Tom Digan & Greg Stewart - Building the World’s Best Fitness App - [Invest Like the Best, EP.454]

23:26What would the lesson plan look like? One of the biggest lessons, particularly from that moment, is selling people on your conviction. In that moment, we were selling both the product that we were about to shut down, but we didn't really even have visuals yet for the new product. So it was as much just selling the team and the conviction on what you were about to build. I think the best example of that a story about another friend of ours, we'll call him Bill in March of 2020, trying to kick start a round, but no one's going to lead this round naturally because who would lead a round in our business at that moment?

23:54And so I was about to lead another inside round where basically I'm pricing the round and passing the hat to all the boys and whoever would listen. What happened there was now I need some more cash. I don't think Brayden knows how many times I wrote check into the business. This was another example of being like, all right, the only way to get this going is to write the first check and lead with that conviction, showing that you had skin in the gain here again. At this point, I'm trying to figure out how to sell anything that's not nailed down. And so it's 401k, put that in, done. What else can we do?

24:22This story here is funny because I'm looking at the line items on the balance sheet, if you want. I'm like, oh, permanent equity. That's Patrick's friend, Brent B. Shore. And Brent came and told this story on this podcast. He has an unbelievable strategy and it's called permanent for a reason in that he buys these family-owned, awesome businesses, and then holds them forever. And so there isn't a liquidity profile here. But I read the documents and it said that if you found another LP to sell to, that you could sell. And so I called Brent and said, hey, I need your investor list. And he's like, S &P's down 35%.

24:54We're in a global pandemic. Of course, I'm not giving you my investor. They were my smallest investor. But he does me a solid and he's like, hey, you should call Bill. Bill's a friend. He's Patrick's friend. You know Bill, another Notre Dame guy. So I called Bill and Bill's a gamer. So he's just like, what are you looking to do? When do you need this by? What are you thinking? How do we mark this? And I'm like, market's down this. What about down 10 %? And he's like, what about down 50? And we do the dance and we end up somewhere in the middle. And I'm like, you're done, but I need the money tomorrow.

25:21And he's like, I'll send you the money tomorrow. And I'm investing in whatever this is going into. He doesn't even really know what ladder is, but he's like, but I'm in. The point there is in particularly those early days, it's important to have skin in the game in whatever way you can. For us, it was about being able to show that level of conviction and urgency. Bill didn't need to see a deck. We didn't have a new product yet. He knew you were involved and he was just like, if you're willing to do this, I need to be involved too. So he bought your stake and then also invested in the round that you were investing in.

25:50Yeah, I think he matched what he was sending me, which was awesome. And that kicked it off. Wow. We're glossing over a lot. Maybe we'll keep returning. I love that story. Let's get to the point now where things are starting to feel like, okay, now we have to build this next thing. maybe this is a good opportunity to ask you what you now know about the world of fitness and people that want to get fit. What becomes your North Star for what product can we build here that's scalable, that can get to what it's become? Yeah, it was no magic bullet that said, go do this and you'll win. But we spent a lot of time the first two, three months I was there trying to dissect the current business.

26:26And the current business was this one-to-one, essentially marketplace, ways, connecting an independent contractor coach with a consumer who is looking for personal training. We're studying the behavior and watching what's going on here. And what I noticed was that coaches could set their own price. And some people had crazy high prices. Some people have more approachable prices. And they're building this as customizable program, building it for you based on your very specific goals. And that's why I'm charging you this amount. And on the back end, we could see that it really wasn't personalized.

26:57It was big bucket personas. The names were Sally Pilates and that was being billed as super personalized programming and charging like you would work with a coach. But we could see like these big bucket personas were like, okay, maybe personalization isn't the secret here, but it's having good programming that's relevant to you. And that same moment, I went through the list of coaches and there weren't a lot of coaches that were making a lot of money on this, but we had a couple that were making four or five grand a month. And I spent time with them and I asked them, what are you doing differently?

27:31How are you making this a thing when everybody else is struggling with it? And we had one in particular and I was like, all right, so you're making four grand a month. Your earnings are growing. How did you get there? Why isn't it growing anymore? And Lauren was a trainer in New York, like a high ticket trainer in person. And she was filling up all of her downtime with online clients with ladder. And we had no idea how to grow. So she figured out, I have this Instagram profile. She had five or 10 ,000 people and she was telling a story to her audience and they were coming in, but she filled up all of her time and she couldn't take on any more clients.

28:04I'm like, that's a bad business. You've capped how big this can get. The constraint is human time. So these two insights of calling bullshit on personalization, watching what Lauren was doing and seeing how she was growing and piecing those together into what became a trial test or an MVP of this vision. We didn't know what we would build, but we said, there's something in these concepts. And in February 2020, we said, you can't take on any more business, Lauren. What if we jimmy rigged the existing app and we created an experience where there could be more than one person in there. You're going to program for a group of women.

28:42You'll go out to your Instagram audience and you'll say, hey, this is for, I'm in New York, busy women in New York, kettlebell training. I'm an experienced coach. I'm going to give you new workouts every week. It's not customized, but very specific persona that she was talking to. And we're going to have this chat in the app where we all can talk to each other. And the app looked like shit. The functionality barely worked, but the concept was clear. We're in process of dying in this moment. She went out to her Instagram audience and we had like a hundred people sign up at a hundred bucks a month, very fast.

29:13I'm like, that was the most exciting thing I'd seen yet, other than getting wins against American Express and her creditors. And that was awesome. We're like, okay, there's demand. Lauren's audience, they came in very clearly that there's interest in this concept. And so that first month we were just watching what was happening because there was nothing else to look at from a product perspective. I think what the most amazing and impressionable thing to me was these people had found each other in the app. They were similar personas. They lived in a similar place, busy women following the same workouts every day, interacting with the coach and each other.

