Bhat's Notes

Vikram Vuppala spotted the market need very early on and raised Rs.183 crores so far. He has got a right team and is out-competing his rivals. His product is great and you will know when you walk into any of Nephroplus centers. He got a very good business model that makes local neurologists his business partners. Now you got an idea why his business got all the right ingredient for Startup’s success. 

Early customer testimonial by Krishnaswamy: My mother was a patient with Apollo. The challenge was always finding the timing of dialysis. They always call you in the last minute and it impacts the mindset of the patient. I walked into Vikram’s office as an alternative. The word he used to say guest, the kind of services they provided gave comfort to my mother and my father. Dialysis is psychologically tricky and we had parents’ anniversary cake cut there. Every person in their system creates that comfort zone from the beginning to the end. I always told them they got to grow big and I am happy they did.

Bessemer’s partner is an ex-Mckinsey too. The power of networks! Both Kamal and I believe that we have created a platform for outside India too. Developing world can elevate us from the perspective of access.

We have always taken baby steps. Once our POC center worked, we expanded to second centre just 10km away. We learnt lessons in managing between two centres.

Then we opened the next centre in Nijamabad. That district has no dialysis centres and we set up the unit in one of the hospital premises. From standalone centres to a centre within a hospital is a pivot. We realized that hospitals in the world don’t make money in dialysis and hence they outsource. We decided, instead of standalone buildings with additional overheads of rent and security, to colocate inside a hospital. Only eight out of 133 centres are standalone now. The rest are colocated within hospitals. Like those Nike stores in malls.

Then we moved onto next state called Karnataka. We usually do revenue share with hospitals. One hospital in UP suspected we manipulate revenue numbers. You might have heard the phrase  “distrust by default”. We showed them our MIS system that has it all black and white. We Overcame that distrust factor. Feb 2015 is when we did Olympiad for dialysis patients in the world. People do paraolympics but not in dialysis. We did it in Hyderabad and it was a huge success. Non-customers see that there are many like them and they believed more in living normal life.

In 2016 we won a 133-bedded PPP project in AP. Then we want to touch every possible life. We don’t believe charity as it is not sustainable. We learnt about the national dialysis program that funded AP goverment and we won the bid.

8 years ago we set target of 100 centres and we acheived that goal last year.

I always have a belief that single founder can’t scale. Cofounders helped me brainstorm and argue and pick up each other’s slack. Whatever arguments happened that night, every one of us  showed up the next day. Many of my friends are solo founders and I advise them to add cofounders.

Why do some founders don’t choose a cofounder?

1) They are not comfortable in dilution.

2) They don’t like the conflicts in decision making.

Logical debate is crucial cofounding as only logic prevails. This is how we did it and we have always went ahead with the logic than yielding to our emotions.

Early days were hard as we didn’t have investments and we didn’t have any reference to hire great people. But I felt that if you network hard, there will always be crazy guys who suffocated in large corporate environments and aren’t crazy about astronomical salaries.

As a leader, you have to do what is right for the business. When we scaled from 4 to 25 centres, I got to take hard decision to let go of existing head of operations. As a leader you can’t have easy decisions. You have to realize that there are different people relevant at different scale. Keep networking and find the rock stars and keep pitching. Talk about impact and compelling journey and we come together to work together at the end of these long sales cycles. This is how you get best talent in limited budget.

Trustworthy and high integrity people are key. I fired someone on a harassment claim. Business took a toll of four months. We shall always do what is right in the long term. These are moments of truth. Employees of your company see that the moments of truth as they happen. It is tempting to give a written warning and let a key employee slide despite his the wrong deed. Sacrificing values for commercials is not the right thing. Values-centric and exceptional organisation is the key. Always err on the side f taking long term decision for the company.

We have gone through three angel rounds and 2 PE rounds.

1) Fundraising is a continuous process. You can’t go off the circuit. Keep networking.

In VCCIRCLE 2014 Summit, I met the head of KKR India.  He got no relevance in investing in our range. They invest in much higher sizes. Later he  quit his business and started a small fund and he is the one who led the 100 crore round that we raised.

