Should you invest in Drugs Direct?

Drugs Direct is an online pharmacy looking to raise £75,000 for 7.5% of equity.

Hence, we are looking at an e-commerce business in the consumer drugs field.

If you think this is still a high growth sector, these are the due diligence questions that we’d want to get answered before investing…


Pricing model confusion

The pitch states that a “key objective for the business is to establish itself as the ‘People’s Pharmacy’ by ensuring that patients have the opportunity to purchase ‘private’ prescription medicines for themselves and their pets at ‘Trade’ prices”

Website shows 10 to 35% mark up on trade price. Clearly, this is cheaper than retail – but it is not trade price.

Life Shield Ltd

Life Shield – a separate business – is claimed as the basis of proof that this team is able to create successful growth.

Life Shield’s website is currently down – I would like to know more about what has happened to that business?

Who is the competition and what might they do?

The pitch video claims that the competition is the high street pharmacy. However, it is more likely that the real competition is going to come from other online competitors.

How will other online competitors react? Perhaps they will simply cut their prices? If so, the company with the deepest pockets will probably win.

The founder?

Is the founder Alona passionate about this business (she joined in 2009)? What are her plans with the business and, as a 4th year medical student, will she prioritise Drugs Direct or her studies?

The pitch talks about Alona in the 3rd party – this feels odd. As an investor, you are largely investing in Alona and her team – so you’d want to hear from her – not someone else.

As things stand, you need to make your mind up from her pitch video.

Exit Strategy

Investors are being asked to buy a card and equity – which is a bit confusing. However, this gets harder to evaluate because there are various exit options at the end of ‘year 3’ which include getting all your investment money back.

Can the company really afford to honour this agreement if everyone took up this option? Or, should sales take longer or cost more to achieve, will this cause the business to fail?

It seems dangerous to set a potential liability of £75k in three years time without knowing how that will be covered?

The Team

The pitch talks about the team – but only talks about Alona on the front page.

I’d want to know, why aren’t the other team members mentioned on the front page? A few names are listed in the business plan but we don’t know much about them. They may be medically qualified, but being qualified to launch and run a startup is a different matter.

What is Alona’s long term ambition with Drugs Direct – will she lead this business or get distracted by her medical studies, working as a doctor or one of her other directorships?

The offer

The offer – 7.5% of equity for £75k values the business at £1m.

If this is a pre-revenue business, then pre-revenue businesses are typically valued at £100k.

There is a statement that Alona has invested £102k of her own money into the business via a loan.

If the founder offers the business a loan, then wouldn’t investors want the same deal?

The pitch also claims to have achieved £100,000 of sales in the first six months – it would be good to talk to some of those customer and see the financials to support this.


The business plan claims to have already turned over £100k in last 6 months of trading. It also claims that the business was incorporated on 31st March 1999.

I would like to see the past 14 years of trading history to verify these claims and to understand why now is the right time to expand this business?

The business plan indicates that Alona Courtney was appointed director in 2009. So it has taken 3 to 4 years to reach this point after her appointment. Would it be fair to say that it has taken 3 years to increase revenues to £100k?

Is now the right time?

Lastly, there is indication that the business will need to raise a further £75k via a second round. Therefore, if you are unsure, you could always wait for the second round of funding to see if the business has achieved all of its targets?

More info here.

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