How I Built This with Guy Raz - ClassPass: Payal Kadakia

Episode Date: June 29, 2020

In the late 2000s, Payal Kadakia was working a corporate job and running an Indian dance company on the side. When a search for a ballet class yielded a confusing jumble of computer tabs, she had an idea: create the Open Table of the fitness industry – a search engine where users could sign up for classes in one streamlined place. When that idea failed, Payal pivoted multiple times, eventually landing on the subscription service ClassPass. Today, ClassPass connects users to hundreds of thousands of fitness classes around the world. It was valued at $1 billion earlier this year, but when the pandemic hit, it flattened the fitness industry, forcing Classpass to pivot yet again. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

This show is in partnership with Airbnb. This past summer, I took my family to Vienna, and it was incredible. We spent our days wandering the old streets, stopping for coffee and pastries, visiting museums, and just soaking up the history of one of the most beautiful cities in the world. And one of the things that made the trip so special was the home we booked on Airbnb. It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb.

Your place, with all of its personal touches and its amazing location, could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Hey there, it's Guy here. And really quick before we start this brand new episode of the show, how I built this isn't just a podcast, but also a book. A book filled with stories and lessons from some of the world's greatest entrepreneurs about the gift of failure, the beauty of ideas,

and the path to building something meaningful. You can pre-order the book right now, wherever you get, get your books or by visiting gairoz.com. One of the best ways we would get customers to sign up is we did this Lou Lemon promotion where people would get a $100 gift card to Lou Lemon if they signed up for class pass and stayed with us for six months. And one day I get to the office and there's like a letter on my desk and I open it and it's a cease and desist from Lou Lemon.

Oh, God. And I remember, you know, my first instinct was like, oh no, should I be scared? but then I was like, oh my God, Lou Lemon knows who we are. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, when Pyle Kadakia couldn't book a dance class online,

she built her own solution called Class Pass, a booking service for fitness classes now valued at over a billion dollars. The more complex your business ideas, the more likely that it will take a lot of time to get it right. Think about companies that depend on data to optimize their services. DoorDash, for example, doesn't just deliver food. It's a logistics business. Same with Amazon and even Peloton.

All these companies provide services that require a lot of data to function effectively. But to get there, to get to a place where they all worked more or less efficiently, required many years of pain. To be clear, there is no simple playbook for running a complex business. There is a lot of trial and error. And sometimes, trying to build a complicated business is like trying to improve an airplane mid-flight. Which is sort of what happened with ClassPass. ClassPass is a subscription service that gives its users access to hundreds of thousands of fitness classes in cities around the world. Back in 2010, ClassPass founder Pyle Kadakia was working a corporate job in New York and also running a dance troupe. And one day, she wanted to sign up for a dance class online and couldn't do it easily. So in 2012, Pyle and a co-founder launched Clastivity, a search engine where people could sign up for all types of classes, from fitness to photography.

But not only did that idea flop, it went. went through many painful iterations, upgrades, adjustments, and pivots before it became what it is today. Earlier this year, ClassPass became the first so-called unicorn of the decade when it raised a round of funding on a billion-dollar valuation. And 2020 was set to be the best year in Class Pass's history. But then, the company flew into a big giant headwind called COVID-19. The fitness industry has been one of the hardest hit since the pandemic began. So these days, Pyle has found herself in the middle of an unprecedented crisis for her company,

a business that has largely depended on people showing up to studios to take fitness classes. Now, one of the criteria for coming on to how I built this is generosity. You have to be generous in recounting your experience, even if it means talking through personal and professional failures and set-womenes. But most of the time, entrepreneurs talk about these things while looking in the rearview mirror. In Pyle's case, the setback is happening in real time, and she's being tested in a way she could never have anticipated. But for now, let's start at the beginning of the story. Pyle was born and raised in New Jersey. Her parents had emigrated to the U.S. from India in the

1970s. My mom's brother, instead of giving them a wedding gift, told them that he was born. He would give them two tickets to America. And they, you know, got on a flight, came here, probably worked, you know, four jobs to make it work. And we're living in small apartments, you know, taking buses to work. Both my parents are chemists. And that's really been the backbone of their life. Tell me a little bit about your, I mean, about like your household.

Was it, you know, was Indian culture a really important part of your life as a kid? Like, did you go to, like, Indian school on the weekend? like on a Sunday, stuff like that? So growing up, I was one of the only Indian people in my school. So I had an interesting, you know, sort of dual identity where, you know, my high school and elementary years were filled with, you know, going to soccer practice and cheerleading practice. And then on the weekends, I would go to sort of this adjacent community.

It was this town called Parsipani where there were a lot more Indian people. And that's where I really got a sense of my. culture and my community. And on the weekends, I would also start dance practice. So my mom's best friend, my dance teacher, she started teaching us Indian classical and folk dance when I was three years old. Wow. And we, yeah, so we would do this in basements, right? There was no, there was no ballet school for Indian dance, you know. And even though my parents wanted us to assimilate, you know, I think it was very important to them that we stayed connected to where we came from. And for me, dance was that way of doing that, even though probably at the time I didn't appreciate it much. I was like, why are I

waking up early on Saturday to go to dance class? So how did you, how did you get super into Indian dance? I mean, because it sounds like, because this is something you did, and we're going to talk more about this, but something you did throughout school and into college, like, what was it about Indian dance that just really kind of drew you in? So in India, there were, at that time, I mean, it's called Bollywood now, but it was called the Hindi, you know, film, Hindi films. And There were actresses like Madhari Dikshit and Sri Devi who were, you know, these unbelievable actresses that would dance in these movies. And, you know, to me, they were like goddesses.

And they, you know, like emulated this power of expression and charisma that, you know, I think as an Indian girl, I would sit in my house and I literally would put the video on over and over and over again and try and emulate it. And I think for me, what I started realizing with Indian dances, it was this way for me to feel connected to where I came from, especially because I was around people who didn't look like me. And it also became this place where I felt really confident. I became this performer when I was, you know, very young. I remember since I was five, I performed at every family function or party. I would have to have like my cassette ready, my dance outfit ready, you know? And I think that that was, really important for me to find a place where I felt alive. I felt like I could touch people. And I think when you're that young and you realize that you have the power to affect other people,

it changes you at a very deep human level. And I think that's really what happened to me. I read a story that when you were, I think, in third or fourth grade, you performed at school. And kids laughed at you and teased you. What do you remember about that? I remember exactly what I was wearing. I remember going on to the stage. And, you know, I think at the time I didn't think my culture and my background was that big of an issue. And then I started doing this dance and it was what my dance teacher had taught me. And we had performed, by the way, like at major places as a dance company, you know,

and sort of an Indian community. But I didn't realize it wouldn't translate to my, you know, elementary school. Prettomily white kids. Exactly. I just didn't see the difference. I just thought it was, okay, well, like, I love doing this and I do this when I compete over the weekend. And even though the audience is filled with Indian people, why wouldn't it work in my school auditorium? And, you know, a little bit after I started dancing, I remember people started like booing and laughing.