29:46They'd never met each other, but they started posting on Instagram about Lauren and Ladder. And then we saw them meeting up in New York at the park together. They'd never met each other before. And that was like magical. There's community elements and social and they're happy. And we'd never seen anything like that in the original version of the product. So all these little glimmers of hope on this concept of programming, it's not personalized, but it's high quality, it's meant for a specific persona, the social accountability element, all these things are like bubbling up as real tangible proof points of something that could be interesting to go work on.

30:21That group, the renewal rate was 90 % plus people paid again, like damn, like they're doing the workouts and they're staying with us. And if you look at the app, you would go, this is garbage. But the promise was being delivered on what we were proposing. We ran one more trial with another coach. It was the exact same outcome. I talked to almost all those women on the phone. It was like, who are you? How did you find Lauren? Why did you go into this app? What problem were you trying to solve? And we talked to all of them and built a relationship and like all those were inputs. Did anything surprise you in those conversations?

30:54It validated a lot of things that we were learning in real time. It's like, why did you join? I'm tired of thinking about what workout to do. I'm already into fitness, but I spend time actually planning this. It's a pain point for me. I don't want to go spend a thousand dollars on a coach. I need something more approachable, but I need help with a plan. I need to know that I'm doing the right thing. I want a coach that is helping me and have confidence that it's the right thing to do. And that was a real thing. And then we saw them meeting up and they would say, oh, I met someone just like me.

31:21And they had the same pain points and they'd become a friend and we work out together. and that was magic. And so all these little kernels just speaking and forming a picture that got clearer and clearer and clearer was the beginning of what that product would be. Everyone's very fond of the Elon algorithm for company building now. It's been passed around as like one method for doing this. If you had to distill your algorithm for how you proceeded from that initial kernel of an insight of, okay, here's something that people are paying for and like, and we can do something with this all the way through to where the product is today.

31:54What's been your, as the CEO, algorithm for that iterative improvement to get from the original kernel to now? Well, I can tell you number one is don't listen to investors on product feedback. That is by far number one. But for us, it's just two things. It's prioritization, ruthlessly prioritize. You have to prove to each other that this is going to be additive to the product. And additive to the product means we have a thesis that is going to increase workout completions. That's our North Star. We're solving not forgetting you to pay one time. We're solving for you to actually complete workouts with ladder.

32:27And what can we go build to go improve the odds of you doing that and staying with us? And how we get to that is we don't guess. We absorb every piece of information that's coming in. And it's all driven by our members. And if you ask the right questions and you have people that are talking to you, you can start forming a picture of what are the huge buckets that actually move the needle. And you can do some work to figure out how complex is this to go build and go do it. And don't do 10 other things just because it's interesting or you can do it. Just do the one thing and do it really well and do it again.

32:59That's still the case today. We just launched Nutrition. It's the biggest thing we've built since the first version of the product. And people on the outside were like, that should be a separate app. Or like, that's a different business. And we're like, well, to our customers, not. We did this survey a year ago. You had 5 ,000 people spending 50 minutes. And it was qualitative and quiet. And we were trying to figure out what are the biggest bets that we could go make. We were ready for a big project and we didn't want to guess. And out of that work, it became very clear that it was nutrition. And what we learned was we have a third of our members who are tracking macros.

33:32Of that third, 90 % are using an app. Of that 90%, most are using MyFitnessPal and they hate it. And they're really tired of managing their problem set in two different spaces. And what we learned through that experience and talking to members was that for the consumer, it's one problem set. I want to lose weight. I want to gain muscle. There are inputs and outputs to that math equation. Outputs is activity and exercise input is what you're eating. And they're managing this in two places. And they know that's not the right way to do it. Because if you worked with a coach, these things are all symbiotic together.

34:05But it all started with a kernel from our members. And we had a really clear line of sight that this would move the needle. They were telling us, I want you to use all of these things, motivational mechanics, streaks, badges, celebrations and help me with the other side of the equation, which is going to dictate success or not. And then once we have that kernel, we do another survey. We go very deep on nutrition, like extremely deep to understand. And we all review it, read everything. We synthesize it, and it gives us a blueprint. And when you do that, it becomes obvious what to build. What does very deep mean?

34:34The nutrition survey, that was probably a couple hundred questions. We read all of them. Now you can put them in ChatGPT. In the beginning of this, I would copy and paste App Store views into a Word doc. I would read every single one of them and I'd organize the words by buckets and I would color code them and I would do ChatGPT and I have these documents that are 100 pages long and it's all just deconstructed words from our members. And very similar to survey work. In the beginning, we would do that with surveys. We'd dissect the themes. What do people care about? And now you can use ChatGPT to synthesize all this.

35:07What is the biggest bet that we can make on behalf of our members? And then we'll think about what are the building blocks of what this should do? Is this nutrition coaching? Is it macro tracking? What does the feature set do? And you aim questions at uncovering the pain point and what they're looking for. And that becomes the guide on the first version of the feature. What did you learn there? What do people want on nutrition? There are two halves to this from my perspective. It's looking backwards and looking forwards. What they were doing is tracking looking backwards. Make it really easy to track macros.

35:37I want to know if I'm in a surplus or a deficit. I want good visualizations. And I want it to be really easy in terms of how to log. It's very tedious. It's very hard with some of the existing legacy products. So give me an easy way to do this. And so the looking backwards to us with basically the table stakes, we need to give a really easy path to tracking macros, logging your meals, logging your food, and telling you what's happening as a result. And then if we do that, and we do that really, really well, there's going to be a whole other opportunity to tell you what to do. Not what you did, but what to do.

