3 Takeaways - ClassPass Founder Payal Kadakia on Building ClassPass into a Billion Dollar Company, Living a Plan A Life and Achieving Your Potential (#80)

Episode Date: February 15, 2022

Learn how Payal Kadakia built a start up into a billion dollar unicorn in her 20’s despite many setbacks, and what her most important decisions were. Payal shares what living a Plan A life means, how the moment that enabled her to launch her life was one of the lowest moments of her career,  and what leadership characteristics enabled her to succeed.  Payal is the founder of ClassPass, the world’s largest health club aggregator with over 30,000 health clubs in 28 countries. ClassPass offers a revolutionary membership that lets members use health clubs and book unlimited fitness classes for a subscription fee.  Payal is also the author of LifePass: Drop Your Limits, Rise to Your Potential: A Groundbreaking Approach to Goal Setting.  This podcast is available on all major podcast streaming platforms. Did you enjoy this episode? Consider leaving a review on Apple Podcasts. Receive updates on upcoming guests and more in our weekly e-mail newsletter. Subscribe today at www.3takeaways.com. 

Welcome to the Three Takeaways podcast, which features short, memorable conversations with the world's best thinkers, business leaders, writers, politicians, scientists, and other newsmakers. Each episode ends with the three key takeaways that person has learned over their lives and their careers. And now your host and board member of schools at Harvard, Princeton, and Columbia, Lynn Thoman. Hi, everyone. It's Lynn Thoman. Welcome to another episode. Today, I'm excited to be with ClassPass founder Payal Kadakia. ClassPass offers a revolutionary membership that lets members use health clubs and book unlimited fitness classes such as dance, yoga, martial arts, boxing, and indoor cycling for a subscription fee. ClassPass is the world's largest health club aggregator with more than 30,000 gym club partners globally.

I'm excited to find out how Pyle built her startup into a unicorn. That is a startup valued at over a billion dollars despite many setbacks along the way. Pyle is part of a very small number of people who have founded and built unicorns and an even smaller number of women and people in their 20s who have done so. She has just written a book called Life Pass. Welcome, Pyle, and thanks so much for our conversation today. Thank you so much.

So, Pyle, you'd worked at Bain as a consultant and you were working at Warner Music when you decided to give yourself two weeks to come up with a business startup idea. Why two weeks? I went out to San Francisco to visit actually one of my Bain colleagues, and I realized in that moment that I wanted to try something new in my own career. And of course, I could have tried to interview at another job, or I could have looked at other industries. But I loved this idea of entrepreneurship that I was hearing from so many other people in San Francisco. And I decided that having a deadline would enable me the chance to really give my mind the actual ample time it

needed to really focus on thinking of an idea without feeling like I could think of an idea forever. And I really believe sometimes time boxing something enables your mind to really meditate on it and force yourself to think about it. So that's what I did. And I wanted it to be two weeks because I felt if at the end of the two weeks, I didn't have an idea that maybe I should be pursuing other options that I had laid out in my career planning. But it didn't really preclude me from being able to do that. And at the same time, I ended up thinking of something which obviously changed my life. Can you tell us about your first product, Classivity?

Yeah, so our first product was actually just a search engine for classes. So very similar to OpenTable, we listed and aggregated millions of classes and their time and dates into one scheduling platform where people could search like yoga and Chelsea at this time, and it would list all the classes for you in search engine format. And that was the first product idea. I raised about a million dollars for it. It seemed like. And that was the first product idea. I raised about a million dollars for it. It seemed like an idea that would work. We put it out there and no one went to class and it was a very devastating moment for me as a founder, but I learned a lot in the moment and

I'm thankful for it at this point in my life versus feeling that it was a failure. It taught me so much to, in a way, make that mistake over such a long time frame to say and tell myself as an entrepreneur that I would never do that again. Most people, first of all, are never able to raise a million dollars, but you were able to successfully raise a million dollars. You built a beautiful website. And at that point, most people would not have been able to pivot as you did. They might have just kept trying what they were doing, even though it wasn't working. How did you decide from there what to do next? I think the core of all of this, the pivoting, iterating that we've done as a company came

