Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Building A Medical Safety Net For India | Aniruddha Sen @ Kenko Health
416 Plays2 years ago
In an individual’s lifetime, the majority of medical expenses are incurred on diagnosis, doctor consultation, medicines, etc. Kenko Health is aiming to build the country’s first Health Management Organisation (HMO)- a health insurance plan that focuses on overall patient wellness and preventive healthcare while keeping plan costs low. Listen on to know how Aniruddha, an ISB alumnus and insurance industry veteran, built this health check-up platform with almost no external funding!
Know about:-
- Convincing investors- the biggest challenge
- Financing healthcare expenses, not insuring
- Identifying target market
- Future roadmap
Recommended
Transcript
Introduction to Founder Thesis Podcast
00:00:00
Speaker
Hi, I'm Aniruddha. I'm a co-founder at Canco Health. Take me on a tour. Take me on a tour. This could be a great intro. Hi, I'm Akshay. Hi, this is Aurob. And you are listening to the Founder Thesis Podcast. We meet some of the most celebrated charter founders in the country. And we want to learn how to build a unicorn.
Opportunities in Health Expenses
00:00:31
Speaker
It's fascinating to look at the world from the eyes of an insurer. Something that we would view as an expense, they would view as an opportunity to insure. In India, health insurance is basically a protection against big medical events, things that lead to hospitalisation.
00:00:47
Speaker
The biggest percentage of health care expense is on small events that need you to spend on diagnosis, doctor consultation and medicines, but don't lead to hospitalisation. And if you look at this from the eye of an insurer, then it presents a massive opportunity to ensure.
Disrupting Traditional Insurance
00:01:02
Speaker
And this is exactly the insight which led Aniruddh Sen
00:01:06
Speaker
to quit a well-paying job to start up. Anirudh is an insurance industry veteran, having spent almost a decade in fast-growing insurance companies. He started up Kenko Health with almost no external funding to disrupt traditional health insurance. And soon enough, he had established product-market fit, which led to top VCs like Sequoia Capital backing them. Listen on, as Anirudh tells Akshay Dutt about his journey to disrupt India's health insurance market.
00:01:34
Speaker
I joined a health insurance company called Max Bupa, which was just starting up. It was Anandjit Singh's joint venture with the British insurance called Bupa. And I think I joined that company maybe three, four months before operations started.
Evolving Roles in Digital Insurance
00:01:51
Speaker
Okay. They had already started Max New York Life by that time.
00:01:54
Speaker
Yeah, Max New York Life was much older and this was the health insurance one. And so I had no background in insurance and, but that was not the problem. I mean, the problem that I faced there was that I was coming from a very different landscape environment, high touch, brand.
00:02:12
Speaker
customer conscious, customer sensitive to a place which was utilities, more closer to utilities, where you do things at massive scale. So there's no time to really think about individual people, human beings. So it took a little bit of time to adjust. So I was there with that company for three years. And then I joined another health insurance company, which was also starting out this time. I joined them way early, two years before the company started.
00:02:36
Speaker
But it was in Bombay. So it was an American insurance company called Cigna, which was setting up a joint venture in India with TTK Industries. And that's where I met Deeraj who's the co-founder. Then I was there for about, I think, again, another seven, eight years. And what kind of roles are you doing there? So what I was doing there...
00:02:55
Speaker
My role also evolved as I stayed with the company. So my job initially was to run their internet-based distribution channels. So it was split into two parts. Part one was where we distributed with no intermediary. And then the second part was where we distributed online, but through intermediaries. Like a policy bazaar.
Inception of Kenko Health Idea
00:03:19
Speaker
Policy bazaar. Yeah, policy bazaar was our largest thing partner in that.
00:03:25
Speaker
And then slowly as time went on, a few more pieces were added to the role. So I started handling some part of the tech as well. Within this also, it wasn't just about distribution. So we started doing other aspects of an insurance company's working. So we started doing some underwriting, some operations, et cetera. So it became like a small spin-off within the company itself.
00:03:55
Speaker
This was like a digital transformation team responsible for digitizing the workers. That too was there. So what this was was a separate unit which had its own processes and so on. So which were a little different from the rest of the company for the rest of the company was all paper based. Then from that, we started a digital transformation exercise, which I was also
00:04:21
Speaker
At some point in time, maybe I was hitting that, and then later on, I was part of the team. I think the primary objective of that exercise was to make the company more digitally native in the existing channels of business. So there's something called
00:04:46
Speaker
tied agency agents who sell insurance so the company wasn't chance wasn't really moving away from agency as a mode of distribution but within agency making some processes more digitized i think that that's what the order of the deals yeah so that's the story that's what that's all
00:05:05
Speaker
It was during this stint with Signa TK that the insight for Kenco Health came to you. So tell me about that aha moment, what triggered you to become an entrepreneur?
