537: He Made $3.6B Selling Fitness Trackers | WHOOP founder Will Ahmed [VIDEO]

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1:04Why don't athletes measure sleep and recovery? Why is everyone just talking about exercise? We knew that there were certain things that we needed to measure. I was building a business that on paper I really had no business being able to build. I was 22 years old and I was theoretically going to be taking on Nike and Apple and Under Armour. And so there was a lot of reasons why people thought I was going to fail at that. Six years into the company's history, we were completely changing the business model. which is another way of saying six years into building the business, we didn't have a business model.

1:36If that hadn't worked, the company probably would have failed. Mind you, like three years after we made that decision, we were a multibillion dollar company.

1:47Hear the stories, learn the proven methods and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

2:00well uh will thank you so much for taking the time to speak with me today uh the first question that i wanted to ask you was can you share your experience with overtraining and how that led to creating whoop absolutely and thank you for having me you know i was uh always into sports and exercise growing up as a kid. And I was playing squash when I was at Harvard. I was a collegiate athlete. And training was something at that point I was fairly used to as an athlete. And yet, it really wasn't something I felt I had mastered. I spent hours a day training. And I was someone who used to overtrain, where you go through this period of time where you're getting fitter and fitter and fitter.

2:49And then suddenly and unexpectedly, you kind of fall off a cliff and you don't know why. Your body's very run down. You kind of have a lot of the symptoms of depression without actually having depression. Your nervous system is very sympathetic dominant. Your amygdala response is heightened. There's just a lot of things about overtraining that are uncomfortable. And you kind of feel sick, but you're not sick. and by the way, 70 % of athletes overtrain at some point. So it turned out to be fairly common. The question I asked though, is why isn't there a better way to measure this? And if I'm going to spend hours a day training at something, why wouldn't I know what I'm doing to my body in a more measurable way?

3:37And so I just got interested in physiology and what could you measure about the human body. I did a lot of physiology research as a student, read hundreds of medical papers. And over the course of my time as a student at Harvard, I came up with a set of ideas and principles that I thought could be relevant for not just training, but really understanding the human body and so that was the the physiology and um and sort of original research that led to founding whoop yeah it's wild so basically whoop started as an academic paper at harvard can you take us through that transition because that's very rare that uh and this is your first business right first business first full-time job yeah crazy and i've been doing it I've been doing it now for 12 years.

4:40And well, look, I think that my story in building Whoop is one around finding a problem that you're obsessed with. I didn't actually know I was starting a company, but I did become deeply obsessed with solving a problem. And I think that that's a healthy thing. I think it's better to get really focused on solving a problem than to tell yourself, oh, I want to start businesses. I want to start companies. I want to make a lot of money as an entrepreneur. I don't think that's as effective as really falling in love with a problem to solve. And a good test for that is like, are you always thinking about it?

5:23And when I was 19, 20, 21 years old, you know, quiet moments in my life, I kept coming back to this idea for Whoop. And, you know, what could you measure? And why don't athletes measure sleep and recovery? And why is everyone just talking about exercise? And these are just things that I would think about in the shower, in the back of a cab, or when I was bored in class. And I think there's something to that. I think where your mind wanders to when it's quiet, I think it's pretty important. And I think for anyone who's thinking about starting a business, really being honest with yourself, hey, is this something you're obsessed with?

6:04Is this something you really want to do? It's a problem you feel deeply about. Because inevitably, there's going to be a lot of ups and downs to building that thing. and what you want is to keep getting drawn back to the problem that you're trying to solve and that passion for the problem. I've found that when entrepreneurs are more driven by some kind of a financial outcome or something, it's harder to overcome those difficult states. Yeah, I agree 110%. Talk us through that transition of taking the product and bringing it to life. What did the first version look like? How long did it take to get to the first version of Whoop?

6:49So I founded the company in 2012 and that summer really started working on it full time with a few other people. And we were a pretty ragtag team. I mean, we were all under the age of 24 years old. We didn't really know what we were doing, but we knew that there were certain things that we needed to measure. So we knew, for example, that we needed to measure heart rate variability from the wrist. We knew that we wanted to measure heart rate as accurately as a chest strap, which was kind of the gold standard at that point for measuring exercise during motion. We knew that we wanted to be able to measure sleep, and there was a whole process for measuring sleep then that involves sleep laboratories and everything else.

7:32So really the first prototype we built was to de-risk some of the challenges I just explained to you. I think there's an important phase for early stage businesses of what do you have to solve at this stage to prove you're worthy of getting to the next stage or you're worthy of raising capital to get to the next stage. And the first thing we really needed to prove was that it was possible to collect some of these measurements in a non-invasive form factor. So the most useful first prototype that we made was one which had a wristband, mind you, a big, ugly, cumbersome wristband that could measure heart rate variability from the wrist, which at that point hadn't really been done before.

