Alto Pharmacy: A spoonful of sugar helps the math go down

(Originally ScriptDash)

Source: Downloadable at

Date: Early 2015

Outcome: Successful seed round. They have since raised $23 million — if you believe Crunchbase, it came as $6 million in a June 2016 Series A and $17 million in a June 2017 Series B.

At a recent Seattle Startup Drinks, I had a conversation with a founder who, like me, has raised money in both Seattle and the Bay Area. The thrust of the conversation was this: Investors in Seattle (and everywhere outside of Northern California) tend to be slow. They want to see you’ve thought through the actual business you want to build. It’s great if you have incredible user traction, but if you don’t have a plan to make money and meet plausible financial projections, most of them will be wary. In short, they want to see everything I listed here.

In contrast, investors in the Bay Area will take big swings at the smallest germ of an idea as long as it has a chance at a big exit (i.e. Your vision is grand and your addressable market size is, at minimum, in the tens of billions of dollars) and you can build the slightest bit of buzz. And yes, you are probably at least two of the following:

  • Ex-Facebook or ex-Google
  • An early employee at a startup that had a good outcome
  • A charismatic man
  • Holding a PhD related to machine learning

This founder relayed to me that one of his Bay Area investors writes dozens of checks per year at $100,000 a pop and he can decide within 20 minutes whether he’s going to invest. The downside is limited, the upside is not, and time is a non-renewable resource. This has been the venture capital business model for decades. So, to this founder, Seattle (and everyone else) is basically doing venture capital wrong. And he might be correct about that.

But I submit to you that the existence of hair-trigger investors is not an excuse to be lazy. Building a proper pitch deck is as much for your benefit as it is for your investors. It forces you to answer real questions about your customers, your market, and your business. And once you’ve answered those questions, it’s not difficult to show investors how prepared you are to succeed and grow.

For as much good as Atrium is doing spreading easily-digestible startup advice, most founders should read How to Raise Seed Stage Funding: The Startup Guide (which is where I sourced the ScriptDash/Alto Pharmacy pitch deck) with a grain of salt. It’s a perfect start if you’re going through Y Combinator or you fit the profile above. This is not a coincidence: Justin Kan has a long history with those groups. But even most Bay Area investors want to know about your unit economics.

Having said all that, I was pleasantly surprised by the ScriptDash deck. After reading Justin’s advice and the six slides he emphasized, I was expecting some serious handwaving. From the guide:

I recommend limiting your seed stage pitch deck to six compelling slides that follow your narrative:

  • Problem
  • Scope of problem
  • Why now
  • Solution
  • Traction (if any)
  • Team

Focusing on these six slides alone leaves you wide open to the top-down “1% of a huge market” trap. It’s a useful framework for figuring out whether or not you’re directionally correct, but it doesn’t compel you to think about how you’re going to attack the market. So the most encouraging thing about the ScriptDash deck wasn’t their “How big is the market” slide or even their elegant solution slides; it was the three slides where they walked through their assumptions on customer lifetime value and customer acquisition cost in a clean and simple way.



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Laying down concrete numbers shows that you think about your startup as a business, not as a hobby. Even if you aren’t getting the numbers to a particularly granular level or if you aren’t sure what your CAC is going to be, just setting up some benchmarks or reasonable goals can communicate a viable path forward — not just for engineering, but for marketing, sales, and operations. At worst, you can look at your projected gross margins and then answer this question: “Given projected cash on hand and our goals for customer acquisition, can we run a legitimate marketing operation with a reasonable CAC?” If your business model allows for a high CAC, you may have just found an opportunity.

Other notes:

  • On the surface, the birth control market looked like a fantastic jumping-off point and I would have loved that focused strategy: Start with a well-defined customer segment, be their first choice when they inevitably have other pharmaceutical needs, and grow from there. But ScriptDash/Alto focused on one geography, and it turned out that geographic coverage and pharmacy benefit manager coverage was extremely important, which is one reason why Pillbox (which checked both of those boxes) was acquired by Amazon for $1 billion and Alto is pivoting to a business based on doctor/pharmacy communication.
  • Good choice to leave those last two slides in the appendix. In isolation, I kind of like them — the “Not Just Better Tech: Life Saver!” slide could have been the start of a stronger purpose than “The pharmacy. Reinvented.” — but the deck is simple and coherent and they don’t add enough value to justify shoehorning them into the story.
  • Find me an investor in Seattle who writes more than $5 million in seed checks every year and we’ll all be very happy.