Four Points in VC Investment Assessment: The Great Tree Pharmacy Case

I currently represent a corporate director at Great Tree Pharmacy. I met its management in August 2013, when it had twenty stores and annual revenue of one billion, mainly in Taoyuan and beginning to expand into New Taipei. Revenue was roughly one-third to one-quarter of peers’. At this writing, it has 380 stores and could reach annual revenue of seventeen billion, targeting 500 stores in 2025 and a firm lead in Taiwan. Other listed competitors’ combined revenue remains below its own. Here are four reasons for the investment. First, assess industry size and development prospects. Industries expressible in one Chinese character—food, clothing, housing, transport, education, entertainment—can be enormous, each with giants and potential fortunes. Pharmacy spans birth, aging, illness, death, and health. It is a key consumer-facing gateway to biotech, medicine, and healthcare, closer to daily life than hospitals and clinics, supporting pregnancy, childhood, families, health and medication advice, care, and companionship. Taiwan’s annual National Health Insurance spending is roughly 880 billion, about 25% on medicines. Aging means more medical and health spending. I therefore saw a large, continually growing industry. Second, assess participants, competition, and whether existing players already offer good solutions. In 2013 the market was fragmented. The largest chain had around ninety stores and perhaps four billion in revenue, against roughly 8,000 pharmacies nationwide. Including drugstores, the structure was still dispersed. I expected larger chains to emerge, as in convenience stores and supermarkets. VC would generally avoid a mature, largely settled market like convenience stores dominated by 7-Eleven and FamilyMart. Pharmacy remained divided among regional players and many independent shops, with chains mostly operating five to ten stores. Great Tree trailed the first two, but not beyond reach. I thought family operation slowed consolidation. Pharmacists needed two years in an NHI-contracted pharmacy before opening their own. Trainees saw family-run pharmacies as temporary employment and left after two years. This produced many independent businesses and a few regional family chains expanding slowly through family replication. Existing innovation and services also left consumer needs unmet. Third, assess whether Great Tree has distinctive strengths to change the structure. In this large, steadily growing, fragmented, traditional industry, Chairman 鄭明龍’s team was more innovative, systematic, willing to share, able to integrate external resources, and flexible in its thinking. Before any peer had listed, Great Tree planned an IPO, engaged a Big Four auditor, formalized processes, issued invoices for all transactions, provided compliant labor and health insurance, and ensured compliant premises. In an industry then generally operating outside such standards, full compliance was costly and competitively disadvantageous. The team nevertheless chose the right path early, using innovation to overcome higher operating costs because it had larger dreams. While peers replicated through family structures, Great Tree established processes, employee ownership, and substantial stock options, making employees partners and sharing success. Pharmacy is people serving people. Staff need opportunities to grow professionally, understand customers, solve problems sincerely, provide medication advice, and see a career with promotion, learning, responsibility, and self-realization. Compared with family-run pharmacies, this attracts excellent people to build long careers and pursue their goals. The book 海底撈你學不會 argues that even knowing Haidilao’s ideas and operational details does not let you copy it. Peter Drucker is quoted: ‘Half of what great companies do is invisible to others.’ You see only the displayed side, while another remains unseen and unlearnable. Great Tree is similar. Competitors may be excited by pharmacy’s popularity, but execution, small operating details, culture, and the CEO’s vision and ability determine success. Retail leader PX Mart entered pharmacy energetically in 2018, then paused after one year: apparent excitement hides high barriers. Great Tree continues improving. In Alice in Wonderland, the Red Queen tells Alice that staying in place requires running as hard as possible. Great Tree keeps running, creating possibilities. Visible results largely reflect earlier positioning; much more remains out of sight. Fourth, identify resources the company still needs for larger ambitions that VC can supply. After assessing size, growth, structure, competitors, and Great Tree’s distinctive ability to innovate, ask what is missing. Money is one resource, but Great Tree already had scale and had not borrowed from banks. Bank financing would have cost less than equity investment. I believed it needed faster access to capital markets. Top Taiwan Venture Capital Group is exceptionally familiar with Taiwan’s markets. Chairman 邱 and I had many years of underwriting experience, with professional listing judgments comparable to intermediaries’. We helped Great Tree list quickly within controlled risks and accelerate nationwide expansion. Top Taiwan also brought in the National Development Fund’s strategic services investment program, enhancing the brand. Great Tree became that program’s first listed investment, its largest by market value, and its biggest job creator. Listing raised recognition, attracted talent, supplied expansion funds through capital increases, and supported strategic alliances and further opportunities. Great Tree is now the leading chain in almost every Taiwanese region. Despite its lead, much remains to explore: pet-related businesses, international strategic partnerships, and a comprehensive health ecosystem spanning birth, aging, illness, and death. Starting at the consumer gateway, it can build an integrated health-industry loop. Challenges and dreams remain, and Great Tree will continue leading partners into the unknown to realize ambitions and create new possibilities.