523: How Wellhub is Changing the Game in Corporate Wellness | Cesar Carvalho

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. Hear the stories, learn the proven methods and accelerate your growth and future through entrepreneurship. Welcome to the founder podcast with Nathan Chan.

1:02So, yeah, I'm really excited to speak with you today. The first question I ask everyone that comes on is, how did you get your job? Okay, how did you find yourself doing the work that you're doing today? My job is the CEO of WellHub and like a quick intro on the business. We're a corporate wellness platform connecting companies and their employees to the best partners in fitness, nutrition, sleep and mindfulness. And we're doing all that with a subscription to employees that costs less than a single partner, but gives them unlimited access to everything that's included. And the story about creating this business 12 years ago is a deeply personal one.

1:47I was working long hours as a consultant at McKinsey, and I was checking into flights, hotels, different client sites every single day. And the one thing I was not doing was checking in with my own well-being every single day. I had always been active. But in those two years, I wasn't exercising. I wasn't sleeping well. I gained weight. And the worst part is it was really, really hard for me to realize that that was having a substantial impact on my life, on my peer relationships, on the relationships I had with folks from my family. and I didn't know what was wrong with me at that time. And well-being was not my first priority.

2:35In fact, it was my last priority. It was something I wasn't even thinking about. And it was really hurting everything else.

2:45So I went into doing an MBA after that experience. And it took me a year to kind of connect the dots and realize that what I was experiencing is something that everyone else in some way, shape or form is experienced when they're struggling at work. And that was a way more prevalent case than I had ever imagined. And the idea to me was, how could I create a service, a product, a membership that would change that and would make well-being, exercising, sleeping well, easy, accessible for everyone and would give people this discovery platform that they could use to try different things until they find something they really love and they stick to it.

3:38and I went from not checking in on my well-being every day to when I started this business started checking in with my well-being every single day and like that helped me inspire other people to do so as well and we built the business we have today yeah what a great story and how'd you validate it like how'd you know you're on to something how'd you build up the confidence to go all in? Is this your first business? It's my first business. And to be honest, the story is I was doing my MBA. I had the idea to start the business during the summer between the first and the second year. And when I saw something that was working quite well, that I was feeling fulfilled at work, I said, I want to dedicate 100 % of my time to do it.

4:32So I dropped out of the MBA and moved back to Brazil where I'm from and started working full-time on the idea. I never got my diploma, but I got to build a business that is now in 11 countries working with 15 ,000 corporate clients and that has a ton of partners involved in like gyms, studios, wellness apps everywhere. and to me, Nate, what really changed the game was a workshop I had when I was there at HBS. It was an workshop about this book called Flow and at my work life at McKinsey and the other experiences I have had, I was never able to find what that book and workshop described as being at a state of flow anyway and and i realized that if i wanted to have that and look i'm a i'm a workaholic i work every single day and i knew i was going to spend a lot of my time working no matter what then i said it would be i would be better off if i had that flow every single day and and the push to start was really trying to build that culture that environment in which i knew I would thrive and work would not feel like working.

5:53And that I could do that type of work and that type of job for decades. And I've been doing this for 12 years now. And it feels like day one. And right now it's a very specific moment in time for WellHub because we just changed the name of the company to WellHub. So it feels like day one. We're just starting the business again and I'm starting all over again. And how did you get your first customer? No, it was a very interesting story. We started not as a B2B solution, a company that would go to market as a benefit offers via HR. We started as a direct-to-consumer business. And my first corporate client was actually an individual user.

6:45who had access for himself. He was the CHRO of PricewaterhouseCoopers PwC in Brazil. And he said, look, this is amazing. I can use all these gyms, these different wellness apps. I can have access to all of that. And my employees are asking me to go and sign different partnerships. But they're all over the place, like constantly working on site on different plants all the time. And his push was very interesting. He was like, what if you could put your network of jams, studios, and apps and bundle all of them for my employees under a single membership, single plan, and we offer that to them as a benefit.

7:31It was his pitch, his idea. And that's how we landed the first client. It was about saying yes to that specific client. Exploring B2B partnerships was a small bullet point in our business plan. In that others section at the end, you have other potential opportunities. That was one of them. And from that phone call, listening to this user who wanted it for his own employees, we built the entire business afterwards. And how long did it take for you to get to that point? And were you getting traction on the direct-to-consumer side? Yeah, so not much. And if we had stayed direct to consumer, I would have probably gone back to finish my MBA and I would have done other things of my life.

