim bhai for making it happen. This also creates an example for the big players in the market. Several large tech companies have raised good investments. Instead of expanding into every vertical on their own, they should consider buying up smaller players in the market. I believe more of this should happen in the industry. I wish there were more founders like Waseem Alim in Bangladesh. It would not only help these companies successfully expand into a new vertical, but it would also create more opportunities in the market. 

Exits are better for everybody. It is good for the companies that do the acquisition. It is good for the founder because it is viewed as a success for the founder. It is good for the ecosystem because when a founder gets an exit, he will back other founders and it sends a positive signal to the investors. 

Ruhul: You mentioned your business was growing and the pandemic had a positive impact on your business. When did you first start thinking about an exit? How did you make the decision?

Gazi Raffan: We had an excellent growth trajectory. The business was on a high growth path but to get to the next level, we needed an investment of US$10 million. But raising money was difficult. The other option was we could operate slow and steady but then some other online pharmacy would come at some point and take over the industry. The second option was to let somebody else come on board, make the necessary investments and take the company to the next level. 

I love working in BanglaMeds. Every struggle we faced in BanglaMeds, I saw them as a new challenge that I enjoyed taking. For me, the growth of the company was more important than my personal gain. So it was an easy choice when the opportunity presented itself to become part of a bigger company and help BanglaMeds grow.

It has been an excellent decision for us. Now that we are a part of Chaldal, we have access to one million active customers of Chaldal, while in the past this number was only 50,000. It would have taken us another 8-10 years to grow to this user base. So I can already see that it has been the best decision. 

Ruhul: What are some of the lessons you have learned in the process of successfully exiting a company? 

Gazi Raffan: Throughout the four years from 2018 to 2021, there were several situations where BanglaMeds was on the verge of going out of business. There were times when I didn’t have money to pay my vendors and employees. I felt like giving up in many instances. But I kept on working. I believed in my company, myself, and my team.

In 2020, I had no idea where we were going. I just had faith in Allah and the belief in my heart that if I work hard, we will get through it, and help will come. To keep the business afloat, at one point I sold my car. When the money ran out I had to borrow from friends and family. I got married in 2020. Due to the pandemic, we couldn’t have a proper wedding program. I injected all my wedding program money into the company. 

These are the sacrifices a founder has to make. If you are not willing to make these sacrifices, your company will not grow. Now that BanglaMeds has an exit, people come to me and congratulate me. But during the pandemic, when we were getting so many orders but didn’t have the working capital to fund the orders, no one asked how I was funding the business. Everyone saw the business was growing, but no one took a meaningful interest in us. 

However, the good thing is that all my sacrifices paid off in the end. But when I was taking these risks I didn’t know what was going to happen. The lesson is this: keep working hard without the expectation of any return and you will be rewarded immensely. 

Part of BanglaMeds Team
Part of BanglaMeds Team

Ruhul: That’s beautiful. What is BanglaMeds today? Can you give an overview of the company i.e. products/services, operations, team, etc?

Gazi Raffan: BanglaMeds is an online pharmacy from where you can buy prescribed and OTC drugs. Our website is www.chaldal.com/pharmacy. You can buy all types of medicines from our website. Currently, our delivery service is available throughout Dhaka city. However, we are expecting to cover every city and area where Chaldal has a presence.  

In the near future, we plan to launch diagnostics where people will be able to get diagnostics services through us including at-home sample collection for diagnostic tests. This is one of our major goals going forward. 

For now, we want to make authentic medicines accessible to everyone, everywhere in Bangladesh. 

Ruhul: How do your sourcing and logistics work?

Gazi Raffan: We do not buy any medicines from pharmacies. We buy medicines directly from the pharmaceutical companies to ensure the authenticity of the drugs. That is the sourcing part.

We are one of the very few pharmacies where every single order is backed by a prescription. To order any medicine on our platform, you will need a prescription. If you do not have a prescription, one of our BMDC-approved doctors calls you to verify your order. Every order is verified diligently. 

For logistics, we use the entire logistics technology and the manpower of Chaldal. So our merging with Chaldal has resulted in a lot of synergies, especially in technology and logistics. 

We share almost everything with Chaldal including technology, HR, marketing, logistics, etc. But we have a separate team that looks after the operation of BanglaMeds.

Ruhul: You share almost everything with Chaldal. Do you work from within Chaldal or as a separate entity?