I mean the terms beyond funds. Valuation can’t be just the most important one. Look at liquidation and anti-dilution terms. Do research and get a overall comprehensive package. Get the smartest lawyer to negotiate overall. You can’t overinvest on an exceptional lawyer. He makes a huge difference in key negotiations. During series C and after, I had this great lawyer I trust. He charges high but I can trust him. As a startup we try to optimize funds, but we shouldn’t do it while hiring a good lawyer.

3) Valuation difference of small size has no difference.

Investors coming in is like a marriage. There are good days and there are bad days. It is very important to focus on chemistry than 5-10% of higher valuation. Pie is what matters esp. when  the pie is very large. Massive impact comes from the fun in growth, high quality investors with good partners and the recommendations you get are the key.

4) Always err on the side of taking more money than needed.

“Never say no to money” is what we founders believe. I have seen founders refusing cash infusion and then they regret later.

Angels had exited but PEs continued to exist. I haven’t done the conventional angel funding.

I had three rules when it comes to angel funding.

1) I should know the angel.

2) They shall trust me blindly.

3) Amount they invest got to be less than 1% of their net worth.

All my angels have been good friends from colleges. I told them it would be risky. I gave them option to stay. But they followed my recommendation to exit once we got series funding. They are real angels. Many a times this gets tricky. Some investors want you to clean up the cap table. They only want Investors, founders and management team in the cap table. Otherwise, anyone can stop the show. I had the luxury due to professional network. I got some great advice. Initially I looked at crowd funding at 20 people and five lakhs to raise a crore. Then I got a great advice from a mentor from TiE Hyderabad that having fewer shareholders is always better. I listened to that advice and limited my shareholders to only six.

Q) How did you work through initial three years without having a doctor on the role?

We took a white paper approach. We took a bit of expedition from Jalandhar to Delhi with six guests. We got good advisors on clinics advisory board of eminent nephrologists. Once Dr. Brain joined, we are all good.

We are three and it helped us to pull ourselves together. There will be always things you want to do differently. In angel fundraising, I have diluted close to 40%. There was noone to advise. Regrets are around optimization. We were lucky with the year after year growth. 50% of our success is tied to luck.

Leverage PR.

We look at private hospitals. We explore countries in southeast asia, middle east and Africa. Based on the baby step approach, we position ourselves in southeast Asia first. We look at the population of countries that will lead this to massive opportunity. Oil prices have fallen and middle east wants more affordable health care.

One third of patients get cross infected. It is zero in Nefroplus.

We are like Nike showroom inside a mall. We take over that designated space and we establish inside a hospital with our own branding. MAX hospitals didn’t want us to display our brand and hoarding in their facility. Then once they know the value of our work, we started promoting our brand at Max’s other hospitals. Sometimes you have to lose the battle to win the war.

I raised funds from overseas companies with indian offices.

Price it at 20-25% lower than big hospital. Staff inflation of 8% is a real concern. Inflation of consumables too. We are not the lowest cost private entity in the city. Our fully loaded cost is less as patients otherwise you may go to acute and painful environment such as ICU.

Andhra Pradesh pays a small amount and guests pay zero. Health is a state subject in India and not at the national level.

Diet is the most under served. We have central diet nutrition team in Hyderabad. We use technology. Our cost is 10% of the cost of dialysis costs say in USA. Renal care with indian diet is what we provide even to outsiders as an open source.

My investors say you are a “distributed Healthcare delivery platform just happened to be in dialysis. Can’t you expand into other specialities?” We don’t want to move away from the core of dialysis. Even our caption says dialysis made easy.

I don’t have time to spend in formal basis. I do mentor 7 founders offline. There is no formal structure and I like that path. I don’t like to get distracted from the core business.

Culture. People. We are confident in releasing diet plans by doing open sourcing.

Amarch and Mangaldas

We used the technology to find the flow rate and hardness of water that are key in dialysis. Using the CCTV cameras we can figure the number of dialysis processes that happen. We could stop leakages with the help of cameras. We improved this by logging the odometer or machine run information. We leveraged the technology only in red flag centers as is costly.