Kenko Health vs. Traditional Insurance
00:05:20
Speaker
The answer is a little controversial in the sense that both Dhiraj and I, we weren't really junior management. We were in our own spheres, reasonably influential. Now, we had an initial idea. I had a few thoughts around Kenko. In fact, Dhiraj had left by then and I was still in the company and I used to. So the gentleman who was running the company at that time is either American
00:05:47
Speaker
And he and I had worked on a basic concept, which is similar to Kenco, and we had done a whole lot of background work for that. But unfortunately, it couldn't really go anywhere. There was an acquisition in the U.S. that fell through. So Cigna was to be acquired by a much larger company, and that didn't go through. So during that time, the whole matter had to be deliberated upon and then whatever severance.
00:06:17
Speaker
issues had to be resolved. During that time, everything was a limbo and all capex were frozen. As a result of which, that went nowhere. But the idea stuck and Deidaj managed to keep discussing it. I think the catalyst for doing this was that at some point in time, we realized that in our career, we had A, reached a glass ceiling. B, this was not possible inside an already operating company. Two, three times we, at least I made an attempt, but
Bootstrapping Kenko Health
00:06:45
Speaker
One failed to do it. Describe the concept a little to me. What was it that you pitched to internally? So what we said is that for every rupee that gets spent inside a hospital, about four to five rupees gets spent outside the hospital. In any country that you go to around the world, your health financier, whether it's an insurer or something else, is expected to finance all your health expenses.
00:07:15
Speaker
and not discriminate that with only some UF fund up to a certain amount. Second thing is that wherever there's an expense in our business, it's an opportunity. It's a commercial opportunity because you could finance that expense. So if you were a lender, you would see it that way. So if there is $300 billion being spent in OPD by individuals, there's a clear
00:07:38
Speaker
commercial business opportunity. It's just that the mechanics and the optics of it were a little different from what we used to do. You can't just apply the same principles in hospitalization expense to OBD. So they're much smaller. They're not episodic in nature, but they're far more fragmented and spread out over a lifetime. High frequency. Yeah, it's high frequency. It's a little bit more deterministic, not completely random and stochastic.
00:08:07
Speaker
Wait, wait, wait. You need to explain these terms to me. You said it's a little bit more deterministic. OK. So what it means is that, let's say, for example, you have mild diabetes. It doesn't require you to take insulin. But you need oral medication.
00:08:23
Speaker
Now, for the rest of the foreseeable future, you will need oral medication. So to that extent, your OPD expenses are a little bit more deterministic. Whereas with a hospitalization, it is a lot more random. Got it. So basically, these are predictable expenses. Correct. Yeah. Got it. OK.
00:08:45
Speaker
So, now handling those mechanics meant that you need to learn a few new skill sets. That's all. Anything new that you want to do will require some effort. Neither was the idea appealing to anyone, nor was anyone convinced that there is a commercial opportunity there. So, the general thinking in insurance circles was that this is loss making or that there is no value in it.
00:09:15
Speaker
And we refuse to believe that. Because in the US, any other part of the world, financing drugs and pharmaceuticals is much bigger than financing hospital expenses. Hospital expenses themselves are so much lesser. And then there are other hidden benefits. If you can manage to make someone go to a doctor regularly, stay on their medication regularly, then they're less likely to end up in a hospital, just common sense. But somehow, the whole abstract
00:09:45
Speaker
So at some point in time, we realize that, you know, it's not going anywhere. Okay. Let me just quickly recap what I understand as the challenge here. So there is a one is to four ratio of hospitalization versus expense on OPD and medicines.
00:10:00
Speaker
And because that is such a larger expenditure, so therefore financing, it will become a bigger business. And insurance is nothing but financing. Essentially, insurance is when you finance one person's expense by building a pool and that pool, everyone is contributing some money. So to tap this market, the challenge would be one is pricing it. How do you price it for every kind of cohort? Second would probably be your risk assessment and fraud prevention and some of those things. Third would probably be distribution, like how would you
00:10:28
Speaker
build a distribution for it. Were those the challenges that you foresaw? No. Okay. So for us, to be honest with you, the biggest challenge was getting someone else to believe that there was some commercial opportunity in this, namely investors. That was the biggest challenge. See, what we had to do, a large part of it, we were already doing, and we have been
Subscription-based Healthcare Model
00:10:51
Speaker
doing it for the better part of a decade.
00:10:52
Speaker
So you were confident that pricing and risk is easy to solve because there was no ready risk models for this kind of financing, right? Yes.
00:11:06
Speaker
If we were doing it for the first time, then we would have had a problem. But we weren't doing it for the first time. This is what our bread and butter was for a long time. So that wasn't so much of a problem. It involved a little bit of work. But the real challenge where we had no control was convincing other people. Because this is not something that you can bootstrap. You can. Which we did ultimately be bootstrapped. So it can be done.