Gazi Raffan: Being a pharmacy, we are legally obliged to have a completely separate operation. We are a separate operation and with a separate team of 30 people. Our pharmacy is completely separate from the warehouse of Chaldal and the employees of Chaldal can not enter our pharmacy without any prior permission. In our pharmacy, we strictly maintain hygiene and it is completely different from a grocery warehouse.

Ruhul: Is your PNL separate from Chaldal’s?

Gazi Raffan: Absolutely. Our financial statements are separate from Chaldal’s. Although our PNL is reflected in Chaldal’s PNL, it is maintained separately. We are a separate registered company which is owned by Chaldal.

Ruhul: Can you give us some metrics relevant to the size of the company such as the number of users, number of orders per day, etc?

Gazi Raffan: We have just relaunched our service on Chaldal’s website. So I won’t be able to give you any metrics. We ran our trial for a month and the result was satisfactory. Throughout the past several months, we have rebuilt our technology from scratch and it is not a much better product and the user experience is superb. After fixing bugs for the past few months, we have made the platform live this month. 

Gazi Raffan: However, during the pandemic, we were doing 250-300 orders a day.

Ruhul: What is your business model? How do you generate revenues?

Gazi Raffan: We have the simplest business model in the world. We buy medicines from the manufacturer and then sell them to the customers on a margin. Our unit economics has always been excellent and positive. 

Ruhul: How did you figure out the positive unit economics? Was it so from the beginning? 

Gazi Raffan: Although pharmacy is a somewhat profitable business, in the beginning, our unit economics was not positive. But if you work properly, you can generate positive cash flow in this kind of business.

Ruhul: Before the acquisition by Chaldal, you mentioned you had an excellent growth run. What were some of the things that worked in terms of growth?

Gazi Raffan: As I mentioned earlier, word of mouth has helped us to grow in the early days. Later on, corporate deals and the pandemic were two of the things that helped us achieve a meaningful jump in growth. The early days of the pandemic were a difficult period for us. It was difficult for us to run the business. Many similar companies temporarily stopped their operation. But we did not. We took the challenge and worked hard. Our people faced various challenges including restrictions on movement. But they continued and put their best effort into the company. Several of our people got COVID running the operation. But we kept going. All the hard work eventually paid off.

Success never comes easy. When all other pharmacies halted their operations, we kept running BanglaMeds during the pandemic. I even had to invest money from my own pocket to keep the company afloat during that time. The sacrifice and hard work paid off, the company grew bigger.

Ruhul: How do you reach out to your customers? What channels are you using for growth?

Gazi Raffan: Our primary medium for acquisition has been digital channels until now. We are now working to turn the regular customers of Chaldal into our customers as well. We will initiate our offline acquisitions in the coming months. For now, we are solely focusing on digital channels for customer acquisition. 

Ruhul: What are the challenges for BanglaMeds now?

Gazi Raffan: The two main challenges for BanglaMeds now are educating the market and growth. The problem is that the customers of medicines are not the typical users of e-commerce. The majority of ecommerce users are young people below the age of 40. For medicine, it is the opposite. People usually start buying medicine after the age of 35 and onward. To that end, many of our customers are not typical ecommerce customers. They still prefer offline. So there is a significant learning curve for them, which is a challenge for us. Making older people, who are not tech-savvy, buy from us using our platform is a major challenge for us now. If we can overcome this obstacle, a huge opportunity will open for us.

Ruhul: How do you plan to overcome these challenges?

Gazi Raffan: I once saw a BATA advertisement from the 1940s. They had just started selling shoes in West Bengal. The ad was simple, it said: “Wearing shoes reduces the chances of contracting tetanus.” It was not an ad about BATA. Rather it was an awareness ad. They had to build awareness for wearing shoes and make people understand their importance. We are in a similar position today with the online pharmacy. We have to educate people and create awareness and make people understand the convenience of online pharmacies. It will take time but I believe the days when online pharmacies will be a mainstream thing is not far if we can execute well on our plans. 

Ruhul: There are a couple of online pharmacies in the market. As the market grows, more investment will happen and there will be more competition. How do you see the competition? How do you plan to respond to competitive pressure once that happens? 

Gazi Raffan: Investment and competition are proof that the market is big and has opportunities. In other words, when an investor invests in a company, it proves that the investor believes that the company can become profitable and grow bigger. But the growth of the market depends on multiple things in the market. One of them of course is the number of companies in that vertical. 