8:23It wasn't something people really tried to do, and it wasn't a particularly well-understood phenomenon. And that measurement, being able to demonstrate that we could make that measurement non-invasively was useful enough to help us be able to raise capital to say, okay, well, we've now done this. We're going to take this ugly-looking prototype and put it into a smaller form factor. And then And once it's a smaller form factor, we're going to sell it and so forth and so forth. You have different versions of these milestones. But a lot of our early prototypes were less about making it look good and more about proving that we could overcome this engineering challenge.

9:05Got you. And would you be able to share how much did that first prototype cost? Like how much did you put in to bring that to life? probably $50 ,000 or$100 ,000. I mean, we had raised about$300 ,000 and most of the capital was going towards figuring out how we could build that prototype. And it's worth saying, like we raised another$400 ,000 after that and then we raised$3 million

9:47and then we raised$6 million. And each of these is like about a year later. But it really took until the$6 million for us to be able to get to a stage where we could manufacture it. So at each one of those additional financings, the$300K, the$400K, the$3 million, the$6 million, each one of those kind of had its own new prototype, so to speak. and the product was getting a little bit more accurate. It was getting a little less clunky looking and a lot of it was sort of de-risking. Okay, we can now measure these things with this form factor and when we make it look much more attractive, people are going to buy it because this many people buy this ugly other thing today.

10:33And who wrote your first check? And can you tell me about that experience? because from research, raising money was difficult, especially seven, eight, nine, 10 years ago where it was a hardware focused product. Well, I think in general, raising capital is difficult. And maybe the mistake I made as a 22 year old was thinking, oh, it's just difficult for me. I think it's hard in general. And it's something like anything that you get better at. It also gets easier as your business gets better. So as your business experiences success, it becomes easier to raise capital. And in the early days, I had to overcome a lot around raising capital.

11:25One, I had never raised capital, so I didn't really know what I was doing. And there's certain techniques that we can talk about that enhance your likelihood of raising capital. The second is I was building a business that on paper I really had no business being able to build. I was 22 years old and I was theoretically going to be taking on Nike and Apple and Under Armour. And so there was a lot of reasons why people thought I was going to fail at that. And then the third reason why it was hard to raise capital was, well, we actually hadn't really done all that much yet. There wasn't much to point to.

12:09We didn't have sales. We didn't have products. So it was an uphill climb from the beginning. And we can kind of unpack how you overcome some of that. But it's all just to say for your listeners who might be having challenges raising capital, like the first$400 ,000 that I ever raised was much harder than the last$400 million I raised.

12:38and I say that just to sort of let people know that just because you're having trouble raising capital at one stage of the business doesn't mean you're not later going to be someone who can raise tens of millions of dollars or hundreds of millions of dollars or more. Are you hesitating to take the next step in your e-commerce journey? Founder Plus has you covered. With proven frameworks tailored to your business needs for fast results, a supportive community of over 30 ,000 like-minded entrepreneurs and weekly live mentorship sessions, Founder Plus is your key to success. Try Founder Plus today for just$1 for seven days and start building your dream business with confidence.

13:15You can visit founder.com forward slash start dollar trial or click the link in the description to claim your trial. So a couple of things I'd love to unpack. First of all, what are the key principles that you found how to get better at raising capital? But then, yeah, what were those struggles? The first principle is that you want to meet a number of investors all at once. What happens for a lot of founders, particularly in the early stages, is they'll meet a couple people and get an early read. And then those couple people will be like, it's interesting. Come back to me. And then you'll meet a couple more people and then a couple more people.

13:57And so you lose the second principle, which is scarcity. You need to create some feeling of scarcity. Because if investors just think they can wait around to see your business progress more, it's easier for them to sort of say, well, I'll check back in with Nathan in three months. And maybe then I'll write a check. you know, because there's no feeling of like the train is leaving the station. And that really brings you to the third principle, which is you have to learn how to close. And closing is saying, we've got these terms and this much capital committed, and we need to know whether you're in or out by this day.

14:49And more often than not, people can actually give you an answer in that period of time. and the person who keeps saying, I need more time and more time and more time, never actually ends up investing. And in the time that it took to do the seventh call with that person, you could have met someone new and closed them. And that also goes back to it's a numbers game. So first principle, it's a numbers game. Second principle, create scarcity. Third principle, close. And for raising that first round, how long did it take? And were there times where you felt like perhaps you won't be able to bring this product to life because no one believes in you?

15:38Because it sounds like it's a very capital intensive product to bring to life. It's hard to even say, you know, when did it close? Because it kind of felt like it just kept going. You know, it never felt like we had raised enough capital. And I'm speaking right now about the first 12 months of the business where I felt like I was just perpetually fundraising as one of the activities that I was doing. And by the way, I don't recommend that either. I think you want to like say, I'm going to fundraise from June to September, and then I'm going to close the round in September. You know what I mean?