36:11Members want to know what to eat specifically. Where should I get it? I'm at a restaurant. Here's the menu. What's the best choice right now based on my goals? They want prescriptive advice, but the looking backwards was what they were using for the apps that they were using at that moment. It was mostly my fitness pal, and there was no brand affinity or love. It was just the tool that existed, that there was trust because they had the biggest database. They had done it for a long time, but there was just a lot of pain in these conversations on how they were doing this stuff. So we made a conscious decision not to charge for it.

36:45So we're going to give this part away. We want to go build trust with this group and win over tracking with Ladder. We're not going to convince a whole new group to do this. We're going to go get the people who are already doing it. We're going to do it better. We're going to win their trust, start compiling this data. And And there's a million products that we can now build. Like if you think about what nutrition does for us, it gives us the whole math equation of inputs and outputs. There's no product in the world that has that. So the picture around the consumer, it's the clearest of any other potential product or service around this consumer.

37:18We know exactly what's happening on both sides of the equation. And that's going to unlock a whole bunch of products and services to help our consumer. And this would be things like I could take a picture of my food. We already have that. That was table stakes. Take a picture. That's easy. but also tell you what's the level of confidence and accuracy because there are trade-offs if you use take a picture versus scanning a barcode or entering very specifically an ingredient or a recipe. So we had to nail that use case, make it super slick, make it very easy to use. And that was the beginning of building trust.

37:48Even in that process that you act like, how do you figure out what to build? We built the first version. We have a group of 2000 members who are beta members and we give it to them. But first we do it as a team. That's the alpha. We're all giving feedback with a Slack channel. Everyone's communicating on what's happening. That helps the picture get clear. And then we release to our beta members and it's in the wild and they're using it. And you hear it right away. What's wrong? What's the gaps? What do you need? We would survey these users every week. We had a question of how likely are you to switch from your existing app that you're using?

38:21And when it started, the number was 20%, pretty low. not super exciting for us. And then we would go build and make the picture clear and help fill the gaps of what folks were experiencing. And it kept going up, kept going up, kept going up. And there's a point where you could just keep building the MVP forever, but it was 85 % one day and it was like, we're ready. We're done. This is ready for the wild. And then we released it and it's been a home run. We're in week six for almost 4 million meals logged, which is insane. Thinking about those early stories where we were literally, we knew all the people in the app.

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39:27Visit WorkOS.com to skip the unglamorous infrastructure work and focus on your product. You said before, don't listen to investors on product. Can you say more about that? Well, I think one, don't listen to any one person on product. Everyone has a unique use case, persona, problems, solutions that they're looking for. So no one person is the source of truth. If you get one piece of feedback, that's just one piece of feedback. So when we talk about investors, I remember earlier meetings, it would be like really prescriptive advice and you should go build this. And it's like, maybe, I don't know.

39:58That's what you want. And then we would go test that with our user base and ask them and they would say, no, I don't want that. Yeah. That's an extremely empirical way of building. Which is empirical and it doesn't have to be completely precise, but it becomes very clear what the big chunky buckets are and everything else on the fringe. It's like, that's not that important. But what is important becomes very, very obvious, even if it's in line with what investor is looking for or not. At various points through this business, you and I have had a call and it will be some period where you describe him having gone into like a cave-like process to go study some new topic.

40:29Some new thing has become the bottleneck for the business. I can think of several occasions when he was studying X, Y, or Z. Describe from your perspective this cave-like process that you've seen him go through to unlock these bottlenecks. Probably four years ago when we're trying to figure out growth, we've built a product, People love it. They're using it. They're telling us what we need to build and what features we need to evolve to improve it. But we still haven't figured out how to grow. The way you get from zero to one million in ARR is very different than the one to 10. For us, Greg's view was, let's go run some experiments.

40:59And so we're looking at some different ways to grow, saying, here are the different options right now. There's SEO, and we're thinking about how to go and start to create content on search. We have a lot of assets in the app that we can leverage there. we're looking at some different channels, TikTok being the most obvious, where it's just all the eyeballs are there, but the brands aren't there yet. That was compelling to us. We understood that the consumer was very interested in engaging with short form video. Meta hadn't quite copied that with their Reels product yet, but it was obvious that that's where the consumer was going with their attention.

41:30And yet the brands weren't there spending yet. We partnered with coaches, these world-class coaches who are all creators. None of them knew TikTok yet. They were all Instagram native. In fact, I don't think any of them at this moment were even on TikTok. And we were excited to go figure this out. And it was hilarious because Greg, I don't know if you've seen his Instagram. It's not particularly cool. He's not a creator, but he was like, I'm going to go and become the TikTok guy. And I'm like, all right, Mr. TikTok over here. I was like, you got to go hire somebody. I'm like, I'll figure it out.

41:57So he goes all mad scientist on trying to just understand every aspect of TikTok to the point where fast forward two years later, and the big dog engineers from China are in our office, because Greg would be calling and being like, the algorithm is broken. And they'd be like, no, it's not. And then Greg would go get a bunch of information from Ryan Mott and send it through. And they'd be like, oh, wait, he's right. There's something wrong with ads manager, because the ad tech was very new. And so Greg was very much triaging and troubleshooting their ad tech in real time. The other story that I just speak to Greg going into his cave, it is winter 2021, probably March or February.

42:31And I don't remember like the Texas freeze when the entire state shut down. We had an inch of snow, but we lost the power grid. So anyways, Greg goes into a cave because there's nothing else to do. And he's reading the book, Crossing the Chasm, great book that I think all founders have read. But Greg's output of reading the Crossing the Chasm was a hundred page slide deck that he sends me when the power comes on. And we finally have internet again. And he's just like, I figured out who our customer is. Ultimately, that was very important work because it set up what we were about to go do on TikTok that you couldn't have success without understanding who that customer is.

