Recently, Dave Cappillo, a partner in Goodwin’s Corporate and Technology Companies Groups and Founders Workbench contributor, moderated a lively audience Q&A at Techstars with TJ Parker and Elliot Cohen, co-founders of the pharmaceutical delivery startup, PillPack. Below are excerpts from the conversation.
Tell us a little about your background.
TJ: I’ve always been in the pharmacy world. My parents owned and operated a traditional mom-and-pop pharmacy. As a kid, I worked at the pharmacy and delivered medication to people in their homes. I was very aware at an early age of how complicated it can be to manage prescriptions. Following high school, I went to Mass College of Pharmaceuticals, and, because I was also interested in design, I cross-registered at Mass Arts. Additionally, I sort of snuck into the entrepreneurial legal system at MIT. They had a web form sign up to help out on the 100k, which was their business competition at the time. I filled out the form and showed up the first day and they were like, “you don’t go to school here!” Despite this, they let me hang out, which is where I first met Elliot who was starting this thing called “Hacking-medicine” which was weekend hack-a-thons for health care stuff.
Is this what led to PillPack?
TJ: Well, throughout that time at school, my dad started up a new pharmacy that was pre-sorting and packaging medications for nursing homes and long-term care facilities. He built this institutional business that was selling to nursing homes and figured out all the operational ways to actually package meds that way. After I graduated school in spring of 2012, I reached out to Elliot to work on PillPack with me – to work on a consumer-friendly online pharmaceutical experience. We pitched the concept at a hackathon at MGH in fall 2012 and won. A month after that we applied to Techstars and in February 2013, the same day we started in Techstars, we started the company.
Elliot: My background was in software engineering and then I went to business school where I interned at a venture firm. When I got the call from TJ about PillPack I thought he was actually calling me to get advice and feedback. It didn’t occur to me that he actually wanted me to work on it with him. That took another 6 months or so of conversations.
TJ: Then we raised about $500k during Techstars and another $3.5 million during Demo Day, totaling about $4 million during the course of the program.
What did that initial $500k look like? Was it seed funds, individual investors, a combination of the two, and how much of that was from Techstars?
TJ: So, we were pitching primarily angels, with a goal to raise a minimum of $50k from each investor. It took us like a month and a half to get anyone to raise their hand. We had a lot of people interested, but no one would raise their hand. And then all of a sudden it went from no one, to basically the two investors we met during Techstars and a couple that we met previous to the program.
Elliot: They were also Techstars managers, but they were people we knew pretty well before the program started.
Tell us about the diligence process during funding rounds. How does it change?
TJ: As a general rule, it gets harder and harder, longer, and more involved. It typically ends up being more about the fund than the exact stage that you’re raising. There’s going to be way more diligence done on a growth fund or hedge fund than you would see on an early stage fund.
What fundraising tips can you offer to founding teams?
Elliot: Don’t just reach out to the masses. I’ve always been a big fan of picking three people you really want to work with and then go super deep with them. It could be mentors at Techstars and it could be early angel investors. Whoever they are, surround yourself with those people. It is more important to have three people who really care about you initially, than to have 10 who sort of care about you. Because the ones who sort of care will never make that one introduction to exactly the right partner. You always get more of a network from three people who really care about you.