Invest Like the Best with Patrick O'Shaughnessy
· Greg Stewart, Patrick O'Shaughnessy
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. And 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. [00:00:00] S0: So he bought your stake and then also invested in the round that you were investing in. [00:00:00] S1: Yeah, I think he matched what he was sending me, which was awesome, and that kicked it off. [00:00:00] S0: 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?
· Greg Stewart
[00:00:00] S1: 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. And the current business was this one-to-one, essentially a marketplace connecting an independent contractor coach with a consumer who was 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 a 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. It 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 these big bucket personas. We're 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? How are you making this 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 5,000 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. I'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.
· Greg Stewart
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. You'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 100 people sign up at a 100 bucks a month, very fast. I'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, it 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. They'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. And that group, the renewal rate was 90% plus. People paid again.
· Greg Stewart, Patrick O'Shaughnessy
We're 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. [00:00:00] S0: Did anything surprise you in those conversations? [00:00:00] S1: It 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 $1000 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 the real thing. And then we saw them meeting up and they would say, oh, I met someone just like me. And they had the same pain points and they 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.
· Greg Stewart, Patrick O'Shaughnessy
[00:00:00] S1: It 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 $1000 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 the real thing. And then we saw them meeting up and they would say, oh, I met someone just like me. And they had the same pain points and they 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. [00:00:00] S0: 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 distil 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. What's been your, as the CEO algorithm for that iterative improvement to get from the original kernel to now?
· Greg Stewart
[00:00:00] S1: Well, I can tell you is 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. And 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. That'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. We 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. Of 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.