43:04What did you find in the book? Not trying to be all things to all people, especially early on. You can go after a big market problem, but you don't have to start there. We were trying to tell a story to everyone. The world was upside down. Consumers were up for grabs because your gym folks were at home. Everything was a mess. All these other companies are launching and we're saying we're weights, We're body weight. We're gym. We're home. It was all things to all people. And it wasn't working. Like we weren't getting to the right person. And Crossing the Chasm just helped me zone in on who is the most important person that we're talking to right now and who's finding success.

43:42And how do we speak specifically to that person and not go try to tell a story that's relevant to a Peloton user? You have unlimited time right now to talk to us about solving this problem. how you cracked the code of growing through something like TikTok. The more detailed, the better. I just think obviously it was a or the critical moment for the business early on, once you had figured out the product, just riff on the experience, literally what you did and what you learned. I had a whiteboard meeting where like, what are the growth loops that we think are available to us that we think we have an advantage on that we think we can do within our own team that we can learn fast enough to get proof points and to dive in on goal and I'm and TikTok came out of that as the winner what we started to do was make content and we knew nothing I had this breakfast meeting with Edsel who leads branding creative and I was like hey man do you want to work on TikTok with me and he was like sure this guy is building all of our amazing campaigns like he's shooting for Nikes and all these things need you to make TikToks with me And it's just going to be me and you.

44:44He's got the creative mind. And we grabbed a coach and we said, hey, we're going to start an account from scratch. You're not on TikTok. We want to go learn. Give us all your video that you have on your iPhone. So you have this inventory of video. You have a smart, creative person. We started handles in the coach's names. Then we started to create content. And very, very quickly, we started to learn what was the content that worked. And we were dissecting every inch of it. What worked multiple times in a row? Why? What are the commonalities? How is this product used? It's not Instagram. It's like TV.

45:17People are consuming content for entertainment and it's not a social platform. It's a media company. And so you have to think about what is the right content that is educational, provides value, that gets to the right person. Because unlike Instagram, where you have an audience that you're creating content for, you have to create content that the algorithm knows who to put in front of the right person. So it's all about the content. But the advantage for us at that moment was it didn't matter how many followers you had. You can start from scratch. Nobody knew how to go do this. But that first account that we started, I remember being on the playground with my kids.

45:51And Edsel was like, dude, one's ripping. And it was like a million views. We're like, holy shit, that's amazing. That video took you two seconds to make. And it was like, do it again. We did it again. We took that account from zero to 250 ,000 people in 45 days. And we weren't thinking about paid at all. We were thinking about what is TikTok as a product? How is it being consumed? And what content wins? How do we create that content? So we got views. We had proof points of traction. And then we said, all right, we have Blink and Bio. Can we get somebody into the app? And we did very quickly. And we're getting the right people into the app.

46:25And all these things were like starting to compound. We started another account, did the same things. We're like, we can do this organically. It was three months. And then we said, let's start putting some money behind this and see how it goes. We had no performance marketing team. We had no agency. I was absolutely against hiring anybody outside the company. And I just committed to learning how to be a performance marketer on TikTok. Because we didn't come from performance marketing or Facebook, we had no preconceived notions of how things should go. And when you talk to Facebook marketers who are moving to TikTok, they were applying all these rules and heuristics of Facebook and Instagram to TikTok, but these are two separate platforms.

47:05You have this Chinese app and a different algorithm. Why would those rules matter over here? I spoke at all hands for TikTok and I was talking about some of our strategy and I had conviction in what we were doing. And I was like, yeah, I make budget changes seven to 10 times a day. And if you talk to the TikTok group, they're like, you shouldn't touch it for two weeks. It's the learning phase and all these things. Well, all those people came from Facebook and all the rules they were telling me were Facebook rules. And at the end of the meeting, this woman comes up to me and she was like, that was really interesting because the things you had most conviction in are the opposite of what we're telling our clients to do.

47:38I realized pretty quickly that everybody is taking this mental model over here and applying it and not trying to figure it out from scratch of like, if it works, do it again. Who cares when they tell me it worked, do it again. That was an important piece of just thinking on our own on how this should go. I launched my first ad. Okay, we can do this. Very quickly, it was getting people into the app and then it just became a drug addiction. I mean, it's like trading. I'm bad at mental math, but I'm also fascinated by traders. And when I was at Goldman, I would interact with traders. It was just magic to me, all the screens and the attention spanages, like, how does this happen?

48:09But it felt like that for me, like I'm moving money around, driving growth for the business. And it became a video game. It's like, how do we beat the video game today? And I had this amazing creative partner in Edsel. I can figure out the ugly of how to be an ads manager person as my job. And those two things together unlocked that channel to just keep going, keep pushing on. I feel like the rewards for doing this in a consumer business are extremely high. And so lots have probably tried, but not lots have succeeded. What do you think it was that let you start to win the video game? Was it the knowledge of how to cut a video together?

48:42Was it topics? No, the creative side, what we learned is the for you page is making a decision on your content of who your content is for, and then shoving it to that person. So the first game on the creative side was, can we create content that gets to the right person for this coach? This is a CrossFit modality. Can we get to CrossFit people using content? And that was just iteration. We would do something. And so you'd say like, what does a CrossFit person care about? What do they care about? What's their problem solution statement? What should a coach say to get you in? We learned about hooks, what you say in the beginning, the first three sentence, it matters.

49:15What should a hook look like? What do I need to say? It gets a billboard that I need to get your attention very quickly. And we had a lot of bad content that didn't work. And then we had stuff that started to work. And we have these whiteboards where we dissect every inch. It's like, what is she wearing? What word was first? What was the setting of the gym? What was the movement? What did we say? And all of the insights of that come from knowing your customer. It's not, hey, we magically figured out TikTok. We did. But our edge was we know our customer inside and out. I had dissected these app store reviews so deeply that we knew the words that were coming out of the mouth for people in CrossFit coming into the app.