And I think I remember feeling really bad when my sister was sort of embarrassed of me when I came home and realizing that, Oh, I am different. And I actually think that started this phase of my life that probably lasted a good six, seven years where I had my Indian life and I had my, my like, American life. And I kept them very separate. Would you describe yourself as like shy and quiet or would you describe yourself as confident as a girl, a young kid? Yeah, it's actually pretty interesting. I was pretty shy and quiet. And I think that was a dynamic of my family. Like my mom and my sister were both very like loud, dominant personalities. It actually, took me until I would say going to college where I started realizing what a leader I was and how, you know, what my voice was and how to sort of take control of situations because I was, I was the baby of my family. And even within all my cousins and everyone, like, I was a baby. And I also, I know we're talking, you know, over, over this microphone, but I'm 411. And I was never very tall.

So, you know, I was always a small person. And so I had to really find a way to, come out of that. And I started really realizing that once I went to college. And what about school? Was it pretty, did it come pretty easy for you? I would say education was a very important pillar of my childhood. Getting good grades was sort of a non-negotiable. I had to work hard to get good grades, though. It wasn't, I don't, you know, I think there's people in the world who are sort of just like great at getting, you know, getting through school and didn't have to study and would just like ace the test. That was not me. I had to study. It was actually. It was actually. interesting English and writing were just harder subjects for me. Maybe because of, you know, my parents,

you know, didn't always speak English in the house. But like math and science, it just was so, was easy for me and I loved it. And I used to always even like think about how my life revolved around numbers and actually did my entire college application essay on how my life revolved around the number two. So sort of- Number Two. Yeah. Tell me more about the number two. So, well, I was the second daughter and this, idea of having dual identities, which I was just talking about, like, I was Indian American, and I always really had this very analytical side to me, but I also had a very creative side to me. And that's

really, I think, throughout my life, like the other sort of dual identity I had, which I always wanted to come together. And I guess that essay got you into MIT, which is where you went. And I read that you, you majored in something called Operations Research, which is like, I guess, like a sort of a scientific approach to management. Yep. But while you were there, I guess you also stuck with dance, right? Like, you kept dancing. I stuck with it. And if it didn't exist, I created it.

So even at MIT, there was no Indian dance troupe that existed on campus with the style of dance that, you know, I had done. So I created it in my second year of being at school. And my, you know, I put on shows there. It was my life. Like, I think everyone, anyone who's like known me, I mean, a lot of people obviously know me today as the founder of Class Pass. But before that, I mean, everyone's just like, Pyle is a dancer, and that's who she was. Just for a moment, and please, be immodest here. You must have been really good.

I mean, like, competitive level dancer. It was, I think, the way I danced that really captured people. I think, you know, since I was younger, people would just, like, stop and watch me dance. And it was because, like I said, I danced from my heart. And I think whenever you see someone's, like, entire being come a lot. and doing anything in their life, right? And I think I always talk about this. It was dance for me.

I think it's music for other people. It's, you know, it's being active for others. And that was my home. And I think when you see someone come so in connection to a place where they belong, it's, it makes everyone feel alive. One of the cool things about when you see an Indian dance troupe, it's so seamless. It doesn't, it doesn't seem choreographed. But it must be like intensely choreographed, like every time. tiny movement, right, is practice and rehearsed and rehearsed?

Absolutely. I mean, I used to choreograph big dances for our culture shows at MIT. And, you know, I think what was nice is I would bring, you know, my entire class together. We had a lot of Indian people at MIT. So some of the dances I would choreograph had 40 people in them, getting 40 people to move in. 40 people who didn't have a lot of dance background to move in the same way taught me a lot about how to lead. Yeah. So you graduate from MIT. This is around 2005, and you join Bain as a consultant.

A lot of smart young people do that. And did you at that point ever think about like opening your own thing one day? Or was that not really top of mind? I actually thought about starting a dance company right away, right, when I got to New York City. A dance company? Correct. That was what I would have done. As a business.

Yeah, that's exactly what I would have done. Or even just like starting a studio or something. I'm actually really glad I didn't. I, and I've thought about this, like getting real world experience and especially in a place like New York City is so important. So obviously, you know, I got real world experience working at Bain, but I also got to see how sort of the dance community and arts community worked because I was dancing and taking class through my first, you know, few years living in New York City too, which taught me so much about how, you know, other fields work as well. And I think I needed that hands-on experience. And I don't think I was ready at that point to, even though I, I, I,

kind of like believed in myself that I could do something. I didn't know what it was, nor did I actually realize how the world worked. But it sounds like this was, this was really what you wanted to do because I guess you only lasted at Bain only. You lasted a Bain about three years and you took a new job actually that would allow you to focus on starting a dance company. Yep, yep. So, you know, I think the first few years when I was working at Bain, I was able to sort of juggle going to dance practice after work and, you know, going to performances on the weekends. I have, you know, I have some interesting stories where one day I remember I was walking to work and there were tryouts for so you think you can dance going on outside my door. And I called in sick and decided

to go audition. Like these were sort of the conflicts I was having in my life. The TV show. Yeah, the TV show. And you didn't make it. I'm shocked. It didn't make it. It's okay. But that's fine. But it was one of those things where I would have, you know, these incredible sort of dance experiences happening, you know, while I was working. And I didn't like that I didn't have this predictable schedule. And so while most of my friends were going off to business school, I ended up taking this job at Warner Music Group in their digital strategy group. Because it would give you time more to work on this or because you wanted to work for Warner. So I kind of at least figured, hey, I'm taking a job in an industry without. that was selling something I believed in.

So that was sort of a way I think I convinced myself that it was the right place. And it was actually a really interesting time in the music industry because everything was moving from physical to digital. So I got to see like an entire transformation happen. Did I really know what I want? Like at that time, did I was I really passionate about that job? No. But was it a means to an end? Yes.

And so you start this dance troupe. And is it pronounced Sa-Dance? Yeah, it's Sa. SA. Saw dance. Yeah. So dance. And this was like your passion, but this really was, and you were performing all the time on weekends in and around New York City.

Yep. And how are you, I mean, were you like running this thing? Yeah. So I was the, you know, I called myself the artistic director and executive director. Every second I wasn't working, you know, during my full-time job. I was either choreographing, rehearsing, you know, I was booking space. I was finding places for us to perform. I had 10 dancers.

Many of them, by the way, also like executives at huge companies, working consulting. Like, you know, we all kind of had that dual dynamic. So we wouldn't have practice until 8 p.m. at night. We would dance until 10, 10.30, go home, kind of do it all again the next day. And how did you recruit them? How did you find them? It was a community-based dance troupe in the sense of, you know, I think everyone through college, like every single college had an Indian dance troupe.

So we all knew each other. When I started building this, you know, they were like, I'd love to do this. They missed dance, right? This is also the crux of so much of where Class Pass came from. They were missing dance. Everyone missed doing something in an activity that they loved so much. And so it was definitely one of the busiest times of my life, but also, you know, this is sort of where it started for me. And I realized what you can do if you hustle.

Was your goal at the time to, like, to turn this into a sustainable business? Were you hoping that you could. quit your day job and dance full time? Look, I wasn't building my dance company for money and all the girls dancing at the time weren't doing it for money either, right? We all had other jobs. We all had ways to make income. So we were really doing this to share our hearts.