down to the fact that we weren't there to put out a product. We were there to solve a problem. And for me, it was, okay, the step didn't work in solving the problem. How was I going to approach it the next way? Did I realize that the first year after I built it? No. I mean, I was still a budding entrepreneur trying to figure out the way of the world. So it was hard. It took me probably another month or two of trying to change the website, trying to do more emails, trying to resolve the problem with what I had built versus sort of taking a new step that I started with. But very quickly, I realized

that the path we had taken was not going to get us there. We had really missed this, right? So you're throwing darts. I was in a very different playing field than where I know I needed to be. And it was hard to get the whole team to sort of re-energize around building a new product. But I knew we needed to go and have a different mindset and have a different group of research in a way to really be able to go after and solve the problem. And until we solved the problem, we were never even close or done with it. So this idea of quitting wasn't even an option because we still were there and there was a problem in the world that needed to be solved. Creating a website is very different from building partnerships with health clubs and gyms around the world. How did you decide to pivot so far? How did you come up

with your new business idea? Well, it was exactly that. We started talking to a lot of the partners and I think for the first year of our life as a company, we were stuck behind the tech, right? We were stuck behind the website because we thought the website and technology would solve the problem for us. But what we really needed to do is build human relationships and understand what our industry needed. So we started going out and talking to yoga studios, dance studios, Pilates studios, and started realizing that so many of them needed new customers in the door. They needed a way to get people to discover them. Many of them were local businesses with fixed costs and they would rely on foot traffic, but they didn't really have another aggregated way to send a massive amount of traffic to them. And obviously like spending on ads and stuff was just not economical for them. So we needed to find a better way for them to have new clients that were going to stick with them. And so we decided that we would transform the

system a little that we had built. And instead of it being a search engine, we would become this discovery place for people to just try new classes. So our second product was actually a product called the passport where people could try 10 different classes over a 30 day period. And they could go to these different partners that we had started working with. And when we started, it was only 20 venues. So 20 to 30,000 has obviously been a journey, but that's really what we needed to really figure out what product market fit was. And I think that's something we talk a lot about as entrepreneurs is this idea of making sure your product actually works in the market you're in. And we realized it wasn't about building some beautiful website. It was really about fulfilling reservations and making sure our partners had someone who would show up at their door to take

class. And when we really started focusing on that and building the relationships and understanding the problems on that side, that's really when we started going in a better direction. You said you learned a lot from failing the first time. What did you learn? First time we failed, I learned many things. I would say the first thing I learned was people did not want to go to class by just looking at a search engine, which was hard for me to realize because it's what we had spent money on. I learned that there was an interest in people wanting to take classes. So people were definitely coming to the website. They weren't following through and booking a class. So that really made me realize, wait a second, if I can get people to the top, what was pivoting them and preventing them from getting to the other part of it? And I recently was just telling you one of the

people who I looked up to is BJ Fogg at Stanford, who is a behavioral design specialist. And he has a whole model about how you motivate people to do something. So while we had built this tool that helped people search, what we had not done was actually motivate anyone to go to class. And so what we really needed to do was figure out what was going on in their brain and in their actual ability to go to class. And one of the things that we thought a lot about was the brain cycles that happened in that moment. So most people are scared to try a new class, right? If you're going to a bootcamp, you're not going to just jump into that class. Then there was a timing issue of, am I busy or not busy at that time? Then there's a price issue, right? Of, do I really want to spend $30 to go to this class? So we were

putting three huge decisions for somebody in one moment. And all the science that we've researched in this shows that in a moment like that, if you're going to put so many big decisions together, what are most people going to do? Click out of it. They're not going to follow through and actually book the class. So that's so much of why the search engine didn't work. It was a behavioral design issue. And we realized we needed to figure out the motivational factor and getting someone to even try that first class. And so it was interesting during that time, one of the things we even did is we told everyone to go to class for free.

So we literally took out one of the variables. We sent an email saying, buy one class, get one for free, thinking everyone would jump on this because we thought money was an issue. We still had two to three signups only. And that's when I realized the brain cycle issue was the one that was really holding most people back. And we really needed to find a way to unleash people to want to try new things. So once we started bundling the classes into more of this experiential thing where, hey, for a month, you get to have X amount of classes if you buy this

one membership, it started feeling like, okay, I'm paid for it on day one. And now every class I go to feels like I'm a kid at a candy store where I can do anything. And so that helped work through the fear most people had when they were trying new classes because they no longer were thinking about fear. They were thinking of opportunity. What could I do with my time? Not, oh no, what if I do this and I don't like it? So we had taken away so much of it and it became something more of, I want to get it do this and I don't like it? So we had taken away so much of it and it became something more of, I want to get it versus something that I don't want to go to. And I'm scared to go to so much of when I think about the brand and what we've been able to do is we turn fitness into this obligatory thing that most people were scared of. And to be honest,