00:11:28
Speaker
Tell me, how did you bootstrap it? Like, what would have been the funding route had you got funding and versus how you actually bootstrapped it? So, I mean, there's no very outstanding answer to this, but I'll just give you an example. Let's say you've fallen sick and you don't have the money to buy medicines. You go to a friend and they give you some money and that trend writes off that amount, hoping that someday you'll return the favor.
00:11:53
Speaker
Now, if 10 people do the same thing, then assume average cost of medicines is 500 rupees. The total corpus required to run this commercially is 5000 rupees, 100 people, 50,000, 1000 people, 5 lakhs, etc. So, it's a function of how many people you
00:12:14
Speaker
you can cover, want to serve as customers. And there's relatively simple maths to it. All you need to do is make sure that there's a corpus large enough to take care of everyone's expenses. So the thing is that this is deeply set in statistics. So let's say, for example, a bank, you go to a bank and you give them some money. That bank takes that money and invests it somewhere else.
00:12:41
Speaker
So if you go back to the bank tomorrow, they actually don't have your money. They have someone else's money, which they will give you. If everyone had to land up at the bank at the same time, then they would here run on the bank. No one would get any money. It's the same concept out here. No one does that. So no one, I mean, everyone doesn't fall ill at the same time. Statistically, it doesn't happen. So as a result of which, there's a certain corpus that you would need to have at any point in time, which will fund the claims expenses.
00:13:09
Speaker
And that's the principle of the op.
00:13:13
Speaker
one of the fundamental principles of operating an insurance company. Now, so we were doing things a little differently. We weren't exactly, I mean, funding claims and stuff like that. But the amount of money that we needed to run a small operation to prove certain numbers wasn't that big. And it's a myth that you need to have red corals to start a company like this. No, not really. Okay. So tell me that journey, like from the day you decided that you're going to quit signa. First, I went on a vacation and then once I came back,
00:13:43
Speaker
Then Deeraj and I for at least two or three months would just discuss various options and so on and so forth. Then we started meeting people, pitching our idea to them. Then the next stage was putting some sort of a business plan together. Then after that, we started building out the basic tech framework and started talking to people like 1MG and so on for the supply chain on the OPD side.
00:14:10
Speaker
And then at some point in time, I think discussion started with potential investors. By that time, we started operating the company. First a few customers came on board, then some more customers came on board, then some more. It took us about, well, sorry. How did you, this was not an insurance company that you were operating. What, what, I mean, wouldn't that need regulatory licenses and all? So what was it that you launched? So it's a subscription based offering. You,
00:14:36
Speaker
pay some money every month and some part of your expenses gets financed. Now, financing of healthcare expenses, not insurance. I mean, it's not just insurance. Insurance is one way of... So that's what we did. It may look a lot like insurance, but technically it is not. We don't indemnify and so on and so forth.
00:14:58
Speaker
Sorry, what is the implication when you say we don't indemnify? What does that mean?
Packaging Kenko's Value Proposition
00:15:05
Speaker
So there are about seven or eight principles or tenets of insurance. One of them is the principle of indemnification.
00:15:15
Speaker
Little translation is that, you know, if you have some kind of a loss at some point in time, whatever, then I will cover that loss. Now, in insurance terms, in health insurance terms, it means that if you have a financial loss in future arising out of an established health-related cause, then within certain boundaries, your insurance company will make good that loss.
00:15:40
Speaker
And this financial loss can be like loss of income due to the fact that you got some disease and you were not able to work. So those are the those are the boundary conditions that are then set in the indemnification contract. So what you just mentioned is making the loss of income, which is so there are within health insurance, you can either indemnify or you can give out a lump sum payments for making for for in lieu of loss of income. That's called a fixed benefit.
00:16:10
Speaker
So indemnification and fixed benefit are two different things. In indemnification, the size of the losses are not. In fixed benefit, the amount of payout is known. So you were offering a fixed benefit product? Something like that. What was the pitch to the customer who was buying it? Pay X amount per month. Pay X and you'll get this benefit. You'll get one, two, three benefits.
00:16:37
Speaker
And what would be the financial calculation in the mind of a customer? Like he must be doing some back of the envelope calculation that I am paying this much every month. So like any person, you would say that, OK, if I pay 100, I should get at least 1000 rupees worth magically.
00:16:54
Speaker
Only then will it make sense. So we had to... One of our jobs is packaging this proposition. Now you can't... This is not magic. You pay 100 rupees and you pay 1000 rupees. That's not going to happen. But it needs to... You need to feel that that's what's going
Launching Kenko Health
00:17:10
Speaker
to happen. Second thing is that you pay me 100 rupees and your neighbour pays me 100 rupees. If your neighbour falls ill, then your 100 rupees is going to pay for your neighbour.