Until this day, I mean, my dance company is set up as a nonprofit. It is something actually that we do because we enjoy it. I think for me at that point in my life, I wasn't ready to fully scale my dance company. and I kind of really wanted to find a way to build, to bring my business side and everything I had sort of studied with my passion together. So I actually started thinking about building something new. And that's really when, you know, the seeds of starting a company like ClassPass started. Yeah. So how did it start? Like what did you do? So in the summer of 2010, I went out to San Francisco. I met a bunch of entrepreneurs because it was

one of my friends' birthdays, one of my former MIT and Bain friends. And all her friends were building apps and ideas. And in 2010 in New York City, I could not count, you know, I didn't know that many entrepreneurs, right? Most of my friends were in finance banking or fashion. So I, you know, go and talk to them about these ideas. They're telling me about what they're building. I mean, some of them weren't even great ideas, but I remember thinking to them and asking them, I'm like, you do this full time. And they said, yes. And I was, it was sort of this new idea for me. Like, and it made me think about this life of entrepreneurship and what if I could really blend, you know, my creativity with my business skills and build something as well. So you, so this trip to San Francisco

clearly inspires you to sparks an idea in your head. And where do you go back to you? You come back to New York? So I come back to New York, correct. So I take a red eye, I remember on Sunday night. And I remember thinking to myself, you know what, Pyle, like, why don't you give yourself two weeks to think of an idea. And hey, if you think of an idea, maybe entrepreneurship is the right way. If not, okay, maybe it's time to, you know, look for another job in corporate America. So I'm studying ballet at the time. I was going to class, obviously, a ton. I wasn't, we weren't in active dance phase at the time, but I was obviously still training. So on the Tuesday after I get back, I, you know, get on my computer, I have my ballet clothes with me. I start looking for a new

class to take. I end up with, you know, seven tabs open. I'm looking at the schedule. I'm looking at the teachers. I'm looking at the times. And it's all over the place, right? The formats are different. I'm kind of getting lost between, you know, the times and the subway I need to take. And by then it's been two hours and I've missed class and I don't go that day.

And that's when it hit me. I realized, oh my God, this is a disaster. This information is all over the place. What if technology could help people put this all in one place for them to be able to, you know, continue to do their passions and go to class? That was the initial moment for me. So this idea of like, and I remember that, right? Like you would look for, you know, a bunch of different yoga studios, for example, or whatever, and they're, you know, websites and tabs and sign up here.

And yeah. And so you were looking at that thinking there should be just one easy way to do this. Right. And at the time, I was really obviously inspired by, you know, products like open table, seamless web, Zocdoc. those were all a part of the offline to online movement that was going on. So that was the idea. And, you know, Open Table, I think, had just reached a billion dollars at the time. And so everyone, you know, knew there was a lot of scalability in a product like this.

So that's sort of, for me, the market research I started doing in those models to see how I could build this for classes. So you're kind of thinking about this, but then what's the next step? I mean, you still had a job at that time, right? Yeah. So I'm still working for Warner. I start, you know, once again, doing some research looking at these adjacent models. I start doing some, you know, a little bit of qualitative research with my friends. So I start telling them, you know, hey, I want to build this idea like an open table for classes,

which by the way sounds pretty good, right, to anyone. It sounded, everyone was like, that sounds great. I would do it. And I am, by the way, the name of the company at the time was called dabble, dabble now, because that was what I thought the company would be. It thought it would be like a place where people could dabble in different classes. Yeah. And I, you know, I would just kind of tell them about the idea.

And they were, people were really interested in, in me starting it. So, and you were, I mean, were you looking for funding at that point or not quite yet? I hadn't quit my job, like you said. I mean, I wasn't fully there yet. And obviously, like, for me, getting my parents' blessing was actually a really important thing for me. I remember sitting down with them Thanksgiving of that year. So we're in 2010 still. and, you know, I was pretty, like, burned out when it came to my job at work.

And I remember just thinking, like, oh, I don't want to go back into the office on Monday. And my mom looked at me and she goes, why don't you quit? And that was actually a very surprising thing to hear from someone like my mother, who's, you know, as I said, immigrated here, wanted to make sure my sister and I were stable. But I think what she had realized, I had been working for six years. I had sort of checked every box that I needed to for them. I think my mom almost got to the point where she was like, you can stop working. Like, you know, go do what makes you happy because happiness is as important.

And that's when I kind of got this freedom to be able to sort of dream about what I wanted to do. I decided in January that I would quit. I sent an email. 2011. 2011 in January, I decided I would quit. I write an email to, you know, all the executives and people I had worked with at Warner Music Group. and the vice chairman of the company, Michael Fleischer, he invites me up to his office and he wants to hear about my idea. And, you know, I'd probably interacted with him two or three times throughout

my experience, but he was really interested in hearing about a new idea. So I go up there, I start telling him about, you know, dabble at the time. And he was like, this is amazing. Like, I'm going to introduce you to someone who can, you know, who's running this tech start program, David Tisch. And he's like, and I want to invest money. So here's $10,000. Wow. Once again, like I'm kind of fascinated by the fact that, you know, I'm about to walk out, you know, or quit my job. And it's like the scariest day of my life. And I walked out with a $10,000 check on the day I quit. Okay. So, so you have this idea and there's clearly interest. And were you doing this all by yourself at this point at the beginning? Or did you, because eventually you had a co-founder. But yeah. So one of the early conversations when I was really, you know, getting feedback on the idea was with one of my childhood friends, Sjeev Sengavi. And he was, you know, an amazing dancer also when we were younger.

He did martial arts. He became a banker and sort of stopped doing all these things that he loved. And when I told him about the idea, I remember waking up the next morning and he had texted me like a hundred times being like, hey, I want to give you money for this. Let me know how I can help and get involved. And that's sort of where it started. So it first started with him wanting to invest. And then little by little, as I quit my job and started working.

on it. And, you know, once again, I knew he was as passionate about being active, being fit, you know, staying in touch with your passions as I was. He was like, you know what, Pyle, like, I want to quit and do this with you. And that's really how, you know, we were always a team. Like, growing up, we kind of did everything together. So that's how, you know, we decided to build this together. I'm trying to, I mean, this is a story that I have almost never heard, which is somebody has an idea like this. And without a deck, without, you know, a business plan, people were like, here's a check, I want to give you check, I want to give you check. And that must have suggested in your mind that this was a great idea, that if all these

people wanted to invest, then maybe I'm onto something. Yeah, I mean, it's actually interesting because a lot of these people, by the way, had also followed my dance company trajectory. And I say that because the way I, you know, presented my dance company, the professionalism, the way I sold out shows, I think people knew I was doing that while I had another job. So these are my friends who had been able to watch me hustle, been once again able to watch me create something from nothing. And when I was like, hey, like, okay, open table is a billion dollars. I'm building a business that big. They were like, all right, sign me up. You know, that's really where it started. And so the idea was basically a search engine for like when you described it, you would describe it as

a search engine or basically as open table, but for fitness. That's how you describe it. It wasn't just actually just fitness classes at the time. It was active and creative classes. So we had photography and drawing and cooking on there as well. And we obviously had all the fitness classes listed at the time. And the idea was you would partner or you would start to like basically dial up different businesses and see if they would partner with you? So at that time, and this is one of the mistakes we made, what we were really interested in was the information, like the schedule data, right? So what we started doing was really integrating with like the backend APIs that were integrated into the scheduling platforms, these places were using. And you would just, those were just open RSA or open feeds and you would just pull them out.