8:22It took about nine months. And we were trying everything at that time. I remember going to the streets and handling over pamphlets of what we were doing, trying different online marketing strategies, speaking to different influencers to have them talk about our direct-to-consumer solution, hoping it would take off. And nine months later, when we signed that client and launched for all their employees, in two days, we had two times more employees, more people using our services than what we have accumulated in the first nine months of the business. And that was when I knew we had product market fit.

9:05when the company was super happy with us, the employees were super happy as well and the partners wanted more visits because they suddenly got a huge influx of new people that were not using them before. And that was when I knew we had a mission to scale. Before that, it was discovery mode. We were trying different things and et cetera. At that point in time, I said, I want hundreds of more companies like this. Then they became thousands and now we're at the 15 ,000 mark and count. Yeah, wow. And, you know, the chief HR, you know, human resources officer for PwC in Brazil, that's a pretty next level client, first client.

9:53How did you get like in touch with he or her? You know, it was him reaching out to us. Because we have this huge, or this, maybe I would say misconception that large companies take a long time to decide and et cetera. There's always a human, there's always a person on the other side. And that person wants to move fast. That person wants to solve the needs of their employees. And they want to find creative, innovative solutions for their employees to change their lives. and this was a clear example of a spark. And like the product was validated by him after using our services already. He knew it was great.

10:40He understood the value proposition and it was just a matter of taking it to thousands of more employees afterwards. We did pilots, et cetera. It took some time to get it launched, two to three months. But once we did, it was a constant conversation of how do we expand this? How do we take this to other geographies? And a few years later, we were serving them in Mexico and many other countries. And now we serve them in the U.S. So the business literally started out of Brazil and then you moved to the U.S. Yes. We're now a global company, but it was started in Brazil. Brazil has a fragmented business market.

11:21People are super active there. everyone values exercise, sleeping well, well-being is super important. And I found it was like the best choice as the first market to test the business. What I realized later, Nate, is that the needs of employees, the needs of companies to keep people healthy, engaged with work, they're the same regardless of the geography. So we could have started the business anywhere and it wouldn't have worked the same way. And what the CHRO of Ernest & Young or FedEx in the US, what they're concerned about is the same thing as their counterparts in the other markets. So, hey founder fam, I want to take a quick break from the show to tell you about something we're really excited about, our Black Friday offer.

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12:47That's$200 off every single year backed by our 90-day money-back guarantee. Picture this. With the help of Founder Plus, you could be running your own Black Friday sale this time next year, or you could be smashing it out of the park, smashing all-time records. So don't miss out. This deal closes soon. Start building your business today at founder.com forward slash plus. That's P-L-U-S or click the link in the show notes. All right, now let's jump back in the show. Did you have to raise money? Yeah, tell us about that journey. Sure. Over the course of our history, we raised more than$500 million.

13:29Wow. But it started with a$200 ,000 check from family and friends when I was still at HBS doing my MBA. Wow. I got people that went to college with me, my former boss at McKinsey to give me money, my parents and my co-founder's parents. And we raised that initial check without even guaranteeing we'd be working on the business for the long run. Because we could have gone back to doing what we were doing. I could have gone back to my MBA after three months of starting the business in that summer. But that money was what we needed to get the business started. And if you think, we are asset lights, it's true.

14:14but because we go to market as a benefit to companies, before we launch the first large client in a given market, we need to have all the gyms, all the studios, all the different wellness apps everywhere in the country. Because if you think of a large bank in the US, they have branches and employees in almost every single city and they won't launch a benefit that cannot be given to every single one of them. So there's a huge upfront investment. It normally takes two to three years of investment, of signing those different partners before you get those first large clients to launch. But the benefit after that is once they start and you have that network in place, then you can add many more clients on top of that network and you can keep working to bring new people to visit the different partners we have.

15:08Got you. So I'm curious, you said you need to sign up a lot of different gyms and wellness partners. So that means you basically needed business development people on the ground in a particular region to do that heavy lifting. and that's where the, I guess, the capital requirements is. And then obviously there's development requirements around your platform and then the integrations between all the other apps and that, and that's where most of the money goes, right, for expansion. Yeah, and there's a third leg as well. So you mentioned business developments to get new partners on board, the technology.

15:57And there's a technology for our partners, a technology for our corporate clients and an app for every single subscriber. So I say we have three technology companies within one here. And then we have the business development part on the corporate side to get companies to invest and add their employees as eligible employees of our benefit. So we also have business development on that side as well. And this is why we are intensive in terms of people and resources at the beginning. And then once you get to a different scale, then you grow really fast after that. Yeah, got you. Impressive. So what were some of the biggest challenges in the first couple of years of starting the business?