00:17:19
Speaker
Now, when I say it like that, you might not be okay with it because you don't even know your neighbor. I mean, you're not going to pay for that illness. Otherwise, you're not running a charity, but it needs to be packaged in some way so that you're okay with it. So ideally, what should happen is that the proposition shouldn't be this. The proposition should be that any day someone needs to go to a doctor,
00:17:41
Speaker
Then there's a pool from that pool, I'll take out five rupees and give it to that person who needs it at that point in time. So it could be your neighbor, it could be your neighbor's neighbor, et cetera. So the packaging of the proposition is extremely important.
00:17:56
Speaker
Say somebody is paying $2.99 a month, what benefits do they get in that? What was sold to them as the benefits of subscribing? They get 20% OPD coverage, which means whatever your expenses, 20% of that will be paid by us, will be covered by us.
00:18:12
Speaker
And they get a three-day hospital expense. Every month or in a year. In a year. Yeah. So it's just for you. It's not for your family. 299 is just for you. It's not for your family. And in a 12 month, it's like you get those vouchers, those hotel stay vouchers, where you get three nights free. They come with some boundary conditions that you can't go to the hotel during this time to that time. This is something similar.
00:18:38
Speaker
who think of it like a voucher program. If you want to go and chill out in a hospital and use it like a staycation, no problem. But you get these three vouchers and they come with certain boundary conditions. Okay. Okay. Okay. So three-day hospitalization and 20% off on OPD. This doesn't cover the medicine costs in this plan. Like that would be a higher plan. OPD is medicine costs.
00:18:59
Speaker
Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay.
00:19:27
Speaker
Yeah, I told you. So essentially, you know, there are two pieces to it. Part one is selection. Figure out who you want to accept into the program. Part two is once selected into the program, you must for those.
00:19:45
Speaker
greater good of the members of the program prevent any kind of misuse. So that misuse prevention has multiple angles to it. If someone is submitting a prescription, you must have ways of making sure that it's not a fake prescription.
00:20:02
Speaker
Similarly, if someone wants to go to a doctor, we must make sure that the doctor exists. So one of the things that we use is that you can't randomly go to someone, get a bill and say, okay, now pay this bill. What you have to do is that you come to us and say that, okay, I want to visit a doctor. No problem. We'll arrange that doctor visit. We'll make sure that the doctor is a bona fide, proper doctor. There's a certain quality of service that you'll be given.
00:20:24
Speaker
And we will also make sure that you don't have to, I mean, if your plan covers 20% cost, you only have to pay the balance safety. Okay. If your plan covers 90%, you only pay the balance debt. So you don't have to send us a bill and wait for 100 days for reimbursement, none of that stuff.
00:20:43
Speaker
And the same thing could happen with diagnostics also. The patient just needs to pay 80%. You will pay 20% directly to that land. All we say is that whenever you have any kind of a health-related requirement, whether it's illness or non-reventive or just maintenance, whatever it may be, come to us first. There's an app. There's a call center. Let us know. We will arrange it. In doing so, we will also make sure that everything is kosher. Everything is authentic.
00:21:10
Speaker
Okay. And what about medicines there? Same thing. Come to us. We'll have the medicines either delivered to you or to your home. Or if you want to go pick it up from some pharmacy, no problem. We'll arrange that also. But come to us first. Get us a proper prescription. We have suppliers. We have people like Parminji and 1NG that will deliver to many, quite a few pin codes in the country. In some pin codes, we'll deliver the medicines within two, three, seven hours. In some, it'll take a day or so. A couple of days.
00:21:38
Speaker
Elegant, very elegant.
Innovative Insurance Arrangements
00:21:40
Speaker
Okay. So what did you launch with? Let's go back to that launch journey. You were telling me that story that you had started talking to investors and in the meanwhile, you had also launched a subscription program. So I'd love to hear how your processes, your product evolved, what was version one and that whole journey. See, on day one,
00:21:59
Speaker
We were doing everything from taking customer orders to selling everything, building the website, everything. And then I think our first employee would have come on board in December of 2021. When did you quit? 2019. Oh wow. Okay. Yeah. It took us two years to get this change on the ground.
00:22:18
Speaker
And when did your first sale happen? Like they say in Hindi and Boney. September 2021. Yeah, so the Boney was in September 21. Okay. Yeah. And so after that, yeah, first two, three months though, we were doing everything. Then our first employee came on board in December.
00:22:38
Speaker
Sorry, it took you time till September because you needed labs, tie-ups. You wanted to launch straight away with this kind of a system, right? Because there is no other way to do this. So you needed those lab tie-ups, you needed the doctor tie-ups, you needed the hospital tie-ups. Correct. That and some background legal and other work also.
00:23:00
Speaker
Did you also have an insurance company tie up? Not on day one, we were talking to everyone. Then I think by second month, first second month, we had that insurance company tie up.
00:23:13
Speaker
And what was that for? What benefit did that give then? So the hospital expense part actually is insurance. It is done in a very... To the consumer, it's just plain and simple one subscription program that gives you coverage for both these types. In the background, there's a slightly complicated arrangement with the insurance company for a defined set of benefits should someone end up in the hospital.