100%. So they were open feeds. We were working with like sort of scraping data if they weren't connected to something. So we were really trying to master was like sort of becoming like this Google, right, of class information. And how much money do you remember raising just to get started? I raised about a half a million dollars. This was before we got into TechStars, which was this big incubator. So you have got some funding and you're working on this idea, but you haven't launched it yet, right? This is still pre-lunch. Okay.

Right. And you get into this program called TechStars, which is like an incubator program. Is it like the Y combinator? Yeah, Y Combinator and Textors are very similar. And this was the second class in New York City. So it was pretty new. But once again, you know, because there weren't that many startups yet, it was a great program because, I mean, I got to meet every incredible founder that, you know, in New York City and even folks who would come by from Silicon Valley. through the program because they came to mentor, right? Because the startup community was much smaller

at that time. Was anybody, by the way, did anybody say like, you know, Dabble just doesn't, it doesn't take, it doesn't speak to me. Well, so in, when was this? I think in 2011, this is before we were in Techstars. We actually had to change our name because there was a company in Chicago that started selling classes under the name of Dabble. So we had to actually overnight change her name. And we couldn't think of anything. So we like literally were just scouring the word class with anything on GoDaddy and found Clastivity. So our second name was actually Clastivity because it was class and activity together. Yeah, I like that. It was good aside from the fact that everyone messed up the eyes and the T's all the time. Like even till this day, no one spells it right.

So that was a problem. But, you know, that's sort of where it started. It was a mouthful. But we were, we got into Tech Stars. We were, we were. Our name was Clastivity, the search engine, everything was called Clastivity at the time. So you're working on it and people are giving you great feedback, right? Like most people are saying, this is awesome. Right, because it worked for Open Table and it worked for Seamless Web and it worked for ZocDoc. Why wouldn't it work for classes? All right.

So you, I guess what, you launch in 2012? You launch, you go live. We go live at the end of TechStars. So June of 2012. We have our big demo day. you know, we're getting all this tech press. We launched the website. And what kind of classes could you sign up for? You had photography classes on there. We had, you know, yoga classes, spin classes. We had a variety of different classes. We had about a million classes listed.

A million classes available. About a million. I mean, it's amazing. And all in New York, presumably, right? All in New York, correct. And presumably, you were eventually going to monetize this, I guess, by, like charging a transaction fee to the studios. Like, if you want your class listed on the site, you pay a fee to classivity? Of course, right. So it was a volume bet, essentially. And like pretty soon after you launched it, you get a, you get like a bunch of press, I think, and like the tech press covers this. It's like all over the place. You do tech stars. And does this just like go crazy? Like, are your servers like breaking down with all the people signing up? Exactly the opposite. There was crickets, meaning no one went to any classes. We had probably 10 days

go by before we got even one reservation. Wow. Yeah, it was heartbreaking. It was one of those moments where, you know, you start realizing all these like false signals of success, right? I was like, oh, all these people who compared this to open table. We're telling you, this was going to be open table. Right, exactly.

And by the way, people were coming to the website, right? So the first thing we did was we thought, like, first of all, we wanted to make sure, you know, the buy button was working. Obviously, that's the first thing you check. you're like, is this going through? Yeah, is it wrong? Is there a glitch? We would test it.

And then we thought it was maybe people couldn't see the buy button. So we would change the colors. Bigger. Yeah, exactly. So I call it. Because it doesn't make sense. Exactly. Exactly.

Exactly. So I call it the summer of buttons because that's like really what we did. And it was it was kind of depressing. I mean, you know, we had once again like close to, by the way, about close to a year and a half, right? We had probably spent close to a half a million dollars at the, this point and it's crickets and I didn't know what to do. When we come back in just a moment, how Pyle took the business in a new direction and then

several more before she finally landed on the winning formula for Class Pass. Stay with us. I'm Guy Raz and you're listening to How I Built This from NPR. Hey, welcome back to How I Built This from NPR. So it's the summer of 2012, Pyle and her team have just launched a big, brand new booking service, Clastivity, and nobody is signing up for it. And they're racking their brains, trying to figure out what to do next. We start thinking about some new marketing, you know, tactics we could do. I remember, you know, we launched this promotion where we literally sent an email saying, like, go to class for free and still know when. So that's when I was like,

okay, we have totally missed this. Something is wrong here. And that's when I knew we needed to start iterating and changing. So the first thing we started doing was going to our studio owners, right? So what we didn't do the first time was talk to the partners, right? We were kind of behind the screens and being, you know, thinking that tech was going to fix all of this, right? And that's when I realized tech does not fix all of this. This is a human behavior. I need to get someone off the couch physically to get them into a classroom. If I can't do that by talking to them and motivating them, there was no way technology was going to fix that, right? And so we started talking to the studio owner is to understand more about what, you know, challenges they were facing.

Many of them offered a first class for free, right? That was sort of their way of getting people in the door. And this was also when Boutique Fitness was starting to boom. So this is when we started to focus a little bit more on going towards fitness. Yeah. But I'm trying to figure out, like, if I want to get an airline ticket, right, I'll go to kayak because it's just easy or expedited. It was one of these search engines.

And it just seems to make sense. Like if I was like, I need to, I want to do a yoga class. and let me just go here and sign up. Like what? It's not clear to me why there was a disconnect between somebody wanting to go to, because people were signing up for classes online. So, I mean, do you enjoy yoga, I assume? Yeah, I mean, I do, yeah.

I mean, I don't do it as often as I should, but yeah. Right. So I think that's really what it is, is everyone, everyone I surveyed would, if I said, do you want to do a yoga class, 100% of people would say yes. If I told them, do you want to go tomorrow at 12 p.m., I would get like a 1% people who would convert. And so that was sort of the problem. It was this, it was this drop off that was happening when people actually were presented with the information in front of them, right? It was the brain cycles of, which class do I go to? Is this the right class? Do I commit?

Oh, no. Oh, my God. Oh, and then it's $20. Forget it. You know. So this was sort of the brain cycles of putting too many decisions in one place for someone that was not working, right? And so something with like airline tickets, like you already made the decision to go. Or if you're going to go eat, you're, you're going to eat. Eating is a utility. Like, you're going to eat, right? And that was the difference where working out and going to these classes are aspirational. I had to really motivate people to want to get out of their houses to go and try these experiences. We needed to build a product and a value proposition that would make classes fun, not an obligation or not something that felt like work. And just to review here, I mean, at this point, your business was basically just a search engine

for classes. And I guess you realize that people are not just going to go into a search engine and look for a class and come and sign up. And so essentially what you had to do was, I guess you had to completely change what your model was. Yeah, a year and a half in. We decided to work, go in a different direction. I mean, we downsize the team. I had to save cash. And I wasn't done. You know, I wasn't done trying to solve the mission. So what was it? What was it? What did you land on? So we started building another product called The Passport. And this was a 30-day product where people could go and try these, you know, one-off

free classes that these studios were offering all in one place. And because we had built so many of these integrations, what was nice is at least that part was done. So what all that people had to do was go on, you know, search around, discover. And they had 30 days, right? So putting this time limit on it also helped them say, okay, wait, I have 30 days to go, you know, try a yoga class, try a dance class. try a spin class, let me go do it. So wait, it was like a, just explain.