16:12You want to just pick a timeframe and attack it and tell everyone that's what's happening and then move on. So that was one challenge that, You know, there's one mistake I think I made. And another thing is like, you need to get your pitch down. And some of that takes reps as well. So if you've never pitched anything to raise capital for, you know, you may take a few interactions to feel like, to feel out what's really resonating. and some of that is just iteration and some of that's just doing it a lot and some of that's the feedback that you're getting in meetings what are people responding to what do people people asking about okay if everyone keeps asking about well how i'm going to deal with this competition maybe i should just talk about that up front and get out ahead of it you know so it's things like that so talk to me about the first version of the product that was ready to sell and did you guys launch with the subscription and what talk to me about the thinking behind that first version of the product to sell was probably in 2014 and funny enough we we didn't make a lot of it we were really focused on how do we create a foundation for ultimately what would become a brand which is to say how do we get like the world's most dynamic athletes to wear this thing and And we really targeted LeBron James and Michael Phelps and the best of the best.

18:10And we got those athletes to wear it. And they in turn really liked it. And that allowed us to continue broadening our apparatus in pro sports. It's worth saying it was harder to go after pro athletes. Like it's a much slower and longer time to market. and pro athletes often think they deserve things to wear your product. But to me, it was the ultimate test of whether we had actually successfully tackled the problem of measuring the human body. Because if we could truly measure the human body and truly tell you, are you recovered? How much strain are you taking on your body? How well are you sleeping?

18:53Like if we could actually tell you these things, then athletes would really need it. And so we held a very high bar for we're not giving this product away for free. This is a product that people need to buy, even if you're Michael Phelps. And from there, we were able to build a whole brand around performance. yeah it's it's really incredible the athletes and the ambassadors you have for the whoop brand can you share some stories from the early days like getting in touch with lebron and or michael phelps and convincing them like any crazy stories you can share that well the key to getting to anyone really famous or well-known is finding someone in that person's life who has a big influence on them, but other people don't necessarily know.

19:57So in the case of a professional athlete, everyone knows their agent and their coach and and maybe their spouse or their partner. So the challenge with those people is those people are inundated. Those people get five requests a day. In 2014-15, the personal trainer was actually not that well-known of a person in a professional athlete's life. And it also turned out that a personal trainer was the right person to evaluate WHOOP. for their athlete. And so our strategy was to go to personal trainers and explain Whoop to them and explain why they should use Whoop with their athletes. And so that was the strategy we adopted.

20:52In LeBron's case, it was a guy named Mike Mencius, who's still his trainer. In Phelps' case, it was a guy named Keenan Robinson. And we've done that with other athletes too. Yeah, you've recently partnered with Cristiano Ronaldo to use Whoop. Can you share just like the benefits or feedback of having someone that is that well recognized as an athlete recommending, you know, being a partner and an ambassador for your product? like what what does that do for a business well ronaldo's in his own category in a sense because he is the most followed human on the planet so the thing to know is there's a lot of levels of a list you know you'll meet a celebrity and i don't care what they've done they're gonna think they're a list, but there's like 10 levels of A-list and, uh, and there's no level higher than Ronaldo.

22:03Uh, you know, he's got a billion people who follow him on the internet and they're very engaged with him and he's very recognizable and he has a deep relationship with his fans. Um, and look, he deserves that. He's built that. Now, in the case of Whoop, we realized that he He had been wearing Whoop for two years. And so then a question came up of, okay, well, is there something to do together? Obviously, he likes the product. Back to our earlier conversation about having athletes authentically use it, this was a great example of that, right? We had never sent him a Whoop. We had never paid him to wear a Whoop.

22:50He just liked Whoop. He wore it all the time and it contributed to his recovery and his training and the way he thought about performance. So I went to go meet him in Riyadh and we spent maybe a couple hours together at his home and we got along really well. And then it became, you know, a question of whether there was a partnership to do something together. The principle, though, that I operate with is. Is there an authentic story here? Right. I think that consumers deserve more credit than they're given. I think that consumers can sort of tell whether someone endorsing a product actually likes it or uses it.

23:33And for Whoop, we've always looked for partnerships where an athlete or some high-profile person or scientist or researcher, they are authentically bought into the product. and that was really fortunately what we found with with cristiano and you know he's now become an investor and and uh and a global ambassador yeah i uh like i said offline uh massive fan of whoop been using the product for i'd say about a year to a year and a half i've kind of jumped on the train where it's kind of now it's becoming really like a mass market brand and product a lot of my friends are wearing it I love the community element how you've gamified that I think it's awesome and like you know friends can check in and friends can see if I've had a big night out because they can see my recovery is just like in the red and I've got the skull like you just like you can see and it's really showed me just like things like what alcohol can do to you and even just like I can measure I now know like with my own research my own personal research the power of sauna and cold because my HRV levels always spike up the next day and I can also see my recovery like from the insights that I get so I love I'm a data different person so I love the product and I'm a massive fan but I'm curious have you guys always had a subscription model why did you choose that over traditional product sales um it was an interesting it was an interesting thing like when i went to purchase the product i was like oh i'd say okay so i get the product for free but it's a subscription and i've always thought that's interesting interesting and what led to that decision it's a great question in 2016 and 17 we were selling whoop is just one-time hardware.