00:23:39
Speaker
Because that is something they are comfortable doing. So you decided to transfer that to their books in a way of speaking. Yeah. So it took us a little bit of time because we were asking for a certain set of defined benefits, which was never done in insurance. And the way the claims would be paid and so on so forth, it was never done in insurance.
00:24:03
Speaker
Help me understand this. If you can just give me some more details here, what are those defined benefits which were not done? So let's say for example, when you take insurance, there are two ways in which you can get your expenses covered or your claim back. One is cashless and the other one is reimbursement. Now cashless means you don't have to pay and reimbursement is where you pay and get the money later. Now we had a problem with both. The problem that we saw with cashless was that it wasn't cashless.
00:24:30
Speaker
was supposed to be, it's called cashless, but it wasn't cashless. So you went to the hospital and they asked you for a deposit. There in itself, it becomes a problem, right? The insurance company is not going to pay the deposit. So who's going to pay? And if you're going after the target segment that we are going after, which is
00:24:45
Speaker
middle-income households, strictly middle-income households. Then they'll have to take a loan or sell an asset or liquidate an asset or something like that, which defeats the whole purpose of taking on an insurance coverage. Reimbursement is not possible because they don't have the capital, many kids.
00:25:02
Speaker
they need the financial assistant then and there. They could take a loan, but most of these guys are sub-trained. So who's going to give them a loan and that to an instant loan because they'll need it with 2-3 days of notice. So we had to convince these guys to
00:25:18
Speaker
work out another way of paying claims where part of the money, the deposit is paid upfront and the money is not paid to the hospital, it's paid to the beneficiary. Now, insurance companies don't pay anything before treatment starts. That's sacrilegious. That's too radical. Yeah, you need to submit the bills. Correct. So that's why it took time to get this thing off the ground.
00:25:44
Speaker
And then the balance is settled again directly to the beneficiary. I think the reason why it's paid to the beneficiary and not for the hospitality is because then you need to have a working arrangement with the hospitality. You need to know someone, which means getting into a contract. And that part, the entire hospital part is ring fenced by a set of intermediaries called third party administrators were licensed by the idea to do this sort of a job.
00:26:10
Speaker
And it was an expense that Dheeraj and I weren't comfortable with. So instead of going out there and tying up with hospitals, we said, forget it. We won't tie up with hospitals. We'll have a list of hospitals who have a good reputation. And the money will not go to the hospital, you'll go to the beneficiary who can then pay the cash-print customer to the hospital.
00:26:30
Speaker
It's quite simple. To those people who are facing a problem because they are having to pay the deposit, it suits them just fine. For us, it's great because we don't have to go through the whole rigmarole of contracting and network and this and that.
00:26:47
Speaker
Thirdly, when you tie up with the TPA, they have 10,000 hospitals on the network. Not even 20% gets used. And then you can't verify 10,000 hospitals. Who knows whether the hospital exists, doesn't exist. Instead, if we have 500 hospitals, but all 500 are relevant to the people who are going to use them. Makes a lot more sense. So that's what we
Pan-India Launch and Growth
00:27:09
Speaker
did. So that's one of the things that we did. And it took time to convince.
00:27:14
Speaker
What would be the process for someone to get that money upfront? Because it is fairly intuitive that you get money once you submit a bill. Here you're getting money even before a bill is generated. So how would you validate that he needs to be given money? We've kept it hyper simple. So if you have to get a treatment done at a hospital, your doctor is going to tell you.
00:27:35
Speaker
that so-and-so-so-and-so issue, you need to get this procedure done. Or in very, very like 3% of total hospital cases in the country, it's an emergency where you don't have time, you don't have prior information. But 95-97% of cases you have prior information, it's called planned.
00:27:55
Speaker
Hospitalization. Okay. Yeah. So if it is planned, then you come to us first. Tell us what you need to get done. Now, the doctor would have written some diagnosis. The diagnosis would have been based on some diagnostics. Give us all of that. We'll look at it. Before you get to the hospital, we would have done all the adjudication or not adjudication, but basically all the investigation that someone is supposed to do.
00:28:21
Speaker
So, the insurance company has given all of these things beforehand. These guys already know, and so do we, that what you're going to the hospital for, is it genuine, is it not genuine, does the hospital like this, etc. Everything that we need to know, we already know. So, when you get to the hospital, there's nothing left to know. We know how much it's going to cost, how much deposit is required.
00:28:42
Speaker
So what is the point? And you only have to pay for a maximum of three days. So that variability is limited because beyond three days, you're not paying. Yeah. See in almost in most. So treatments at a hospital or even at a clinic, largely are deterministic or
00:29:03
Speaker
again, largely are established in nature. So if you go to get a cataract surgery or procedure done, then the removal of that cataract and placing of the intraocular lens is a three to four hour job. It has standard cost. The lens cost also has a range which is fairly standardized. So most procedures are like this. If you have the data,
00:29:29
Speaker
about all such procedures going back 5, 6, 10 years, you would have a fairly decent idea of how much what is going to cost and where there is some variability that happens from place to place. So a small hospital, Lucknow, it will cost lesser than a rich candy and Bombay. The same thing. So one knows these things.