49:47And we use that as or ammunition on how to speak to them and create compelling content hooks that got to that person and told the story very fast that got them to keep going to follow it coming to the app. And just to orient in the history of the business, how much revenue or whatever was there at the start of this S-curve and how quickly did it accelerate? Four, five million of era. We were getting some success, but like the beginning of the TikTok journey, it started at three million, but five when we started to put money into the machine. And it sort of exploded since there. It exploded. But one of the things we learned that was critical to TikTok is you have to own the creative.

50:21And this was like not typical for brands in our space. They'd hire an agency, the agency would make creative. But we're learning all this stuff on the organic and we're learning the iteration cycles are so fast. You can't just hand it off to an agency and hope that it comes back correctly. So we started investing in creators full time. We had JD's on the website in 2023. It said full time TikTok creator. People were like, what the hell is this job? But it's no different than social media job. 10 years ago. That's not a job. Well, it is a job. It just wasn't a job yet. And it was the same dynamic.

50:51So complete control over the creative. We have these coaches on our team gave us this edge on compounding learnings, this mini agency that was figuring it out across all these different creators that we controlled, that we weren't just waiting and hoping that somebody on the other side of the fence would throw us the right thing. If that was the frontier then, what is the frontier now? What we're thinking about now is the short form video strategy will always be a core part of our strategy. That's not going away. But I think what we learned... It's expanded well beyond TikTok at this stage. Exactly.

51:19I think what we learned last year though, is that we certainly don't have a product problem. We have a very special product. Our customers love us and they're asking us to go deeper with them. But most people still don't know who Ladder is. We're consistently top three or four in our category in the app store. And yet the awareness is very low. I think that's largely a function of the short form video strategy that we had that was speaking with creators in these winning formats to a specific persona that wasn't really leading with the latter brand. Now we're excited to go and think about celebrity partnerships and out of home and TV, and we're already making these campaigns.

51:53Now we're just going to go and put them in these other channels. So that's certainly a big focus of next year is just telling a wider story that frankly is just going to amplify what we're doing on Shortform Video. How are you going to be empirical about that in the same way that you've been about product and marketing so far? It's small controlled bets, big on scale, but limited on bets that we're making. So if it's a celebrity partner, we need to know exactly who that audience is. Is this someone that resonates with our user? Are they going to amplify the right message that represents ladder?

52:22To date, we had no leeway to spend money that didn't turn into results. It was like, here's the money in the bank, turn into users, keep doing it again. And this is a little bit different. What we've realized very quickly is we do have an awareness problem. People have heard a ladder. We're getting big. We're the number one grossing fitness app in the app store. We're a top 100 in the U.S. of all U.S. apps. It's big. So we need to go invest in really concentrated bets that speak very specifically to our user that leverages the creative horsepower in our team. We have really special people in our team that can create stuff that no one in the world can from a brand perspective.

52:56So it's not as perfect of a science. And I kind of bucket it in two different paths. But my thesis over time, it's going to make the short form engine a lot more efficient. If people are not aware of ladder, we have like one video we're trying to convert you. They're learning about ladder in that video. If you've seen and build trust with someone who's endorsing it or you have consciousness a nugget, yeah, there's a higher likelihood that that person is going to take the first step. So I think the two played together. And you asked like, what was the super charge over the last couple of years?

53:27We did deal with General Catalyst that changed the game for us and their customer value fund. And essentially what we realized is the capital markets aren't funding CAC. in consumer companies. We can't just go raise a bunch of money just to put it into TikTok. The appetite's not there, no matter how good the product is. And General Catalyst has solved that where they're financing our investment of growth every month. So the payback happens over time. It's not as much of a cash hit. But it lets me think about half the house is this very performance, very controlled. You can underwrite it, which General Catalyst did.

53:59And now we're going to go invest in some squishy stuff that should be proven downstream that it has an impact and makes things more efficient, but it'll be iteration. Nothing else. It will be a game of figuring out what works, what doesn't. If you think about the experience of, you said you'd built some enterprise companies before this versus consumer. It seems like in the last five years, for a long time, no one invested in consumer because actually really up until, I guess, very recently, AI is, of course, unlocking things in interesting ways. If you were to pitch a young entrepreneur, a teenager, or a young college student on building a consumer business rather than the much more traditional B2B thing that's dominated the startup world for a long time.

54:36What would your pitch be? Why is it fun and different to build this kind of business? The fun part is you get to see it every day and it's impacting people. That's real. We're providing real value. We're changing lives. I read these stories every day coming in to our team of like what happened to this person because of ladder. What else could inspire you more than that? We're not selling their attention to advertisers. We're helping their lives. That's really fun. And the feedback loop is fast. You make something, you know exactly what happened. That's exhilarating. And you have a report card that's your users and no one user is the right answer, but collectively they are.

55:10I'd say what people don't realize in consumer is how freaking hard it is. And there is no quick fixes. There is no growth hacks are not a real thing. You have to be black belt at building products for the consumer and growth. You have to have both those things within your own team to survive and then be able to raise money to GoFundNet, which is its own mission. So in my mind, if you want to get a consumer, you got to love talking to people. You got to love extracting information from human beings to go create solutions for them. It's not like, I think it should be. That's how consumer companies die because they just freaking guess.

55:43And it doesn't match what the consumer is looking for. So it's really hard and you have to be excellent at both sides of the house. Half our team worked on workout completion, half of them works on trials off TikTok. That's the business, very simple, but we are equal weight in black belt on both of those skills. And without either one of them, there would be no ladder at this stage. Great product, no growth, doesn't work, doesn't get funded. Great growth engine, no product, leaky bucket, doesn't become a big company. Both those things have to be true to be able to build a company that's durable and last and just be ready for 10 years.