It was a, you would just pay, how much was the 30 days? So it was $49. We had about, we had 20 studios at the time when we launched, and they were of different genres. So using your pass, you could go to up to 10. You had to be a new customer. And these were all fitness. This was not, these were not like photography in our classes, just fitness.

These were all boutique fitness classes. So 10 classes, we had 30 days to use it up. Correct. So you had 30 days. You came onto the site. You could see all the schedule information. And you basically got to stamp your passport, right, with different studios. So it was like five bucks a class.

Basically, correct. But then I guess the question is, why would they pay $49 for it? If they could have just done it individually for free. It just was an easier booking experience, right? I mean, that's like where technology really, I think, in our lives started coming alive. It's like sometimes it's easier to call a cab than Uber, but you still do Uber because it's like in your phone. Right. And I think it was sort of that type of experience of people just saying, oh, my God, this is all in one place.

And, you know, we made it all so easy, right? Like we would give information. We would have photos. It just felt more accessible to people in the way we were also presenting the information. And it felt exciting, right, to say, hey, like, let me sign up with my friend and we'll both do it together for a month. You know, it just felt like you were going on a journey together. And this kind of brings me back to having a value proposition and not just it being a search engine. So how did it do?

the passport model. So we finally started seeing reservations, which was, you know, a really great, was great progress for us as a company. We started, you know, having people try these classes. They loved going to, you know, yoga on Monday, dance on Wednesday. Our studio owners, though, you know, were getting the raw end of the deal because the promise we had made to them was that 75% of people would come back to these studios. Now, what we were doing, we were, every single time you went to class, we collected a rating review, right? from you on if you liked it. If you gave a class like a four or five, we would then retarget you with a package right from that studio directly. So, you know, people would try these classes and

they weren't going back. We saw less than 10 to 15 percent of people go back to studios. And that was not fair, right? These studio owners were giving us these classes for free, but we're not getting people to come back and be loyalists. And bigger problem for me was this is a 30-day product and it's a one-time purchase. That's also not a great business. Because you need to repeat customers. Of course. Right. So the other thing we realized, which was very interesting, was people were buying this product with multiple email addresses. And we started getting yelled at from our studio owners who would call us and say, hey, you told me like customer X couldn't come back. I saw her again last week. Because they were using a different email account. They were using different email addresses

and signing up over and over again for the passport. They loved a variety. And that was sort of this thing we stumbled upon accidentally, which was this idea that people really loved, you know, having this, you know, different classes to take and this motivation of I could really package my own workout routine together. So then we started thinking about what if this is something that needs to be, you know, recurring every month. So we did a survey with our users where we asked them, you know, if you could go back and do this product over and over again, use the passport month over a month and visit your favorite studios, you know, would you do it? And 90s. 95% of them said, yes, I would.

Wow. So that was sort of the information and insight we needed to say, hey, let's try a subscription. And so you've got customers. And were you getting a lot of customers? I mean, what was a lot? Was it like being thousands and thousands of people signing up? No, this was, I mean, we had a total of about 2,000 customers on the passport before we pivoted to class pass.

So we're, you know, we're getting there like in the sense of, you know, the chart was starting to go up, but we had a problem that that still needed to be fixed. even though all these, you know, moments were great of people starting to talk about us and tweet about us, we still needed to do more work. So this is when we started to test out a monthly subscription. So in June of 2013, we sold a class pass model where we let 50 people come on and try, you know, try this out on a more monthly basis. So what was a difference between the class pass model and the passport model? So the class pass model was a monthly subscription where you could go back to any of the studios, right, up to three times a month. There was still a cap on it. So you could try,

you know, you can go to, you know, a dance class, a class, spinning class, whatever you really want to do. You just couldn't go to any one place more than three times in a month. That's when we started. And it was also $9 for 10 classes when we launched. And this was really inspired by the success of the passport model, that you saw that model and you thought, this is really where we should, this is what we should be focusing on. Like one simple idea that people can get, wrapped their heads around, and that's what, like, that's going to work. Correct. And it was just exponential growth after that.

And by month three of having the class pass out, it took over the passport revenue, and we knew that that was the model to focus on. So June of 2013, you launched the class pass idea. And by the way, was the business still called Clastivity? Yes, it was. So we were called, that product was called the Clastivity ClassFass. Right. That's a mouthful.

Yeah. And it's $90 bucks a month for 10 classes a month. There are a variety of options in New York, which is an amazing deal, right? Because some of these classes could, I mean, that's $10 a class. Some of the classes were $30. Yeah. Absolutely. And, you know, we had a variety of different studios on the platform. I mean, there were certain studios that we just put on the platform where we didn't have like full agreements with yet because we just wanted to test. And, you know, we started sending them so much. traffic that they would call us up and say, hey, like, who are you guys? Can we, you know, let's chat, let's talk about this. And then we were able to, you know, negotiate a better rate. But we kind of were really just testing out this idea and if people wanted to do this. And as I mentioned, like, people would make a reservation and then we would go fulfill it on the back end. So basically, when someone would sign up for a class through your website, you would just go to the studios website and sign up that user and pay the fee yourself. And I guess it didn't matter whether you were losing money on it because you just, you just wanted to see if this thing worked.

Yeah. So in the beginning, I mean, we didn't really care as we were testing the concept, right? We were, we just wanted to prove that we could do this and get their attention, right? That's the number one thing in the beginning is no one was going to really, I mean, at least the bigger studios weren't going to, you know, pick up the phone. I mean, for the smaller guys, it was actually, it was fun. We would actually, you know, there were days where I would do five classes a day because the way we would really like, we'd love to kind of go into these studios was take the class with

the owner. and then sort of talk about class pass after, you know, sit down with them in our sweaty clothes after work with an iPad and talk to them about what we were building. So you were really, you had to be like a door-to-door salesman. Like you had to go, like I always think about the story of Sarah Blakely selling fax machines door-to-door, which is what made her into a great entrepreneur. I mean, you had to do that. You were basically knocking on doors and saying, hey, I got this business.

Do you want to work with us? It was amazing, though. I mean, we had to go to class, which, as, you know, I think that was so important. for the people, you know, we were meeting is that we were their customers and we loved going to class and so did everyone on my team, you know, and we weren't trying to, you know, we weren't walking in there in suits with some like some marketing like platform for them. We were, we were like, we were like, we have this idea. And, you know, we truthfully, like, we did so much to understand about more about their business. So we did a lot of analysis for every single studio because

we wanted to make sure they had a good experience with us and wanted to stay with us, right? We wanted to have high retention of our studios because that's also what was going to keep our customers happy. And Powell, we should mention here that I think at this point you've got this model where you're paying the studios like a fee for each class that your customer takes. So your customer might be paying 99 bucks a month, but you were paying the studios like a negotiated fee every time one of your customers would go to one of their classes, right? Exactly. Yeah. But it's a little bit like going to the dentist. Like if I go to the dentist and I pay cash, I'm going to pay a higher rate than if I have an insurance policy because I'm going to pay a rate that the insurance

company has negotiated. So, I mean, it's kind of a fair analogy, right? Right. Yeah. I mean, the dentist feels a lot much or much more cruel than going to a yoga class. But sure. Yeah, I see what you're saying, like in the sense of, yeah, we have a pre-negotiated price. But the whole thing is, it's the discovery side. Like you probably wouldn't have ever even gone to the yoga class if it wasn't for Class Pass. By the way, I mean, you had raised about $500,000, but I imagine that money was gone by that point.