The current retail pharmaceutical industry is valued at $4 billion. According to my estimation, as per the current market size of the online retail pharmaceutical market, there can be at least 3 more companies in the vertical.

I welcome competition. Because competition does several things: it keeps you on your toes and helps improve the quality of the service, it increases the value of the market, it creates awareness and helps grow the market. The stage we are now in Bangladesh is more so. Because one single player will not be able to create all the awareness. 

The next question is whether all the players are following the regulations and have licenses. Those who do not have a license should not be allowed to operate. Because regulations are important and only those who have worked hard to get a license should get the opportunity of doing business in this market. There should be a level playing field.

Ruhul: How big is the market of online pharmacies? What are the challenges and opportunities in the vertical?

Gazi Raffan: While overall retail pharmacy is a huge market, online is still a pretty small market. But in India, 5% of the retail pharmaceutical industry is owned by online pharmacies. So we can expect the same to happen within the next few years. By 2024, the online retail pharmaceutical industry will be approximately worth between $150 to $250 million. But this growth will depend on market awareness and technology penetration. 

Ruhul: What are your plans for BanglaMeds for the next 5-6 years?

Gazi Raffan: For the next five years, we plan to make our service available all over the country so that anyone from anywhere in Bangladesh can order and get authentic medicine delivered within 24 hours.

I have heard stories where people died due to not finding the right medicine on time. I have heard stories where people took insulin for a month, only to discover later that it was saline sold as insulin at the same price as the real insulin. Our health sector, especially outside Dhaka, is plagued with problems. These problems are the very things that I wanted to find solutions for when I started BanglaMeds.

We want to make authentic medicine available for our people, no matter where they are. I am not saying that BanglaMeds is a non-profit organization. But sometimes even when you are paying the full price of authentic medicine, you might not get it. We want to change that.

And then we want to expand into a few more verticals such as diagnostics and so on in the coming days. 

Ruhul: 3 things people do not understand about online pharmacies. 

Gazi Raffan: The first misconception among people about online pharmacies is that they think when it comes to selling medicines online there is complete negligence of rules and regulations. If you search on Facebook, you will see many Facebook pages that sell medicines. They do not have any pharmacy let alone drug licenses. People think online pharmacies are like those Facebook pages, without any regulations, which is not true. We are a fully compliant online pharmacy. There are a few other players who operate legally with licenses and all the permission.  

Second, people think not much technology is required to run an online pharmacy. But this is not true. It is a highly technology-dependent business. The better the technology the better you will be able to serve your customers better and grow your business.

Third, people do not understand the importance of logistics in this business. There are online pharmacies that deliver orders within 24 hours. Though it is not an emergency delivery service, it is an on-demand express delivery service. To provide this service, you need a top-class logistics infrastructure.

If you can not combine all three, it will be very difficult for you to run an online pharmacy.

Finally, it is a capital-intensive business. You need a huge capital for the inventory. You need a lot of cash to run a business in this vertical.

Ruhul: What is at the heart of an online medicine delivery business, which you think is a must for running an online pharmacy?

Gazi Raffan: The first important thing is to follow the guidelines of DGDA.

Second, to maintain cleanliness and hygiene. The medicines have to be packaged in a completely sanitized environment. 

Whenever I see a new online pharmacy, I try out their service. In most cases, I have seen that they go for a similar model as food delivery, where a delivery guy picks up medicines from a physical pharmacy and delivers it to the customers. When it comes to selling medicines online, you need to have your inventory to store the medicines. Many newcomers in this market do not know about these rules. As I said before, there should be a level playing field. If someone wants to sell medicines online, they should follow the rules and regulations. Only this way will the industry prosper.

Ruhul: This was the last question about BanglaMeds and online pharmacies. Anything else that you’d like to add?

Gazi Raffan: Healthcare is a sensitive service. You need to have the dedication to serve people to do business in healthcare. I sometimes deliver medicines myself when there is an emergency and no delivery man is available. The mentality to serve others has to be the core of your business. Otherwise, your business will not grow. I am not saying to open a non-profit organization to serve people. People respect doctors because they are serving people. Doctors are one of the highest-paid people in this society and they are respected for their dedication. You can serve people through your business and you have to have that mentality. You need to have the goal to serve people in a way so that they benefit from your service in the long run. If you have that mindset, you will win in the long run. 

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