56:14It's not going to be six months or a year. It's going to be a slog and constantly problem solving along the way. So it's splashy, it's fun, but it's really fucking hard to do. I'd probably say don't do it. There's probably easier things to get funded to do. But listening to the stories, as Greg said, when you hear from one of your members about how Ladder has changed their life in some way, and it's easy to, when you're looking at the charts and everything, that gets lost on you sometimes, but you're constantly pulled back by these stories. I think our creative team does a great job of telling those member stories, and that's something we'll continue to do.

56:46Our customers, as Greg said, they literally tell us what to do. We sent our annual survey out. This year, we had 5 ,000 responses that take an hour on average is what people are spending. We already have 5 ,000 responses in the last two days. And they're answering 230 of our most burning questions about what to build from here, what companies to partner with, would you be interested in supplements coming from Ladder, everything as it relates to all the different surface area that we could explore. So that's really exciting to us is just continue to listen to them. They're huge advocates for us.

57:16So we're going to continue to do that. If you want to be by yourself with headphones on working on a consumer, it's a losing strategy. I see that all the time where it's like you're just building shit. You got to be talking deeply to the user. If I think about the two big world things happening that probably most impact your business, they're out of your control. It's AI and GLP-1s. And I'm really curious how you think about both of those things as creators of opportunity, as potentially risks. I'll mention GLP-1 fast and then AI is like a much bigger conversation. On GLP-1, it's interesting because all the science would support that you need a strength training plan alongside your GLP-1.

57:57You're at risk of so much muscle loss. So we think that's actually a macro tailwind and something that will help us. It's not something that we've investigated to date, but can totally see us working with some of the bigger GLP-1 providers at some point. The science backs that relationship. So that's not something that scares us. In fact, it's a question we asked in our survey, which we've never asked before. Are you on it or are you thinking about it? People who are fitness enthusiasts doesn't mean that they're not on GLP-1s. And so we're going to continue to learn more there. On the AI, I think what gets exciting for us is that it feels like we can have our cake in 82 now.

58:29And that in the beginning, we felt like we need to focus on a venture scale business here and solving a problem that's solvable for a customer with software, which felt like one-to-many programming. Now with what's available to us in AI, we're able to deliver that personalization as well, which four years ago we couldn't have. Two years ago we couldn't have launched nutrition with our same team, you know, six-month span like we did. Beyond that, what I get excited about is that in an age of a lot less differentiation in tech and commoditization of certain features, because it's become so easy to people think you can just use ChatGPT to build an app, I would challenge someone to try to build the experience that we've built using AI.

59:09And I think we're going to continue to lean into things that AI can't touch, which is we've built a compelling brand. We have a tremendous amount of trust from our members, which is really exciting. We deliver a human experience at scale because of it. We've been thinking about it for four years. We've been using it as a tool for three years. It is chapters for us. In the beginning, it was a non-coding tool. It was how do I synthesize information? Well, it was amazing. I could take 5 ,000 responses and really understand what's happening. And so then it was everywhere. I can take it to think about how do I create compelling TikTok hooks based on all of this survey data or user data.

59:41That's a tool. It saves time. But it happened at the exact right moment where our entire team is 50 people and that includes 20 full-time coaches. So 30 people excluding coaches. We started scaling at the right moment where AI started to become a use case that made us not have to go higher or expand the team just to solve a problem that we looking to solve. The team would have been a lot bigger if this were four years ago, if we didn't have AI in every element of our business. The second chapter for us is using and incorporating the product, not replacing the human. We believe in humans as motivation.

1:00:14It's really important to feel like having a relationship with the coach, but I don't want to have coaches and reading chats all day and interacting one-to-one with users. I want it to feel that way and use tools to expand the capabilities of our coach. We have teams with 60 ,000 people that are in it. And now the chats are big and cumbersome and complex. And the coach's message isn't the only reason they're there, but it matters. And the magic moment for a coach is saying the right thing at the right moment that makes the most people satisfied with what they're saying. What isn't a great use of time, which was happening, is scrolling the chat for an hour to go figure out what's happening here.

1:00:50So we built a product called Ladder Pulse that automatically come in, reads every single chat that's come in tells you, here are the three most burning questions. Here's the content you should create. Here's the member you should respond to because they've never been responded to by a coach. Send. Done. So now we've removed all the cognitive overload of what to say. And it's all powered by this tool that we built purposely for the business. We're building software now to go support a better experience that's built on AI. Nutrition is a great example. We have never gone into nutrition if there was no AI.

1:01:21MyFitnessPal had to build a database over time by hand that became the value of my fitness pal. That's not the hard part anymore. The hard part is the consumer experience and knowing what to do with the data. So it opened up the capability that wouldn't have taken the business sideways for five years to go solve that problem. And then we're inventing products from scratch. I'll give you two examples. One, we have, I told you, a North 3000 paying members. We have one person that touches support. It's not even a full-time job. We have tickets coming in every single day. And we spent time trying to understand who's coming in, what are they asking, what are the buckets here and we built a product.

1:01:54That person's name is Maeve. We built Maeve AI, M-A-I-V-E. And we built a customer support tool from scratch. It's purpose built for our company that manages now 90 % of the flow coming in and the experience is as good or better. And it's faster than it was before. And we made it ourselves in our team. That would not be possible five years ago. That solved the huge problem. Now we don't have to expand that team and we can deliver a better experience through that. And we have a person on our team who only works in AI. That's the job. He's been doing that for a long time. As your business grows, Vanta scales with you, automating compliance and giving you a single source of truth for security and risk.