00:29:56
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts and subscribe to the show.
00:30:17
Speaker
Someone going for, let's say, a knee replacement. Most of their costs would also be covered under this plan. OK. So let's go back to the journey. So December, you got your first employees. By then, September, you started selling. By October and November, you also got an insurance partner to cover the three-day hospital stay in the plan. Yeah. Then December 2021, we got our first dorm sheet. Where did you launch? Was it one city, or was it like a Pan-India launch? Pan-India.
00:30:47
Speaker
Wow, okay. That must have really taken a lot of network. No, we weren't constrained by going to each hospital and doing one network tie-up. All we had an understanding with the insurance company that we will choose the hospitals where people can get treated at. And we were just looking at people's reputation. So it was a small list that we started with.
00:31:09
Speaker
about a hundred, 200 diagnostic labs, the doctors, because the labs and all what we do, it was that if you, if you go to an aggregator, like one MG, then they're already serving multiple locations. Okay. Okay. So one MG has like labs or like they have a platform where they aggregate labs. Is it like they have a hub and spoke model. So what they do is they'll come to your home. They'll take the collection.
00:31:35
Speaker
They'll take the sample, then that sample will then go to a hub somewhere from that hub. It will go to the lab, where it will get tested. It may be a one-engine lab, it may be a third-party lab.
00:31:46
Speaker
But the logistics of this is provided by a company called, I'm just forgetting, just alluded to, which 1MGPOD. It's just basically it is logistics. Now that's for a test. Similarly, doctors will be there on 1MGPOD. And if it's an online consultation, then you don't care whether the doctors in Jaipur or where. So because of these health tech startups having laid the groundwork, it was easier for you to plug in and
00:32:16
Speaker
Do a nationwide rollout. Absolutely. We were simply when we continue to just ride the wave of digitization that these guys have done. So they are the ones actually organizing the OPD market. They're simply coming in with a financing solution. And as that market gets more and more organized, we just simply are there.
00:32:37
Speaker
So yeah, you were talking about the funding journey. Yeah, so someone offered us a term sheet in December, and then I think it took us another three, four months to close the whole round and do all the paperwork, and we were doing it for the first time, so we knew nothing. And then May, June, July, we started hiring a core team of people, many of whom passed away. Who was your first investor?
00:33:05
Speaker
Singapore-based fund called PNEXT. Okay, okay. And how did you, like initially you were hearing a lot of no's, so how did the yes happen? No, different from the no. Okay, it was just like you keep trying until you... Yeah, one conversation, then the partner came in for another conversation, done. Okay, possibly the fact that you had launched would have given you some data to talk about that might have
00:33:32
Speaker
Yeah, without numbers on the board. And what kind of sales had you done? Like by December when your first employee came in? I think we would have had about 4-500 customers. Pretty good. So you were doing like 100-200 every month during those early months?
00:33:48
Speaker
You could say. Yeah. Okay. And how did that trajectory grow? Like by middle of next year, what kind of like... So we had 500 customers in December. I think August, we would have had 10,000 by December of last year, we had to think 25, 30,000 and now we have about 60 or 70,000.
Building Kenko's Core Team
00:34:09
Speaker
What is your monthly addition right now? How many subscriptions do you sell every month? Roughly around 10,000. Okay. Tell me about your go-to market. How did you kickstart this? I mean, I'm assuming that establishing trust's credibility would have been a key factor to like a key challenge because you didn't have a brand and like health is something where people
00:34:33
Speaker
may not easily trust somebody that they have not heard of. I can't say it was a key challenge because every time we started something, Max, Boba, Signa, it was the same thing. It doesn't matter whether you're... So we had already seen that happening. And then you're like, it's a matter of time. You just keep knocking on as many doors as possible. And GTM, so yeah.
00:34:58
Speaker
Yeah, that's what I was asking. What was your GTM? Was it through agency? No, initially it was selling directly. Agency, no. Agency never. And then slowly as we got into the corporate side of things, then we started approaching licensed insurance brokers. See, insurance brokers talk to human resource personnel.
00:35:17
Speaker
Now, they are well-placed to, so for example, AON has a division called employee benefits. Our employee benefits, one of the employee benefits is insurance. There are many other types of employee benefits. So this is an employee benefit, a healthcare coverage.
00:35:33
Speaker
So we started pitching that to insurance brokers one bit, one small, one person outfit. We got a couple of customers from there. Then slowly, slowly, some investor references happened. And then one thing led to the other.
00:35:49
Speaker
Your direct sales channel, is that like tele sales or is it like online or like how does that happen? So it's we acquire prospects online and we close them over the phone. Yeah. So we have two centers, one operates out of Bangalore, one operates out in Gurgaon.