Yeah. So by that point, I actually raised a little over, I raised another $700,000 after Techstar. So what was nice is, you know, I had money to get to this point. I actually remember in the summer of 2013, once Class Pass worked, we almost were, we were getting to a point where I had about three to three months of cash left.

Wow. And so I thankfully, you know, raised a bridge round from, actually Cyrus from Zoc Doc helped me raise that round, which got me into got me through to January, which is when I officially closed my seed round. That was going to let us launch in other places. This is January of 2014. January of 2014, correct. So between that point, what I really wanted to prove was getting to a million dollar run rate, right? So that would mean that we had a thousand people paying us monthly.

for ClassPass, which was a $99 product, and that would mean that I was at a million-dollar run rate. And that's really what I wanted to get to for January. And I think, you know, this was such a fun phase for the company because every day we would, you know, have new customers and we would be doing these crazy promotions. And one of the best ways we would get customers to sign up is we did this Lou Lemon promotion

where people would get $100 gift card to Lou Lemon if they signed up for ClassPass and Steve. with us for six months. And one day, I get to the office and there's like a letter on my desk and I open it and it's a cease and desist from Lou Lemon. God. And I remember, you know, my first instinct was like, oh no, should I be scared? But then I was like, oh, my God, Lou Lemon knows who we are. You know, it was one of those moments where I remember celebrating kind of because we were so small, right? And to sort of be on the radar of a company like that, it made me realize, like, we were really onto something. But why is that not a lot? Why couldn't you offer a

Lulu Lemon gift card. Well, we were like marketing it with like, it was in our marketing materials, right? I see. I see. So it made it seem like it was like a partnership or something. Correct. So did you stop offering the Lulu lemon gift card? I think we may have done it once or twice more, but we were careful.

And I mean, you know, at the end of the day, you do what you need to, right? I think that was, this was like the beginning. As long as it's legal. As long as it's legal, exactly. Like we didn't want it. We weren't obviously like not. You know, we didn't want to, you know, Lou Lemon's obviously a great, you know, partner to us now. And we've done a lot with them. But it's just, you know, at that time, we were, we were just five people in an office trying to make something happen.

So I love this idea. You had a very clear goal. You needed a thousand paying customers a month for a million dollar run rate, which was still not going to make you profitable, but it was going to prove the concept. And did you get there? Did you get to that point? Yeah, we got there. I mean, when you look back at the curve, right, that we started seeing, I mean, it just the numbers were exponential, right? We just started doubling and then we were tripling. The amount of people sort of signing up for class pass talking about class pass was exponential and viral, right? And all of our marketing outside of this Lou Lemon promotion really came from people telling each other about it. So we would do a lot of, you know, referral tactics and referral marketing and it was very much a product people wanted to do with their friends. So it was a million dollar run rate that we wanted to achieve by January. And this is basically the advice I had received was,

you know, once you get to a million dollar run rate, you'll be able to raise your Series A, right? That was sort of what I had heard in the market at that time because, by the way, I had gone out to Silicon Valley three times already. In that, in the previous year. Yeah, in the previous three years I'd been building my company. Looking for cash. Looking for cash. So I was like, I kind of remember feeling like, oh, I have to go back out there. And I don't, I don't want to come back with, you know, no cash, right? That was, that was just not an option. I imagine a lot of the rooms that you were in where you were trying to raise money were filled with men. And I imagine men who perceive themselves to be powerful or important. Were you ever intimidated? And if so, how did

you find your courage? It's, you know, this is a great question. And I feel like it's been the backbone of my whole life, which is I had to get comfortable being different in every room. I think being different just became something I got very used to. And I think things like, you know, dancing, things, you know, staying in places and being around people who made me feel confident became ways for me to never doubt myself. And I knew I was smart. I knew I had passion. I knew I knew how to work hard. And so if people doubted me, like, that's their problem, not mine. And I think I would always walk into a room with a lot of confidence, with knowing exactly, you know, how I wanted to present my company with, you know, all the, you know, jazz and charisma I could. And, you know, if people didn't want to believe me, it's their problem.

And I would find someone who was going to, right? And I think that it was so important to me to find people throughout my journey who understood who I was. And I think everyone struggles with this. I never wanted to be boxed into any one thing, right? Like, I'm a dancer. and I'm a business person. I am, you know, I am short, but I am completely powerful. You know, I'm Indian and I'm American.

I've kind of always needed to, I've always had this sort of struggle with sort of being like in one place but being many things. And everyone's multifaceted. And I think when you find people who see what your magic is and can see it, it's, you know. Okay, so it's around the end of 2013. You've hit your million dollar run rate. And at this point, you start to get rid of some of, of your earlier products. Like, for example, I think you get rid of passport the $49 package.

Correct. I always remember this conversation with one of my advisors in that fall, and he was like, Pyle, you need to focus and get rid of the passport. It's cracked to you guys. It will be a chapter in your book one day. And I remember, like, at that moment, because it was like our first sort of child that had worked, I wasn't fully ready. But by, you know, three months later when, you know, We had crossed 1,000 customers on ClassPass, and I mean, you know, 90% of the reservations were coming through the ClassPass model. We knew it was the right way to go. And we luckily got the ClassPass domain. We got the ClassPass like Facebook name, IG name, Twitter account.

And in February of 2014, we finally changed our name to Class Pass. All right. So you get Class Pass. And up until 2014, you were only in New York, but you wanted to test this out. and so you expand it to L.A. and Washington, D.C. and San Francisco, but that presumably meant over the course of the year, right? But that meant that you had to expand your team, you to build your team out. Yes. Right. So in January, once we raised our $2 million seed round, the hypothesis was,

okay, can this work in other places, right? That was the number one thing we had to prove. We needed to make sure that this was just not a New York phenomenon. And so we launched in Boston and D.C. And we started seeing the same traction, the same growth in those markets, which gave us confidence to say, hey, let's bring this to other markets. And so we ended up, you know, hiring more people, sending them out to these cities, expanding the team. But it was heavily a sales effort. But we were able to get cities up in a matter of two weeks. So you start to build it out to other cities.

And that year, 2014, this is kind of a pivotal, even another pivotal year because you had this model, the $99 a month for $10. classes, which was an amazing deal. Then you kind of double down on that. You made a $99 for an unlimited unlimited membership. You could go to as many classes you want for $99. So it started as a summer promotion. In 2014. In 2014 to continue, you know, with growth, we did a summer promotion for unlimited. And I think the other part here is we were, you know, there was no blueprint, right? We didn't know how many classes people would go to. With the 99 for 10, we were seeing our average around, you know, five or six classes per customer. We didn't know if that was right. And we had people, some people telling us 10 wasn't enough. Some people telling us 10 was too much. So it was, you know,

we didn't really know where the numbers should be, if that makes sense, right? We had to test different plans. And so, you know, we were in obviously heavy growth mode. So we do this promotion for unlimited summer. And at the same time, we also secure like amazing partnerships with like top tier studios, like, Ferry's Boot Camp Flywheel with, you know, a bit of a higher price, right? So we're also dealing with a little bit of our cost structure changing from more of the premium inventory. We do this a limited summer promotion. I raise my series A.