1:02:30Learn more at vanta.com slash invest. Ridgeline is redefining asset management technology as a true partner, not just a software vendor. They've helped firms 5x in scale, enabling faster growth, smarter operations, and a competitive edge. Visit ridgelineapps.com to see what they can unlock for your firm. How do you think about saying no to potentially juicy revenue opportunities that aren't core to the subscription, complete a workout, acquire customers? I can imagine a ladder dating service. I can imagine ladder being an origination platform for GLP One, for... Or ladder coach tools. Or ladder coach tools.

1:03:03Which is absolutely a business. The Ben Thompson sense of aggregation theory, you're maybe a consumer aggregator. You've aggregated a lot of demand in this specific space. Historically, those companies have figured out how to monetize in lots of different ways. How do you think about the siren song of hire ARPU and new sources of revenue? But a lot of those businesses have died too because of doing too much at the same time. We've got a multi-phase vision from the beginning of what this thing can become. And our goal is to be the de facto product in this category. And we have stepping stones that we anchor to and they get moved around, but we have a vision for how to go do that.

1:03:43I think about new ventures, new business, push versus pull. Are we being dragged into this area by our members? Is it so freaking clear that this is going to be really exciting and solve a really important problem for people that are relevant to us, like nutrition? Nutrition was on the board as an investor deck that you have from five years ago, but it didn't make sense to build it until last year. When we had critical mass, it was very, very clear from our members that that was going to move the needle, and now we'll build products on top of that. So we're ruthless in prioritizing. You have to make a clear, clear case of what this does to the business.

1:04:15We have no Android app. People think that's insane. But building an Android app requires basically pausing development on iOS, splitting the team's focus in time, playing this game of catch up for a user that has much lower revenue potential and could absolutely take the business sideways for a year. Will we have an Android app? Yes. We won't have it this year. It's these levels. In my mind, we have to go earn the next level. And if we earn the next level, what should that be? Let's figure it out and then start the work on that. So I think all these things that everyone talks about later, we'll go do all of them.

1:04:43But I'm playing like a long game here. This is not go sell the business. Let's go build the generational business in consumer that solves the most problems for the most amount of people. In that big long-term vision, fitness, working out, and nutrition are two obvious major food groups of the vision. But what are the other big stepping stones that you think about? It's the system of record for health and fitness. is what Greg's talking about and how we've talked about it for a while. There's a category winner in every category. Transportation, it's Uber. In short-term housing, it's Airbnb and Spotify and Music.

1:05:16There's no clear winner in the health and fitness category. It clearly needs to be a mobile first company. It needs to be a product that has engagement that looks like social that we have. Nutrition was the next obvious step and it increases the surface area for us to really think about these other product extensions and line item extensions. Some of what we talk about is there's so much commerce already happening in the app. We see it every day. We see, hey coach, what's that creatine you're having? Should I be having whey or vegan protein and love those new shoes? Where do they come from? People are sharing links all day.

1:05:47There's different chats based on supplements or on food or on apparel for that matter. We're watching, we're learning. There's an opportunity for us to reduce friction there and start to think about, is that a marketplace? Does it look more like an Amazon experience at first while we're learning and then we're building our own branded products? Our members want to tell us that they got a DEXA scan and they would like this to be their system of record for their biomarkers. There's a lot of people building companies in the biomarker space. I think that would be a really cool maybe partnership to start or it could be a feature of our business.

1:06:16So we get excited about if we build a compelling product and brand where people are opening this app 10, 15, 20 times a day. There's a lot of opportunity for us to insert other products and experiences into it. So there's a long list that have been on the whiteboard since the beginning. What I think about is product expansion and user expansion. And product expansion, there's no like, oh man, that's brilliant. It becomes obvious when you look at it, but we lost nutrition. Now we have inputs and we have outputs. Our members want us to tell them, what supplement do I need to go take to make me whole?

1:06:50They want to buy that from us. Those will become businesses for latter when there's critical mass and it becomes very clear that this is a real problem that we can solve uniquely for the business. So all of those things start to open up. I think there's user expansion too. We have a very specific user. It's a very big market, but it's not everybody in fitness right now. So we think about ladder is how do I get a hundred million people to be working on ladder every day? It might be a different problem set than the current product right now. We spend time thinking about how do we get the people earlier in their fitness journey into ladder?

1:07:21Because if you think about our product, it's progressive programming. So they need to know that programming is valuable. They got to be into strength training. Okay. That's its own bucket. They need to be able to pay for that. Use a phone during a workout. All these things are big market, but they're inhibitors to broader fitness. And we've got this content library that is not valuable to our members. Our members are paying us not to think. They don't want any choice. They want to know on Monday, what exactly should I do? And we asked this question in a survey. We said, what would you pay for the whole library?

1:07:49And it was like a dollar because it's not valuable to them. I already have my Monday workout. I don't need 10 ,000 workouts, which is every other fitness product. So I think it's going to be a path. it's not this year, it's not next year, where we give the individual content away, where we give away every other product, which is just the library, because the library isn't valuable and isn't what our members are paying for. But it starts to map to how consumers in the outer rings of fitness are consuming content. What we learn, investors come in and say, who's your biggest competitor? Is it Peloton?

1:08:18It's like, no, it's YouTube by far. It's not even close. It's people going to YouTube and typing 45 minute upper body dumbbell, give me a workout, and then consuming it on YouTube. YouTube's not built for fitness, but the content lives there. We need an on-ramp to ladder that mirrors that consumption pattern. There's amazing content, the best content. You're getting it on YouTube. It all lives here. It's free. There's motivational mechanics that are important. It amplifies the importance of social and the power there. So I think there will be a freemium component that it will be the right moment to hit on it.

