Eric Kinariwala, Capsule, on rebuilding the pharmacy from the inside out

In this episode of the Pulse Podcast, we interview Eric Kinariwala, Founder and CEO of Capsule, a technology company rebuilding the $425 billion pharmacy industry from the inside out with an emotionally resonant experience, and technology that enables customized outcomes for doctors, hospitals, insurers, and manufacturers. Based out of New York, Capsule has raised $270M from investors such as TCV, Thrive Capital, and Sound Ventures. Capsule delivers prescription drugs to local patients in two hours via an online app, website or SMS.

We cover topics from how Capsule is supporting the NYC community through the COVID-19 public health crisis and Capsule’s long term vision to be the hub for healthcare to the lessons and experiences he has gained from attending business school.

Start-3:30: Achieving childhood dreams and Eric’s career before Capsule

• Before we dive into his founder story, we asked “What did you want to be when you were growing up?”: Eric surprises us with his answer of wanting to become a pilot. Since he was a little kid, he has been fascinated with the Wright brothers and still believes planes are one of the coolest things that humans have invented. Eric reminds us to not take for granted the power of human ingenuity to be able to hop on a plane and be halfway across the world. Although his path today has brought him to lead Capsule, about 10 years ago Eric fulfilled his childhood ambition and earned his pilot license!
• Before founding Capsule: Eric spent an early part of his career as an investor at Bain Capital and Perry Capital where he focused on investing in global retail, healthcare and technology companies. Eric earned his undergraduate degree at the University of Pennsylvania’s Wharton School and his MBA from Stanford Graduate School of Business. Further along the episode, we touch upon both his educational experiences and how they positively influenced his career long term.

3:30–10:00: The birth of Capsule

• The birth of Capsule: In January of 2015, Eric woke up on a cold snowy day to a throbbing headache, and proceeded to dial his doctor, who sent him a prescription to treat his sinus infection. He then puts his coat on and treks out into the wintery outdoors to his corner pharmacy chain in the Lower East Side. The second he walks in, he notices everything that could possibly go wrong with a pharmacy. He makes his way to a dark and dingy basement with more than 20 people in line in front of him, and to make matters worse, his cell phone also has no signal. After waiting a grueling hour to reach the front of the line, the pharmacist then informs him that they are out of stock on his prescription. He ends up going home empty-handed with no medication and heading back to bed. He wakes up the next morning thinking how the whole pharmacy experience could have been so terrible, and that was the spark for Eric to build Capsule.
• The spark: Eric describes his founding moment fondly and shares the inspiration and energy he felt when he began working on a room by himself at a WeWork in FiDi. He shares some candid advice about becoming a successful entrepreneur: your heart and head have to align to really take that leap of faith. One half of the equation is familiar to business school students everywhere for example, “Is this a good market? Is this a good industry? What is the competitive landscape?” The other half of the equation is having a visceral understanding and passion for the problem you’re solving. What’s the source of energy you keep going back to? When your heart and head is aligned, then there’s a match and that match creates a magical spark. Eric shares even to this day, he is still tremendously energized and tremendously terrified five years later.

What’s the source of energy you keep going back to? When your heart and head is aligned, then there’s a match, and that match creates a magical spark.

• Today’s pharmacy experience is broken: 70% of U.S. adults go to the pharmacy at least once a month. There are 70,000 pharmacies in the U.S., literally one in every street corner and is the second largest retail category in the nation. Today, only 1–1.5% of prescriptions are delivered online, which hasn’t budged in the last 50 years. Eric lists a long list of frustrations that are familiar to all of us: medication going out of stock, lack of price transparency and lack of privacy about personal medications.