We announce it, right, on all the media blogs. And literally the wolves come out. The next day, I start seeing a competitor in every single city. Like local competitors? Like some company would just decide to, like, aggregate a bunch of studios or gyms in a city and then offer packages to users? Yeah, so now I'm dealing with multiple things happening at the same time where I can't really change my pricing

because all my competitors have copied my same product, right? So everyone has an unlimited product now in the markets. We obviously were the frontrunner because we had started the business and we were raising more money. I mean, by the way, six months after my Series A, I raised a $40 million series B. Right? So just think about how quickly that scaling and that growth is. And even in terms of numbers, when 2014 started and we started projecting how many cities we would be and we thought we'd be in eight cities by the end of the year. And in September, once we launched our, or we announced our series A and all these competitors came out, I remember thinking we need to go much quicker. This is not going to work. We're going to lose some of our markets. We need to win. and we started this project as a team.

We called it Operation 2015, which meant that we wanted to be in 20 cities by the end of the year, right? So this was launching 12 extra cities in a matter of three months. And so we hired like 60 people that weekend. It was absolutely like one of the quickest things we had ever done. We literally like bought tickets for people to go into these cities. We trained them. They went in. We launched all these markets.

And we did it by January 1st of 20, 15, we were in 20 markets around the U.S. And we had to build a protection shield, essentially. And so that summer of 2014 temporary promotion became... It became the product. Yep. So here's what I'm wondering, right? And I think this is important point to point out, which is even though you were getting

tons and tons and tons of customers, I can't imagine that people paying $99 a month was profitable for you because you still had to compensate the same. studios, and even though you were paying them less than what they might charge for a full price class, I can't imagine. Like, if somebody was going to 20 classes a month, that was going to, that was going to be five bucks a class, right? Right. Well, so we were obviously looking at the averages, right? And so in the beginning, you know, we started seeing the numbers go up and it was on our radar. And we also then obviously started seeing our costs go up because we started getting better inventory, right? That was the other thing that happened is we started attracting the better

studios, right, which we had to negotiate better rates with. Because they're going to charge more money because they're the better studios. Of course. Yeah, because at that point, the way we were doing a lot of the discounting was it was a 50% off of their 10 class pack rate. So it was obviously going to be higher, right? So we were kind of in this jam and we started doing some price increases, right? Because that was sort of the first thing that, you know, anyone could try. And what we wanted to do was really find this really nice price point where we wouldn't have people leave, right? I think the other point is fitness should be accessible, right? And I think that was a belief we had as a company. We didn't want to have like a $300 product that didn't work for anyone.

You had, I think at one point you tried to raise a price to about $19 a month. And customers, as I'm sure you can understand, we're like, hey, what, like what gives? We were paying $99 a month for this. And now it's like twice as much. We didn't go that high that quickly. I mean, we started with doing like a $15, $20 increase and then it went up to around $150. When we started doing was introducing lower packages. And then what happened was, you know, our really profitable users were obviously choosing the lower packs, which made the unlimited package even get worse in terms of our margin, right? And the people who are sticking with that product were obviously the ones who were using it a lot. And so over time, the margin of our unlimited product was

deteriorating as the cohorts were growing. And that puts you in this weird situation where you were kind of betting against your subscribers, like, I guess, like, hoping they don't go to too many classes. Yep. I think for me, even as a founder, I remember, you know, showing up to work one day and I was doing, like, a social media interview with my team. And they asked me, you know, Pyle, like, tell customers, like, how many times you work out. And I was like, oh, I go to class every day. And they were like, you can't say that. Like, we don't want people to go to class every day. And that's when I was like, wait a second. This is, like, not the mission we stood up for, right? And it was sort of a moment where I knew we needed to make a change as hard as it was.

I was like, this is not going to work. You know, we're betting against our customers being active. And that completely goes against everything we fought for for the past, you know, three, four years where we were just trying to get somebody off the couch. Yeah. There's actually a great Planet Money episode about this several years ago about how gyms don't want you to come there because they make their money when people don't show up, right? You know, it's very true. It's, It is sadly very true. It's the breakage model, right? And that's not what we wanted to bet on here.

It's the exact opposite. And the breakage model would be that people would buy the unlimited pass, but really only go two or three times. Yeah. And that's not the promise you want to make to people. I mean, obviously there is a lot of data and customer testing we did. And I mean, we have so much data on like, you know, how many times people go to class and how we could change it. And we were trying to understand what human behavior would do. What we didn't know is every time we would make a change, human behavior would change, right?

And so we had to kind of do this testing while the airplane was in flight. So it was clear by 2015 that the unlimited model just was not, you were increasing the fees, but the margins were diminishing. It was clear to you that it just couldn't work. You couldn't offer this as a product. We knew that. I mean, what's amazing about the story. I just want to pause and point this out is you've already had like five companies in one single company at this point.

Oh, we're not done yet. And it's actually really amazing because, you know, that's really what I think, especially a technology-focused business is about. It's about you don't know. I mean, you had this model in 2011 that was foolproof that everyone said this is a no-brainer to slam dunk. But it wasn't. And you had to shift. I mean, you're what? At this point, five years into the business.

Yeah. And you have five different products that sometimes it worked really well. And then you kind of evolved and you realized we got to pivot again. I think that's, you know, really is in the DNA of our company now. And I think we're super resilient. And I've learned this, you know, to be mission obsessed as a founder and not product obsessed. It's not my product that makes us. It's us actually creating a.

solution, right, to the problem. And as variables change, whether there's things that change in the world like we're going through right now or, you know, things that changed in my customer's behavior, I have to be able to respond to it in a way that's aligned to the true north. And that's the one thing that's never wavered in our company is what we're fighting towards, right? So when you got, I mean, the other challenges, you offered something that people got used to and they left and you said, it's not going to be available anymore. So I'm assuming there were people who were not happy about this. Did you take a hit initially from that? Did people stop signing up as quickly?

The noise was bigger than the impact it had on the business, for sure. But the noise obviously still hurts, right, in the sense of you never want, you know, your customer's unhappy. And that was definitely a tough, tough day. And, you know, we obviously knew it was the best thing for the long term part of the business. And, you know, we're here today because of it. And we have, you know, obviously, you know,

built a much bigger business since then. And that's obviously because we were able to get through that moment. So basically you you pivot to what offering packages like, you know, $99 for 10 classes, or do you go back to that kind of model? Or what did you do? Yeah. So we have, yeah, we have class packs now, right? So there's like a three pack, a five pack, a 10 pack. And then you could always add on extra classes through bundles and all our cart. So we kind of made it a bit more, you know, pick your plan and by how many times you want to work out. And also, I think it's based on credits, right? You get credits.