00:36:06
Speaker
So you would have Google AdWords campaigns around health insurance. People searching for health insurance would see this option of Kenco. Correct. Let's continue now on that journey. Sariya, I keep asking you so many details. No problem. So yeah, I think that's it. So here we are. Then we hired a core team in July, August. And then we grew a little bit more.
00:36:34
Speaker
And then in December, we got our second term sheet. Then that took a little bit of time to close out because of COVID and etc. We closed that out in March. This was with Sequoia. We closed that out in February or March. And in the meantime, while that was going on, we were engaged in expanding the core team, hiring more people. And this time we had the ability and the capital to work there and hire some of the best talent.
00:37:01
Speaker
What all areas did you need talented? Product management, program management, analytics, sales. Analytics is for the risk. Analytics for everything. Sales analytics, pricing analytics, disease wise, clustering, all sorts of things. We do.
00:37:22
Speaker
And when you say product management, like are you talking of like a digital product, like the way, say, as a product manager, who works on that app? So from that sense? Yeah. So we have three or four products, each one serving a different purpose. You've got product team handling different aspects of that. So you've got one set of product managers looking at all the enterprise products.
00:37:48
Speaker
So these are things that are not necessarily customer-facing, but they increase the efficiency of a company. And then there are people who work on consumer-facing products. So there we have products for end-consumers. We have products for prospects. We have something for administrators, HR administrators about corporate accounts.
00:38:08
Speaker
Okay. So basically the consumer product would be where they can book. Like they can say that I want to do a doctor visit. Yes. Okay. That's where basically they can use what they have bought. The HR product would be like say onboarding new joinees or managing exits. Correct. Exactly. You said there are four product lines. And then there are enterprise products.
00:38:38
Speaker
Which is for your in-house usage? Yeah, correct. So, some are sales related, some are business dev related and so on. Subscription management, etc.
00:38:49
Speaker
Okay. And what does the program management team do? So these guys, they hold the whole thing together. So they could be individual projects, but they are typically multifunctional. So these guys hold all functions together as part of our whole
Expanding Health Services Vision
00:39:03
Speaker
program. So let's say we are introducing something right now, where an OPD order
00:39:10
Speaker
like a medicine order, we get totally automated from end to end. And up to a certain order amount, no human being will touch it. Now that has people from engineering, it has people from product, it has people from the process designs at the enterprise side, then it has designers, marketing force, etc. Someone needs to hold it all together. That's a program match.
00:39:35
Speaker
Right now, how it happens is when someone asks for a medicine, then there is a human approval that happens, so that you're eliminating, and it'll instantly get... Not just an approval. Some human being needs to perform certain tasks. For example, they need to take up prescription, read what Manchin has written out there on that prescription.
00:39:55
Speaker
Check a few things on the prescription and then place the order with the supplier. Check the order status. Keep updating the customer. All of these things are all the one thing. So if someone is placing an order through the Kenco app, he's paying 80%. How does that happen? Like the cash and delivery order as well.
00:40:13
Speaker
No, you'll get an invoice inside the app. So there's a payment between the app to pay the 80%. Okay. So essentially then Kenco becomes a fairly high frequency app for consumers because like any medical use case, they would open the app. Oh, they are opening someday that happens. Like Jensen and Nicholson, whenever you think of health, hopefully you'll think of us.
00:40:37
Speaker
Okay. What is the roadmap for the app? So what is the roadmap for the product? And what is the roadmap for the business overall? So the vision is exactly what you stated, right? So let's say we approach a company and the company has a hundred employees and they give them healthcare coverage. So when one of the employees gets that coverage, it's not just then that that employs kids and spouse and in some cases parents also.
00:41:05
Speaker
And potentially, it's a household, right? So now you've got three or four primary family members covered. You've got two parents, maybe two sets of parents. Then you've got domestic health. In some cases, you can have a bed.
00:41:23
Speaker
Now, our idea is that this is a house, this is a family, this is a household. Every week, someone or the other in that household, twice a week, should take out the app and order something. Now, that's not going to happen if we are only focusing on illness.
00:41:42
Speaker
curing people. Or only focusing on paying their bills. That's not going to happen. So that consonants will only come when we create contextuality and more opportunities and avenues to book our services. Now, which means we need to look at, extend the definition of health and look at adjacencies. And here is where things get a little interesting. When you brush your teeth,
00:42:07
Speaker
you're maintaining oral hygiene. If you don't brush your teeth, you'll end up with cavities and we'll have to pay for a root canal treatment. So it's in our best interest that you stay there and keep brushing your teeth properly. If you buy a toothbrush, you're going to cost 100 rupees. You'll buy one toothbrush a month for 20 years. That's 1200 rupees into 20 rupees. So that's 24,000 rupees. One root canal is 32,000 rupees. It's just
00:42:36
Speaker
No, but complete no brainer. So maybe we should be paying for the toothbrush and maybe then you should be able to take out the app and order a toothbrush and have it paid for also. Now, why? You don't expect that your insurance company is going to pay for your child's diapers, right? Or your auntie then rough shampoo. But why not? So that's where we are getting to. Now, the total size of the OPD market is $300 billion.
