Covid response the right medicine for Dawaai growth

Karachi-based Dawaai, the on-line pharmaceuticals startup in Pakistan closed its series A funding at the end of March. It is on the way to turning a profit by the end of the year as the pharmaceuticals and medical supplies aggregator rushes to meet demand generated by the Covid-19 pandemic.

While the onset of Covid-19 has resulted in most people working from home, the founder of Pakistan’s first medical e-commerce site is busier than ever. Since mid-March, cities across the country have been under a lockdown enforced by army troops. Only services deemed “essential” - including medical deliveries - are permitted to continue unaffected. The pandemic has proved a boon for Dawaai’s business.

“Demand has tripled,” Dawaai chief executive Farquan Kidwai told FinanceAsia from a company warehouse, where he was providing an extra set of hands to help the company keep up with orders.

There are roughly 5,000 confirmed Covid-19 cases in Pakistan and 91 deaths as of publication time, according to the John Hopkins University tracker. And the high cost in human lives from the ongoing pandemic is jumpstarting innovation in Pakistan like never before.

“The [SARS epidemic of] 2003 effectively changed the trajectory for the digitalisation of China,” said Kidwai. “Now the same thing is happening to Pakistan.”

Kidwai hopes to carve out a reputation for Dawaai as the Pakistani equivalent of Indonesia’s HelloDoktor or India’s 1mg. By fulfilling a vital role in the country’s medical sector, the startup is well on its way, according to venture capitalist and Sarmayacar founder Rabeel Warraich. “Dawaai has become the largest aggregator of pharma in the whole country,” he said.

Weaving a web

Dawaai - meaning ‘medicine’ in Urdu - was founded in 2013 by ex-Merrill Lynch and Lehman Brothers banker Furquan Kidwai. The company serves Pakistan via an e-commerce shop fed by seven warehouses dotted across the country and a web of regional logistics partnerships, which he predicts will rationalise commerce and aid delivery in a market that is fragmented.

“It's a broken, multi-layered distribution network in the country,” Kidwai said.

Dawaai’s business is equally divided between corporate and consumer clients. Nearly seven million people use the website on a regular basis to purchase medicine or compare prices, according to Kidwai.

The start-up previously received nearly $1 million in seed funding from Grab backer 500 Startups as well as Kingsway Capital, Sarmayacar and Mentors Fund and closed its series A funding with the round reaching into the several million dollar range, according to multiple sources. This capital is now being pumped into keeping the website well-stocked as Pakistan is battered by the global pandemic. “There might be some additional funding that the company secures in the next couple of months as well,” Warraich noted.

Dawaai is a recipient of the International Finance Centre’s (IFC) Startup Catalyst fund through Sarmayacar’s investment in the online pharmacy. Sarmayacar, a Pakistan-focused venture capital group, received a $2.5 million endowment from the IFC in 2019. The bulk of the funding is earmarked for early stage startups based in Pakistan while $500,000 will support women-owned enterprises.

“Additional requirements that come with IFC investment are typically Environmental, Social and Corporate Governance (ESG) considerations,” Warraich said. “Outside of that, it’s the same limited partnership that they enter into and are treated the same as any other investor.”

By bridging an important gap in access to authentic medical care in Pakistan, Dawaai certainly makes the governance cut. “Between 30 and 50% of the country’s pharmaceuticals industry is counterfeit,” Kidwai said.

In order to ensure authenticity of goods available on Dawaai, the startup monitors every step in the supply chain. “We buy directly from manufacturers or authorised distributors, so what we sell is coming directly from the source,” he added. Best practice is hoped to accelerate growth in the current environment.

Luring on-line

“We are making money,” Kidwai said, adding that he expects the startup to be profitable by the end of 2020. Dawaai’s fixed commitments are minimal and current unprofitability stems from corporate costs.

In addition to pharmaceuticals, Dawaai sells general medical supplies - from crutches and splints to examination tables and blood pressure cuffs. However the average transaction cost remains small, “around 4,000 rupees or $30,” Kidwai estimates.This shows that driving scale is everything.

Dawaai’s biggest struggle is luring customers away from brick-and-mortar pharmacies.

“Moving customers from off-line to on-line has been a challenge,” Kidwai acknowledges. The pandemic has forced many people to make the switch, so Dawaai, which has virtually no competitors in Pakistan’s medical e-commerce sector, is well placed to make the most of the opportunity. But success depends on whether any move on-line proves permanent or technologically supportable.

Limited data paints an incomplete picture of the country’s internet penetration. In 2010, there were roughly 18.5 million internet users in Pakistan according to estimates by the International Telecommunications Union (ITU). By 2016, this figure had risen to 34 million - just over 17% of the total population.

3G and 4G subscriptions have quadrupled in the last three years; today more than a third of Pakistanis have internet access from their phones, according to December 2019 data from the Pakistan Telecommunication Authority.


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