I came from that as well, being I'm a 411 petite person. Like I never felt like I belonged in that industry to making it something that was fun and accessible, and more of this fun opportunity of what could I do? What could I try? And that mentality shift in someone's mind is really what transformed our product. And when we discovered people wanted this sense of variety and adventure with classes, that's when the entire model took off. Clearly, you did not think in terms of failure, because if you had, you might not have continued. So how do you view failure? It's not an endpoint, is it? It's a data point. It's a way to learn. It's a way to understand what is not working and help

you figure out how you're going to move forward. Failure and success to me are very similar. They are both just points in the journey that are getting you to that end point or that journey of where you want to get to in your true north. You can't get stuck at either. You have to take what they give you and move forward. And I think it's a lot of the times, especially with failure, you're worried about what other people are going to think. You're worried. You're not actually doing. And I think over time, I have learned to never get stuck in failure. It's about moving forward.

It's the same way with success. You reach these great milestones as a company, but it's really about what's the next day going to be? What are you working on next to go to help people even more? And I think that's the mentality you start to live by. Instead of having those highs and lows, you start realizing you're on a journey that's great and grand, and you just want to keep reaching either your mission or fulfillment, whether that's as a human being or not. You talked about product market fit. When did you know that you had it? I remember so clearly,

and I think a lot of times people think that they have product market fit when you've got thousands of users using your platform and you have this crazy hockey stick growth. For me, we had the hockey stick growth, but it was really four or five emails that I read from customers. We were doing customer service at the time. My name was Pam, and I was literally interacting with so many of our customers. And I remember reading these few emails that told me that this product had changed their life. It had made fitness fun. It had given them confidence. It had transformed the way they thought about what they could do with their time.

And my background, I had been dancing since I was three years old. And so much of the reason I started this company was because dance gave me this place where I felt so alive and I fought for it through my MIT days, my Bain years, even my class pass days. And the reason I did it is because it was so important for me to find that time because it made me confident and it made me feel centered.

And that was what I finally felt I had given to everyone else when I read those emails. I had given what dance was to me, to them. And that's when I knew I had product market fit. And on a more marketing level, I remember I was in my elevator a few months after going up to my apartment and there were a few girls talking about it in the elevator. And that's when I also knew, wow, people really love this product. And I think when you hear other people talking

about it is when you really have the most belief in it, because as a founder, especially at that point, I had tried a few things and it wasn't working. I think when you really get the validation from your customers and your partners, that's when you really know you have product market fit. And once you had that product market fit, you had essentially, at least it seems like you had hockey stick growth, you had to grow really quickly. And I think you talk about that. And you talk about hiring 60 people in a weekend in your book. Can you tell us about that about growing so quickly, what that was like? Growth comes with positives and negatives one of obviously the negatives here was that it spurred competition across the entire nation on people who wanting to build the class pass model in their

city as well and because it was a local play it was something that made sense for different cities to have as a leader I wanted to really look forward and not focus in on the competition always but as a founder and as someone who wanted to protect this business and knew the network effects of having everyone being on one platform, I knew I needed to fight. And we were going to launch in eight cities by the end of the year. We said we would launch in 20. And that meant hiring 60 people over a weekend

to get salespeople out there to sell ClassPass in these new markets and train them. And we did what we had to do. And I think once you set a goal as a founder and what you need to do to achieve it, you just, you go for it. You learn to work through all the roadblocks. And really that's at the core of so much of what I feel like my book is about is just working through roadblocks, whether they are more real roadblocks, like money, time, skills, not having the people, or if they are mental, like expectations and fear of failure, you just have to put a plan together and then go and

execute. And that has never failed me. I love your quote from leadership expert, Robin Sharma, that on the other side of your greatest fears lives your greatest life. Can you tell us about that and how you actually did it? That quote always reminds me about the day I quit my job to start ClassPass, because I think quitting your job in your 20s is one of the scariest things you can do because you don't know what income you're going to have. And I think being the daughter of two immigrants from India, I know that security was so important to them. So being on this other side where I wouldn't have that income every single month and that base of office

