- VCs are lurking around what some consider the next frontier of the delivery sector: pharmaceuticals.
- A regulatory change means a bevy of startups offering prescription delivery has emerged in Germany.
- This has opened up a new market for people to get medicines without leaving their homes.
Startups offering to deliver everything from groceries to iPhones have lured billions of dollars from investors.
Now, venture capital firms are lurking around what some consider the next frontier of the burgeoning sector: pharmaceuticals.
A bevy of new pharma delivery startups has emerged in Germany looking to take advantage of a legislative change that has enabled e-prescriptions. The switch means that Germans no longer need to physically pick up their medicines and can instead have drugs delivered directly to their door.
Unlike their rapid-grocery peers, these new startups are not seeking to offer drugs within 10 minutes delivered from a dark store. Instead, they work directly with local pharmacies to offer their customers the service.
German pharmacies are not allowed to be run as companies in quite the same way as in the UK or US. Individual qualified pharmacists can run up to four branches within a set geographic area, meaning chains like CVS can’t operate the same model in the country, according to Lukas Pieczonka, cofounder of Berlin-based pharmacy delivery startup Mayd.
As a result, individual pharmacies are now in a position to benefit from guaranteed demand from consumers. It’s estimated that some 750 million prescriptions are written by practitioners in Germany each year but lawmakers are keen to avoid a situation where potentially sick people are forced to travel to pick up medicines.
In an effort to digitize its healthcare system, which previously prevented the delivery of prescriptions to patients from pharmacies, the country has introduced e-prescriptions which will allow patients to send their medical orders to pharmacies from an app, have a consultation and have them delivered.
Cure, another Berlin-based startup that aims to take advantage of e-prescriptions, has raised $5 million in a round backed by San Francisco firm Craft Ventures. The company is founded and backed by a series of former mobility executives including ex-Lime and Voi employee Noa Khamallah.
“The COVID-19 pandemic has shown us that ‘quick commerce’ can be a real asset,” Cure’s cofounder Ali El-Ali told Insider. “Previously everyone with a fever, a cough and a high risk of infection had to leave their home and get in touch with people, the pharmaceutical delivery service now allows the weakest members of society, in particular, to be protected from risky contagions.”
Berlin is also home to First A, which is backed by Jörg Kattner and Felix Chrobog, a founder and former COO respectively of Coatue-backed grocery startup Gorillas, who have both subsequently left the business, as first reported by Insider.
Importantly, this is a much more asset-lite delivery market. Pharmacies store medicines meaning startups don’t need to own or rent warehousing space or fulfillment centers in the same way as grocery companies while the relative margin on some medicines is higher than fresh produce, for example.
As a result, despite the rush from a number of companies to enter the space and win over customers, it’s not generally seen as an area where only one player can succeed per geography.
“This is not a winner-takes-it all-market but first movers who play their cards right have an advantage,” El-Ali added.
Paul Murphy, the partner at Lightspeed Venture Partners who led Mayd’s recent $34 million Series A said the company could build a $10 billion or more valued business in Germany alone, even if other European countries followed suit.
Efforts to deliver pharmaceuticals have already been made beyond Germany. In the US, Amazon has already begun offering to deliver prescriptions while in Ireland, trials to drop them to the door via drone has taken place.