10:00–13:00: Building the first beta and three key early insights

• Recruiting the early founding team and building the first beta pharmacy: He reminds us that while building a healthcare company, it is important to have clinical expertise on the early team, and in this case, a pharmacist to build a better pharmacy. Eric shares how he recruited his Chief Pharmacist, Sonia and how he built the first version of Capsule’s pharmacy that started on 25th street in the middle of NYC. Quickly outgrowing the space, Capsule has shifted to a larger pharmacy format today and now has the capacity to support the tremendous growth they have seen in the business.
• Early insight #1: Eric’s terrible personal experience is not uncommon and the pharmacy touches everyone. Many patients face a similar set of frustrations.
• Early insight #2: Pharmacy is the most frequent interaction in the entire healthcare system. An average person goes to their pharmacy eight times more often than they go to their doctor. Eric emphasizes the importance of trust in influencing consumer behavior. He believes trust comes from two things: frequency of interaction and building a brand. Capsule is really focused on building trust with their consumers through those two avenues.
• Early insight #3: The pharmacy and pharmacists have the opportunity to be the quarterback of the healthcare system. Every important stakeholder in the healthcare system, the doctor, the hospital, the insurer, and drug company, all come together at the pharmacy. There is a tremendous role for the pharmacist to play and the pharmacy brings all these stakeholders together — to connect them and make everyone better. So the mission of the business is to build a pharmacy that works for everyone: every consumer but also every doctor, every insurance company and every pharmaceutical company.

13:00–15:00: Capsule’s seamless prescription delivery offering

• How to use Capsule: Using Capsule is a simple process and you can use it in two ways: If you have a prescription in a pharmacy, then you can go to Capsule’s website or app and put your personal information in and then Capsule becomes your pharmacy. There is a simple 3-click checkout flow and then Capsule will automatically connect with your insurance, share the price of the medication, the doctor’s instructions, number of refills, and you can text or chat with a pharmacist with any questions you may have. Consumers can then schedule same day delivery anywhere in NYC. An even easier way to use Capsule is to tell your doctor to directly send your prescription to Capsule.
• Radiant consumer feedback: Capsule has built a strong following of customer evangelists in New York who love the delivery but even more so, love the feeling of being looked after. Capsule has also brought technology improvements to the industry such as solving persistent out of stocks through predictive inventory and smarter algorithms.

15:30–21:30: Capsule serving their community under COVID-19 uncertainty

• COVID-19 causing a surge in demand: CDC currently recommends having a minimum of 30 days of critical medications at hand. Across the board similar to what telemedicine companies have seen, Capsule has also seen a substantial surge in utilization and demand for their business as customers are required to stay at home as much as possible to avoid the spreading of COVID-19.
• Serving the New York community in a time of need: Capsule is prepared to serve New Yorkers in a time, where more than ever, medication delivery is an essential tool in helping contain the outbreak and help people stay at home Capsule has built the technology systems in a way that is really scalable. Eric shares how rewarding it has been for him and the team to be able to serve the community right now. Eric shares Capsule has been aggressively hiring to support the surge in demand.
• Laser focused on medication, but a large roadmap ahead: When I asked him on whether Capsule was considering at-home test kits, which a few companies are exploring for COVID-19, Eric shares that although Capsule has the opportunity to reduce many areas of friction for consumers, it is important to focus on delivering 150% on one offering vs. doing ten things at 60%. Capsule has large ambitions for what the business can become as the hub of healthcare for consumers. But for now, they are laser-focused on delivering medication.
• Will consumer adoption of online prescription delivery stick long-term? Under COVID-19, we are seeing people who had not previously engaged in things like telemedicine or digital pharmacy are trying them out for the first time. Eric believes that if consumers have a good experience with digital health tools broadly, they’ll continue to use them. We are currently living through a moment of increased awareness of digital pharmacy and telehealth. If healthcare technology companies like Capsule continue to deliver an amazing experience solving people’s pain points, there is no reason for folks to discontinue once things have calmed down.
• Views on other players looking to expand into prescription delivery: Eric encourages anybody who is contributing to others staying at home and is confident in Capsule’s competitive moat, being a strong proprietary technology platform that can power the entire digital pharmacy process end-to-end.