16:48Sure. So I would say that in the first two years, because this business model I started wasn't created before, and there were no larger companies that had this model as a reference. Fundraising was really difficult. We needed to convince people, not only that there was an opportunity, but this business model going B2B was the right approach for solving the problem. And that was first. And that happened at a time where, especially in emerging markets, 99 % of the companies started were copies of models that were doing well in the US or in Europe or in different places. So that was the first one.

17:33The second one was that very few funds believed in 2014, 2015, that great global companies could come out from everywhere. And now today, there are amazing companies from Australia taking over the world, companies from Europe taking over the world, the world, many, many large scale companies that are the leaders in their categories that were not born in the Silicon Valley specifically. But back then, that wasn't a reality. So when we started to pursue this idea of starting this business everywhere, where it was difficult to raise money as well. The third part was whenever we got to new geographies, optimizing for what was the right level of investment to accelerate as much as possible to that inflection point where every single new company could be launched and the network of partners would be great for that.

18:33So finding that sweet spot of liquidity and accelerating as fast as possible to that point. And you know, with every year after that, and I've been doing this for 12 years now, we're operating in 11 countries, we have 2 ,000 employees, I still get those challenges all the time. And every year there's a new lion to kill, a new opportunity to tackle. Does it get easier though after a certain point? Like, I know some friends, they say, look, once you hit around$20 million a year, you've got a solid leadership team in place. It does get easier. Have you found that? No. I found the opposite, actually.

19:20I think the biggest lie I was told is that, like, this is a marathon, not a sprint. To me, it's way more than a marathon. Like, this is a race that never ends. And what I realized is that even when you hit$100 million, we're getting close to a billion dollars now in revenue. And, like, the problems are still there. I think what changes is the nature of the problem you're solving and how consequential those decisions are. We have a great leadership team in place. And, look, we have an amazing leadership team in place. a team of people that has been working together for more than two years now. So there were no changes in the leadership team of WellHub for the past two years.

20:07We know each other. We understand our vibe. We know what makes each other tick. But I think the type of problems I have to deal with today are problems that they can solve by themselves. Decisions that eventually are one of the members of the leadership team feels like is the right one, but the other one feels it's not, that we should focus on something else. And look, by having that group of people that has been working together for more than two years disagree on something and then having me be the judge of one or the other is really, really tough. So the nature of the problems became way more complicated, way more complex.

20:49They involve way more variables than they did at the time. And I don't feel my job has gotten easier at all. I feel the type of issues are way more complicated and we also have a better team to solve them. So I feel it got more complicated and we have a better team. Yeah. Okay. Interesting. And I guess one thing I was just curious about going back to when you said you raised a couple hundred grand from friends and family, but they didn't really know like that idea that you raised the money off could have changed and that that concept for i guess the original version of well hub um how do you convince people to believe in you and your co-founder to give you even a couple hundred thousand dollars when you have no track record, not a hundred percent on the idea.

21:46Yeah. The first round was from people that knew us, you know, they knew we would fight, to build something. They knew we were smart. They knew we would hustle. But then when it came to getting institutional capital from like professional investors and et cetera, then it changed. I feel what was really, really critical for us was to prove that we had a rough diamond in here that could be polished and become really, really big. But then the challenge was to prove that. And in our case, I can share what it was. It started with an amazing product for the employees of our clients. It started with the subscription, a subscription that was better and cheaper than any other solution out there.

22:42Not only cheaper, not only better, but both. And the plans we created that included unlimited access to all the gyms and studios in our network, to the different wellness apps, to nutritionists, and et cetera, by having them be unlimited and cost less than a single membership to a single gym, so there was a price advantage as well, we got the hearts of employees. And then by having that specific corporate client that I mentioned launch and see 25%, 30 % of their employees using this service and loving it, we got the heart of the HR leader as well. And the combination of the two got to the secret ingredient of our platform, which is behavior change at scale.

23:32when you look at all the problem in the space of benefits is that once you launch a benefit very few people enroll five percent six seven eight percent of the people sign up but just because the solutions have a very low retention rate one year later you're down to two percent of your people actually using a given solution every single day and the really cool thing about what we have is a solution that enrollment and usage only grows over time because we don't have a single point solution. We have them all here. And in fitness and well-being, every year, there's a new trend. When I started my business, it was Zumba.