25:30You'd sign up for$500 and you'd get all the services, so to speak. And what we saw is that we observed really two things. The first is that people who bought Whoop would wear it for a long time. Now that was actually a big deal because a lot of people who wore other wearables, wouldn't wear them for a long time. Other products had what we call really bad drop-off rates. So if you bought the wearable three weeks later, three months later, you were no longer wearing it. We didn't have that problem. We had really good user engagement. But the second thing we observed, and this is, of course, not good, is we weren't selling a lot of products.

26:24Like our sales were low. And yeah. And so we asked ourselves, well, what's wrong? Like what's not working here? And a lot of it was the sticker shock of the upfront cost and the lack of awareness of the brand. And so we asked ourselves, okay, is there a business model here where we could charge less up front? But if people really fell in love with the product, it could benefit us in the long run and there could be a subscription to go with it. So that was the initial seed of the idea. and then we played with different business models within that. It's worth saying, I don't recommend most entrepreneurs innovate around their business model.

27:23That's something that worked for Whoop and it might work for your business, but it's generally an unusual thing if the way you sell the product becomes super differentiated. But it became that for us. I mean, we transitioned to being a subscription versus a hardware fee and everything got better. I mean, our sales went up and to the right. Our brand awareness grew. Even our internal, the way we operated the company, it became much more customer centric. What can we do for our members today? It's not just about the new people we got on the product. It's about keeping our existing people on the product.

28:15And so all of those were really, I think, benefits to building a subscription. I get asked by founders a lot, should I build a subscription for my business? And I think it's a real question. It definitely depends on your business. One good question to ask is whether your product or service is something that's used daily or at most weekly. Typically speaking, people who are paying subscriptions for stuff need to be using that product regularly. Another question to ask is actually whether you can afford, you the business, can afford to have a lower entry point and make more money over time. Because the crazy thing is, the faster you grow, the faster you actually might run out of cash.

29:11because you're going to be acquiring people really quickly, but they're potentially signing up for less than your whole product cost to make. And so you need to have a balance sheet or the ability to raise capital that allows you to absorb those costs. And we were able to do that, but it's just worth noting that's another challenge to think through. because even when i looked at it and i understand this space and i was thinking geez the unit economics like like how like that must have like people must return it like all these different things right because you're you're giving the product for free plus a trial as well i think i got a 30-day trial and so yeah i was like wow this is crazy um how they're able to to afford to do this um and in and how long did it take to kind of get the unit economics right or to know because that would have been pretty scary right i mean look it was very scary just to say it you know six years into the company's history we were completely changing the business model which is another way of saying six years into building the business we didn't have a business model and uh and so yeah a lot of a lot of building a company is just surviving the next shot on goal i mean it really is like if that hadn't worked the company probably would have failed and mind you like three years after we made that decision we were a multi-billion dollar company.

30:54So I'm curious as well, tell me about kind of the manufacturing and scale part because you talked about the balance sheet and cash flow. Were there any times you had manufacturing setbacks that almost derailed the company? How'd you overcome that? We had huge manufacturing setbacks during COVID when we were launching a new product.

31:22So a whoop, right, which for those watching is this little sensor on my wrist, it's got a lot of amazing capabilities. Sleep, recovery, exercise, strain, stress, pulse socks, all these different measurements, 24-7 coaching. I just bring that up because it has 150 components for being a pretty small product, like 150 unique little pieces that make it possible. And if you have 149 components out of 150, you literally cannot make a whoop strap. And it's just worth reminding yourself how much work that creates for your supply chain team and for your manufacturing team and for your quality team. Because you now need all of those components to be performant.

32:24And during COVID, we had a component we thought we had a million of, and it turned out we had zero of it. And so all of a sudden, we couldn't make whoop straps. And that was a very painful phase for the company. Fortunately, we had raised a lot of capital before that, but it was really a challenge. So how did you overcome it? Well, chew glass and stare at the abyss. I mean, there was a little bit of just white knuckle that. I mean, it was really hard. And every day we were on calls late, early with different manufacturing partners around the world, supply chain partners, trying to find this component.

33:15Our engineering team was re-engineering the product, trying to figure out how we could make the product without the certain component. We were trying to figure out how we messaged to our members that we didn't have as much of the product as we thought we did.