00:43:04
Speaker
And it is the cause of medical inflation. It grows at about 10 to 20 years. It's not going to be possible for us to cover that entire 300 billion. But we think that there is a cool $100 million opportunity. And year on year, immediately within the next two years, there's a $100 million option, which is 700 curves. So that would mean about a million people.
00:43:29
Speaker
who should be covered or are subscribed with. So that's our immediate aim and target. Okay. But your pricing would have to increase, right? If you start offering even a toolpress because you're subsidizing 20% costs. So that would, I mean, if the more options you are giving them, the more your subsidy bill will rise. Well, may not be. So let's say for example, you sell,
00:43:56
Speaker
one toothbrush. Colgate family charges the MRP on that toothbrush is 100 rupees. So, you are a retailer. Your distributor will give you a 1% margin on toothbrush. We make 1 rupee. Now, tomorrow, if you start selling 5 million tooth pressures, will you be satisfied with 1% margin? No, not going to happen. So, there is some angle around that also. That is the part that we borrowed from the American system.
00:44:23
Speaker
Okay. The American system has like a, they earn a percentage of medical centers. Like what is the American system? They contract prices based on volumes or payments. So insurance companies are also in essence, they're paying, if you're paying for the medicines, then essentially you're the consumer of the meds, right? The end consumer will be someone else. If you're going to buy
00:44:49
Speaker
medicines and bulk, it means you have purchasing power. Yes. Yes. Yes. Right. So yeah. Okay. Okay. Okay. Interesting. Okay. So the more you move, the less you actually pay, but right now you're doing it through like one M G and other players. Would you then look to eventually have your own logistics set up for maybe maybe. Yeah. Sure. I mean logistics is a capital intensive business. It only makes sense when you're once you're at a certain scale.
00:45:19
Speaker
So why not MIDI? Although even logistics today is plug and play, right? With something like a ship rocket, you don't really need to. I mean, it's a subscription service. It's not that plug and play for pharmacy and diagnostics and all, not yet. So yeah, it's not an open and shut answer.
00:45:37
Speaker
Got it. And do you think your B2B revenue will be higher or your B2C revenue will be higher? As of now, B2B is higher, but we're hoping that by the end of the year, it will be 50-50. By the end of second or third year, it should be about 30% corporate, 70% non-profit. Okay.
00:45:56
Speaker
And you said that one of the key things for you is to select the right customer whom you're serving. How do you do that? So we try and find out what their health state is by asking them a bunch of questions. We also do some medical tests. We also look at their financial health. And then all of those responses go into an algorithm which computes a certain score, which looks very similar to credit score.
00:46:24
Speaker
And then there's a threshold fix. Above that, you're eligible. Below that, you're not. And is it like a self-service for someone who's buying or it's like assisted? It is both assisted and self-service. It depends on what you want to do. Most people want to speak to a person because it's related to help. But if you wanted, you could just go there, answer a bunch of questions, shoot your product, pay and leave.
00:46:48
Speaker
With time, I guess it will become more self-service as the power of the brand grows, you get more word of mouth. We are hoping so. Yeah, we are hoping so. How much of your inbound is through organic right now, through word of mouth and so on? I wouldn't know. It's difficult to say because when you're looking at digital analytics, let's say sales happening on a website,
00:47:10
Speaker
You will see you have something called the last click conversion. What that means is that just before you bought, where did you click before landing up on my website? Okay. Like a Google versus a Red. Now, almost 70-80% of the cases, you'll see that no one clicked on an ad.
00:47:28
Speaker
They either typed out the website address or they clicked on an organic search result and came. But that is not true. That doesn't mean that you should stop advertising. So if you see a billboard while you're driving, it doesn't mean that immediately you're going to go out and buy. That billboard has a decay effect. So advertising like that. So thanks to e-commerce, what happens is that you're able to measure these things. With physical advertising, traditionally, you can't measure these things. So now we are able to say,
00:47:57
Speaker
We create these things called attribution models, which medium had what kind of a weightage in a certain transaction. We are able to see the entire click still. Let's say it took 12 days for a person from the time they started researching till the time they finally bought and where all they went, where all they clicked.
00:48:18
Speaker
how did they react to our ads and organic results and so on and so forth. So overall, I would say organic has a world of 20-25% weightage. Wow. And you built this attribution engine in house. Google gives you all the tools. These tools are now openly available.
00:48:36
Speaker
If you like the Found a Thesis podcast, then do check out our other shows on subjects like marketing, technology, career advice, books, and drama. Visit the podium.in, that is, T-H-E-P-O-D-I-U-N.I-N for a complete list of all our shows.