1:08:49But we've been talking about it and thinking about it for a long time on how do we get to the wider rings? And then over time, you move those people, just like we do on TikTok, into this concept of a plan. Hey, now you've done 40 workouts. They're in seven different teams, but you're not really happy that your results aren't there. I got a different way. We can tell you exactly what it should be. The analogy I give to folks outside the business is you're working on a puzzle. Puzzle, you got the picture on the box, you got all the pieces. You got 10 ,000 pieces. And the picture is what you want to go build.

1:09:17Well, our members have the vision of themselves. That's the box that they're solving for. And we give them each piece in order, one by one, to construct the puzzle that they're trying to solve. No thinking at all. Well, most products in fitness is just a bunch of random pieces. And it's like, pick up a piece that you feel like doing today. That's not a great strategy to getting to results. One more question is what it's like talking to investors now versus early on. This thing has changed quite a bit. Your sources of capital have gotten - We talk about push versus pull. Yeah. Increasingly sophisticated over time.

1:09:47I was the least sophisticated at the start. you've gotten to much smarter, more institutional investors ever since the beginning. Say a little bit about that journey. What's exciting is just on the investor landscape in general is that there's not much innovation being funded in fitness right now. When we first started trying to tell the story and raise money to institutional investors, it was like, how could you possibly compete with Peloton? They're a$50 billion company in that moment. You should build AI weights. That's what I remember multiple times. I was like, that seems like a bad idea.

1:10:15Where's the hardware? And then Peloton has their post-COVID troubled and they're like, oh, well, Peloton didn't make it or that story got very hard. How can you build a good business? It can't be done. So it's being used against us twice now. But all that while we've been iterating on product and shipping product to every other day and listening to our customer and building something that our members are telling us is really, really valuable. And so we have this amazing headstart where we feel like we just don't really have any competition. So that's been really exciting. It was hard for a moment.

1:10:45Now we find ourselves in a position where when you get to this growth stage, people can see the numbers. You can look at App Store metrics and see that our business is inflecting and see that the growth rate has been really strong. And so there's a lot of investor interest. What's unique about conversation with investors now is we're in a strong position in that because of the general catalyst deal, we control the timeline on raising money. Our business now generates cash. It sustains itself. That doesn't mean we don't have huge ambitions. We do, as Greg just talked about, We want to be the system of record in health and fitness.

1:11:15That's going to require raising additional capital, at least another round, and continue to invest in particularly product and engineering. Fortunately, we have some great investors already around the table right now. And the way we've been approaching it is start to go and spend time with a small group of really high quality investors to get to know them outside of the context of a fundraising round, which is not something that we were used to. Now you have time to actually build rapport and get to know people when you're not raising money. What I think is important there, four or five years ago, it was, it's cash.

1:11:45We just need cash. I don't care who comes from it. Terms, sure, sounds great. We need money. We're dying. There was no selectivity. And this GC deal has given us a lot of leverage where we have more money in the bank than we did when we closed our series a year ago. And it's giving us time to really think about who are the people that we want in the boardroom? Who are the people that we want advice from in talking to companies in their portfolio? Even before we're thinking about it, just knowing who are the five human beings, forget firms, because that's less important to me, who are the people that we're really excited with for the next leg of ladder.

1:12:17And we now have some cushion to go be smart. That was not possible. This remarkable journey is completely crazy. I know it's hopefully chapter one or two, and there's a long story to still be written. What is the kindest thing anyone's ever done for you? And you can take that either personally or professionally, however you want to take it. It has to be my wife through all of this. She married an investment banker in New York and San Francisco. And that has a path and a vision for life that you can predict and study. And then I turned into this entrepreneur who was making no money. And we have three children.

1:12:50Like she is also working very hard, but she has given me the room to make this possible. And if that dynamic wasn't true, there's just no way that I could do this. There would be no path. it's a huge burden that she took on and it's a huge component of how he got here. Greg just went with the wife, so I can't do that, even though that would be the obvious. You've got to thank my wife who had been putting up with me since we were 19. What I'd say is I would thank my dad, actually. When I try and describe to my kids what it is I do or what my role is, I always say that I sell. That's what I do. And when I think about that, the quote that always got me excited was what Ken Griffin would say, where I don't even think it was his line, but if we're all going to eat, someone's got to sell.

1:13:31and that always pumped me up that selling was important. And it wasn't always something that was transactional, but I learned sales watching my dad. It's not something he told me, it was something that just being with him. So we commuted to school for years, two different private schools where it was like an hour commute and could be longer with traffic. And this is early nineties, mid nineties. You got those old Zach Morris cell phones. And my dad was a mortgage originator. So he was always on the phone and he was basically a traveling salesman, but on the phone in the car the entire time. He's a lefty, so he would have his phone on his shoulder and he would have his notebook on his left hand taking notes and the map and he'd be driving with his knees.

1:14:09And my brother and I would be listening to my dad selling basically every day. The three things that he taught me about sales are, one, to be effective in sales, you need people to like you. Ideally, they want to root for you. And if you're really good, you can get them to potentially quit what they're doing and want to join you. That would be like the best thing. But then second thing is they need to trust you because that's kind of all you have. integrity is everything when it comes to sales. And the third thing is you need to be relentless, but not in an annoying way, just deeply persistent.

1:14:37That's just carried me well through two very different careers to date. And he's just been an awesome role model and someone I think about trying to teach my own kids lessons like that. Amazing place to end. You are one of the best salespeople I've ever met. The car rides worked. It was effective getting me into ladder. Yeah. Thank you so much, guys. Thank you. If you enjoyed this episode, visit joincolossus.com, where you'll find every episode of this podcast complete with hand-edited transcripts. You can also subscribe to Colossus Review, our quarterly print, digital, and private audio publication featuring in-depth profiles of the founders, investors, and companies that we admire most.

1:15:13Learn more at joincolossus.com slash subscribe.

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