21:30–25:00: What’s next for Capsule?

• The long term vision and mission in the business is to build a pharmacy that works for everyone. Eric shares that they are focused not only on patients but also on how to improve experience from the doctor and the insurance company’s perspective. Capsule’s goal is to be national over the next 18–36 months.
• For doctors: Capsule partners with thousands of doctors in New York. An average doctor appointment is 7 minutes, and half the time is spent on dealing with paperwork or pharmacy interactions that take away from the patient experience.
• For insurers: Capsule has partnered with Oscar Health Insurance in December which is a large health insurer with a base of operations in New York. A large component of the partnership is telemedicine and supporting their members with prescription needs. If we can ensure people continue to get and take their medications, then we can drive longer term healthcare costs down such as preventing hospital admissions.

25:00–29:00: Building a resilient organization with culture

• Eric’s take on culture: He doesn’t think about culture as good cultures or bad cultures. He thinks about cultures that are either aligned with the mission, purpose and objectives of that organization, and cultures that are misaligned.
• Capsule has two values: 1. Everybody needs some looking after sometimes. 2. Winning together. Eric shares the meaning behind each of the values and how it translates to the Capsule team executing on their vision.
• Who does Capsule hire? They are hiring across the board and here is a tip for those interested in potential working for Capsule: Eric thinks about bringing folks on the team when they are able to exhibit both the ability to accomplish incredibly ambitious objectives and also do it in a way where their success is uplifting, empowering and motivating for those around them, enabling everyone to do their best work.
• They are always looking for incredible talented people to join the team and are in a tremendous growth phase now! Check out Capsule careers page. Hint: If there is not a role on their website, you can also create your own role.

29:00–31:00: Value of the business school experience and favorite memories

• As an undergrad, University of Pennsylvania’s Wharton School curriculum gave Eric the tools and the fundamentals of business, from corporate finance valuation to understanding how markets and industries work, to getting exposed to high level leadership concepts. To Eric, the undergraduate experience was an incredible foundation to build his career upon.
• As an MBA graduate, Stanford GSB was really valuable because Eric was able to build on the four years of work experience he had gained at that point, and contextualize the academic theory in the classroom. Eric thinks that one of the most valuable parts of business school was finding the time and space to understand his authentic leadership style, and meet and learn from an incredibly talented set of peers. But for Eric, it was really about being able to learn from incredible entrepreneurs who became professors or came to lecture, and learn from how they tackled through real life problems while scaling and starting their own businesses. The lessons he learned from business school have stayed with Eric as he’s scaled Capsule.

31:00–34:00: Favorite memories during his MBA, both personal and professional

• His favorite quote from his GSB Professor Irving Grousbeck was along the lines of “If you want to be safe, then buy a toaster”. The idea behind it is that the world is uncertain, and you should pursue what your passions are. That’s the only way to not have risk in your life. If you are doing what you love, regardless of what the outcome is, you’re doing what you love.
• His favorite business school trip was on a New Years trip to India with a group of his classmates. The hotel they were staying at cancelled their original booking and they ended up having to pile eight people into one tiny family room! For Eric, working through an inevitable obstacle, in a fun and hilarious way, was the best way to forge really deep friendships.

34:30 — End: Words of optimism while facing an uncertain economic environment

• As markets are super uncertain right now, Eric’s overarching view is that there is always capital for great companies, great teams and great entrepreneurs with great products in good times and bad. Though, he warns that it might not be at the price you want and the valuation you want.
• Eric believes that all crises will pass at some point and hopefully without doing too much damage to society. He is encouraged by seeing everyone really leaning in to contribute and address the public health crisis together. The world needs talented entrepreneurs and there are a lot of people that want to enable those entrepreneurs to succeed with capital.

Big thank you to Eric for sharing his time with us on The Pulse Podcast! Subscribe for our new releases on Twitter or Apple podcasts.