and all of that infrastructure was scary. And so I remember walking into work that day, having conversation with my boss, telling him I'm going to be moving on. I didn't actually know exactly what I was going to be doing at the time, but I knew I had to take a leap for myself. And I ended up writing this email to the leadership team at Warner Music Group and the vice chairman of the company decided to call me to his office and wanted to hear about my startup. And I was like, great, like I can come up right now and tell you about it. And so I was explaining to him how I wanted to build this database of classes, like open table. And he goes, great, I want to invest. Here's $10,000. And in my mind, I couldn't believe it. Like this was the day I was so scared about, but here I was on the other side of it, walking out of that building with a $10,000 check towards my next adventure and next

product I wanted to build. So I think for me, when I realized that I could open so many more doors when I was doing something I loved, that's really what that quote meant to me was that on the other side of my greatest fears, which was closing this door, so many more doors open for me. And I saw that happen so much more as I started living my dream and really pursuing what I really wanted to be doing. I know you think in terms of a plan A and a plan B, what does living a plan A life mean for you? I think when you're living your plan A, you really are able to thrive authentically and not let expectations stand in your way. I think when we see people live their plan A, they do great things because

they are not limited by other people's thoughts and expectations, but they are going for what they are really truly meant to be doing, whether that's on earth and with their time. And I think the greatest like athletes, the greatest entrepreneurs of our time, the greatest inventors are all people who have decided to live their plan A. I think when you're living your plan B, you're compromising on something and you have to ask yourself, what are you compromising on and why? And I think so much of it

is working through that compromise, right? You can't do it immediately. I think that's part of what I think is so important to do is to figure out what constraint or compromise is in your way and put a plan to work through it. It's not going to change in a day. If you don't have enough money or if you don't know the right people, figure out a way to do it gradually and strategize around it so you can end up on the other side where you are living your plan A. What were the most important decisions that you made at ClassPass? I would say the most important ones were

obviously becoming a subscription model from day one. I think that was, it took us three years to figure that out, that this meant to be a monthly membership, not an open table-like model. I think that was a very important part of the whole system is knowing that people wanted to be a part of this discovery process that they really wanted to do on a monthly lifestyle-esque basis, not just, let me just do this for one month or even one class. The second one, wow, there's been so many along the way. When I talk about scaling really quickly, I think that was so important because it taught us how to scale. It taught us how to have a playbook that literally

has allowed us to launch across the globe, whether that's Asia, Australia. I think that was a critical part of it. I think building an incredible team, having an incredible, even for me, I decided to not be CEO in 2017 and bringing in somebody who could run the team, Fritz Landman, who has been an incredible investor. To me, I think those decisions are paramount is making sure your company and product is being led by the right people because as a leader, you cannot do everything. And you have to learn how to scale yourself

and scale your idea and your vision. And that comes from trusting and hiring great people. So I think hiring great people is definitely one of the most important decisions I've learned to do and enable, but I've made in the company. What do you think are the most important leadership characteristics that enabled you to succeed? I think it's my sheer drive and passion towards my why. I think I have strengths and weaknesses like all leaders do. But at the end of the day, when I believe in something and I care about it, I'm able to bring

people along with me because I just care so deeply and I'm doing it for a why. I'm not doing it for fame or money or power. I'm doing it because I deeply care. And I think that motivates anyone to get on board with you because it's authentic. I think there are times in my life where I probably felt like, oh, I needed to get money for this or whatever. And all those times in my life when I wasn't living authentically, even I always remember there are times where I stopped dancing and I'd have my team say, hey, like, are you dancing? Because they would know that the inspiration of all of this came from something I loved and I protected in my own life. And so it comes down to that authentic leadership. But like I said, it's about fighting for something you deeply,

deeply care about. It also seems like your ability to make decisions quickly and your bias for action helped drive your success? 100%. I think every entrepreneur making decisions is a key part of it. The more you sit and stay comfortable, that's literally money wasting away, right? If you have employees, if you have infrastructure, rent, you literally want to use every single one of those days and that resource of time and money wisely. And that's really what it comes down to is what decisions are you making to try something new, to move things forward and essentially not running out of money? Because that is the only thing that when you've really failed for a company, and I hate saying this, but it is true, is when you're out of cash. That's the end day.