24:18Then it became Pilates, then CrossFit then cycling and now we were just talking about pickleball and the racket sports around the globe and in two years there will be a new trend everyone's going to be talking about it and no matter what the trend is we're going to have them all in our platform and people are going to be using all of them and that's true for physical activity but also true for diets it's also true for the types of meditation and meditation itself So the secret is having that platform that can have a lot of people signed up and that enrollment, that utilization grow over time. But when investors saw that, then what they needed to believe is just on our ability to take that from one, five, ten clients to hundreds, if not thousands of clients afterwards.

25:12So the points of questions and the question mark, they're really less relevant than they were at the beginning. And I think what founders need to do is to find that use case, that ideal client profile that you're delighting so much to prove that you have a lot of value to someone. And then the question is how to spread that word afterwards. And once you have that point, capital runs to you, not runs from you. Yeah, that's a great insight. So coming back to like that practical piece for founders that perhaps are in that phase of finding product market fit with their product, what advice would you give?

26:02the most important part and it is what got us to find out that that user also wanted to offer this for his employees I think it's being really, really close to your customers, to clients, etc. Be on the phone with them be with meetings be the person that knows about your product the most but more importantly that knows about your client the most What do they value? Why do they value it? What are the things they like in your product? What are the things they like in your competitors? And what really matters to them? I think if you have your radar on, if you're constantly scanning the market, and if you're trying to get that ICP to love you, that's the right thing to do.

26:53And once you find that thing, then you focus 100 % on your energy, on delivering it the best possible way to as many people as possible. And in the early days, how often were you on the phone with your customers? Like, you know, I'm curious, like how close were you? Can you give us some examples? Every single day, mate. We had a small office, but everyone was sitting together. And what we had as a rule is the phones of our reps there, We had two reps at that time, like agents answering the phone when clients had questions or partners had questions. After both of their lines were occupied, were busy, my cell phone would ring and I would pick up the phone.

27:39And if I didn't pick up the phone, my co-founder, who was the CTO of the business, would pick up the phone. And if he didn't pick up the phone, the other co-founder who was leading all the partnerships with gyms, he would pick up the phone. every single meeting we had we were talking about the business every single time we were meeting clients friends we would talk about the business and all of that was an art of gathering information and having really really candid discussions among ourselves on on how to best change our business change our business model to to incorporate what we learned from those conversations so talk to me about the partner side of things because that's no easy feat either potentially once you've found like once you've found product market fit even just to get the partners to agree to effectively heavily discounting their service and and asking many so then you can bundle it into your service to have an unfair advantage yeah how are you able to do that, especially in the early days.

28:45You're convincing people to believe in something that doesn't really exist. Yeah. And to me, there was a lot of trust between our key partners and us. And there was a clear vision that they bought into it as well. And all the case studies we've built with our partners afterwards have proved that vision right. And the vision is that those partners, they would be willing to engage in partnerships like the ones they have with us, if we can prove to them that the people we're bringing to them are new, that they have never been to those partners before and that they would start a new routine and they would keep engaging with their partner afterwards.

29:29And that's what we wanted in the beginning. We wanted to be an incremental channel for all these different partners so that we can get companies to invest and get those new people to them. And no partner individually can go to a large organization with 10 ,000 employees and sign a deal with them. But together, as part of this ecosystem, we can all get not only that company to sign an agreement, but to substantially invest and to substantially communicate to other employees so a lot of people join. And then the secret became, how can we bring new people to them, new people to visit those partners?

30:07and once you surpass 5-6 % of enrollment in a given client, you are past the folks that were already active. And then when you get to 40 % enrollment, 45-50 % enrollment, all that incremental enrollment is all of new people and people that were not really active at that time and they're just changing their behavior because suddenly there's a new solution, a new subscription here that costs way less than it costed before and that gives them unlimited access and that they can join, by the way, they can join a cancel at any point in time. So that thing allied with the intensive communication from the company side to get people to engage because the companies also benefit from having happier and healthier people in their workforce.

30:59And those two things is what brought a lot of new people into the space and what made our value proposition to the partners unbeatable. And the vast majority of the partners we have, they don't partner with any other B2C solution in the space just because B2C players tend to cannibalize the members that they already have. But for us, given the fact that we only work with companies that are substantially investing and substantially communicating with their employees, we guarantee incrementality to them. Yeah, I see. That's really clever. All right. So curious on, I guess, the wellness side of things.