So you just have to do whatever you can when you have that time and money to use it as wisely as possible. And so making hard decisions, whether that's with people, with time and resources, it's so important to be able to keep moving forward. And not to fear failure. When you're doing things as quickly as you were, like hiring 60 people in a weekend,

you can't get it 100% right. No, you can. And once again, it's about acting quickly in whatever mistakes you've made and not letting it sit. If you've hired people and they're not working out, I don't think I've ever heard anyone say like, oh, I fired that person too quickly. It's always usually too late. It's one of those things where you just have to learn how to go quickly and make decisions. And honestly, it works out for both people. Whenever I've let go of someone or any of that, I always check in with them a year later. And by the way, everyone's in better places because of that. People want to be in environments

they thrive in, whether you're the leader or the employee. What was your philosophy through COVID? Well, that was an interesting one. I actually had a baby six weeks before COVID started. So it was an interesting time for me personally, as well as professionally. Classless was coming off of its greatest month ever because January is always such a great time. We had reached unicorn status. It was incredible, but it very quickly changed as obviously so many of our partners shut down. We froze all the accounts that we could for our customers. And the heartbeat of the company was reservations and we couldn't get people to class. So it was really tough from that perspective to really think about what we were going to do. But we really wanted to make sure that we survived this, not just as a company, but our partners.

So it really became about how are we gonna get through this as a company and how are we gonna help our partners get through this? Because that was the most important thing. We knew there was going to be another side of this. We all were going to get there. It's just a matter of time and we needed to survive it. So it was obviously about survival, making sure that we were smart about our costs and then being able to send as much revenue as we could to our partners by allowing them to teach either virtually to our customers or letting them take their on-demand classes. You also launched new products during COVID, the focus on online classes.

Exactly. Being able to have people still take classes online and send revenue to our partners was obviously a very, very big part of it. I think one of the really fun things that we did during COVID was start actually exploring some of the other categories. So when I actually started the business, we were actually not just in fitness, we were in creative classes as well. So we were doing all different types of classes and experiences. And through COVID, we had a bit more time to rework the product. And we started adding a lot of wellness experiences to the platform. So we've got things like massages and acupuncture and nails and beauty on there as well, which was always a part of the vision of how we can keep enhancing people's lives and time. And so that was a blessing of COVID is we were able to work on that.

But the number one thing was protecting our partners in the business to get through this period and helping people work out as much as they could through our online product. You've been working on ClassPass now for about a decade and just sold the company to a wellness company. What's next for you? This question is always so hard for me because this decade has been unbelievably incredible. And I'm looking inward right now because I want to chart the next decade of my life. And that doesn't happen by just kind of going and doing a bunch of things.

It's really about doing what I know lights me back up. So I'm dancing. I'm building an Indian ballet to tour next year, which is really important to me to tell the stories of the people and who I am and who my ancestors are. So I'm really excited about that. I'm investing and advising incredible founders, especially women, which I love doing and being able to offer them guidance from my own journey. And on top of that, this book, you know, I'm really excited. I've had a really interesting decade. And I even think before that with my dance company, I'm excited to help

people learn a little bit of how I was thinking to see if it can help them and just try to help them live their dreams and not let anything stand in their way. Before I ask for the three takeaways you'd like to leave the audience with, is there anything else you'd like to mention that you haven't already talked about? I think we've talked about most things. I guess the only one thing which I think is so important is time and not feeling guilty. I think so much of my journey comes down to being really particular about how I spend my time and not feeling guilty about it.

And I think that's such a key muscle for anyone to learn. And you can learn it at any age because the more you start prioritizing your life with your own priorities and living your schedule focused on that and not other people's, that's really when you can truly thrive. I love your mission statement, every life fully lived. Exactly what it comes down to is time and hours of people's lives. What are the three takeaways you'd like to leave the audience with today? Number one, get started.

I think we get stuck sometimes and don't know where to go, but I really think it's important to get started in any direction because it's the only way you're going to gain that confidence. Number two, I would say be authentic to yourself. Don't let expectations of anyone else ever stand in your way. Really, truly hear your own voice. And number three, do some goal setting because it will help you in really being able to identify exactly what you want to achieve and move forward and make progress. Kyle, thank you. This has been wonderful. Thank you so much for having me, Lynn. If you enjoyed today's episode and would like to receive the show notes

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