So that was another change we made. I know. We've definitely made a few iterations to the company. But we made that change slightly after the class packs, was we realized that the class packs were a bit constraining in the sense that not every class was the same price. And just to be clear, a higher ticketed item, would be like a Sunday morning yoga class

versus a Wednesday 10 a.m. Yoga class. Correct. And my favorite thing is you can now even book things like massages and acupuncture and other types of experiences that would have never fit into our class model before because we now have these new experiences

in different cities that people can go to. You kind of really became kind of important and a symbol for young women who wanted to become founders, especially women of color. You know, you launched this business. You were getting a lot of attention. You were raising a lot of money.

You were running it. I think the company was valued at almost half a billion dollars in 2017. And that year, you decided to step down as CEO. Remained as part of the leadership of the company. But your business partner, Fritz Landman, becomes CEO. I mean, tell me why. I mean, I wouldn't want to be a CEO personally. I think it would be horrible and boring and stressful.

I'd rather do like strategy and vision stuff. Right. Yeah. So first, I think it's important for people to understand that the role of a founding CEO significantly changes as your company grows, right? So what I was doing when we were five people and, you know, even 50 people, it's very different than all of a sudden when you have 200, 300 people. And I started finding that the title of CEO was defining me and boxing me in more than me being able to sort of, you know, have the freedom to continue to do, you know, the creativity and the vision and the projects that I knew I really wanted to spend my time on.

And I realized, you know what? And I was lucky. I had a great partner in Fritz. Fritz had been working with me at this point for three years. We kind of also started, you know, he started getting more involved. and he was kind of in the day to day a lot more. And I was working on more like of the strategy and the vision of the company.

And so it became pretty, you know, easy for us to make the shift. I think like what I realized in that process is that a title like to me doesn't mean anything. It's the work you do. And, you know, it was really important for me to make sure that, you know, especially little girls and women know that they can be CEO. Yeah. Now the opposite side of that is I would not want to see some.

somebody in a role that didn't feel authentic to them, right? And wasn't letting them be who they wanted to be. Yeah. So you stepped down as CEO, but obviously still very much involved in running the company. And you really kind of growth, go on to kind of a, just this explosive period of growth, right? I mean, you guys acquired a couple of competitors and international competitors and really growing very, very quick. and as you grew, as you, as expected, you also become a bigger target, as you should be, as any big targets, anyone that does well, it becomes a big target, and that's part of the deal.

You know, that's just part of the price you pay when you have success. And you start to get a lot of criticism, really more visible criticism from studios and from small business owners who had studios saying, look, this is a lot of criticism. is really undercutting our, you know, our business because our margins are so low anyway. And class pass, you know, we have to work with them because they're now the big 100-pound, 800-pound gorilla on the block. And we have no choice, but we're not making any money off of this system. And of course, I'm sure some of it you feel like is unfair, but some of it has to be a little bit fair. So, you know, we always look at all of our partners. And, you know, I think

it's important to understand that we're a two-side-a-marketplace, right? We're always trying to balance the two and be this middleman that is making both sides happy. And with that being said, you know, I think there are many studios out there who've literally built their entire, entire, you know, businesses off of class pass, right? Like wouldn't be alive today without launching with us. And on the flip side, you know, I think we also know that there's companies that, you know, have had to deal with discounts who didn't want to, you know. And I think for us, we're always trying to improve. We're building, you know, our technology, our algorithms, our data to make sure that we're always maximizing revenue. And our studios are making money when we make money, right?

So everything is 100% aligned. I do think, you know, studios would love to be able to do some of this themselves. But when you really, I mean, when you think about it, it's not that like, I hate saying like it's not that they can't. It's really just that the synergies, right, of a, of a company like ClassPass being able to do customer acquisition for. an entire industry, right, where a class is, you know, $25, $30 is just obviously more efficient when we're selling a product that has a bigger lifetime, right? We're able to put money into Google Analytics or Facebook, you know, and they can't do that. In, I think in February of 2020, there was an article in Vice, and it was a big article about Class Pass. I think it was called Class Pass, a squeezing studios to the point of death.

I know that your company refuted it. you went out and kind of refuted what they said. And let's say, let's say a significant part of the article was inaccurate. I don't know. I'm not saying, but let's just say, for argument's sake, it was. That article still must have stung a little bit when you sighed. 100%. I don't think we're ever at a point as a company where we, you know, are saying, like, we know that we're right and that, you know, we have the exact perfect way of doing things.

What we're always trying to do is make the majority. of our studios happy, right? A majority of our customers happy on a given day. And, you know, we're improving our models. We're improving, you know, the way our business works for all these studios. And it really comes down to prioritizations. But we're always, you know, once again, like our teachers are our product, right? I always say this. It's not, you know, our product is not this technology we built. Our product is this class that someone goes to, right? Offline. It's, It's the experience they have with our instructors in our studios. And that is the most important thing for us to protect and make sure that everyone feels like they are getting, you know, a good end of the deal.

I think in January of this year, you closed your Series E round with a $1 billion evaluation, the first billion dollar value company of this new decade, which is amazing. And, you know, like many or most businesses, I just talked to a founder who was on the show, recently and who told me February of 2020 was their best month ever. And then comes March. And here we are. You're at home. You've got a three-month-old baby at home. Yep. By the way, congratulations. Thank you. And it's just a different world. It's a different world. I mean, these are unprecedented times. And I mean, studios in our business were one of the first things to obviously be mandated. by the government to shut down. So overnight in almost, you know, close to, I would say,

95% of our markets, most of our studios closed down. I mean, you raised money in January. So I have to imagine that that helps you because it gives you some cushion to maybe weather this storm for a while. Yeah. So, I mean, we've obviously had to make changes anyway. But, yeah, I mean, we're happy we have that money. But that's still. doesn't mean we can waste it, right? I mean, this is all about survival. Yeah. So the number one thing that, you know, we're really focused on is making sure our studios make it through this time, right? I mean, they are small businesses. They have huge rents. They, you know, many of them have had to let go of their employees, you know, and their instructors

during this time. But we want to make sure that obviously when this is over and, you know, we don't know when, that people can return to these amazing experiences and instructors that they know. So what we've really been focused on is, you know, how do we send money to them? And we have a partner relief fund that we've launched where customers can donate directly to their favorite studios. And on top of that, you know, something which is obviously very important to us is how do we keep people active at home, right, today in their own spaces? And so a few years ago, we started working actually on a video product. And, you know, we were lucky that, you know, we had it sort of up and ready. And so right when this started, within like a week, our entire product changed. And, you know,

our homepage and everything became do these digital workouts. And we've launched this live stream capability where you can use your credits to book these live stream classes to over 50,000 different workouts a week that are going on from our studios. So what we're, you know, I say this in the sense of we're trying what we can. Yeah. We're doing what we can. And our studios, obviously, if you book these classes, make money. And that's really one of the most important things right now is for people to stay active and our partners to be able to make it through. Yeah. And so I wonder how do you, I mean, it's very hard, even for the most optimistic people. Yeah. It's hard. It's a hard moment. Yeah. I mean, you know, I think it's been really heartbreaking to see, you know, what this has done

to a lot of small businesses. And even, you know, for, you know, we've had to let go of a lot of employees. I know a lot of companies have had to. I think it's hard. I mean, we started this year being a billion dollar company, right? And then have lost a lot of our revenue. So we're going to have to go backwards a little before we go forwards, right? But I think if you have the mindset of we're going to figure it out, we have a team that's unbelievably loyal.

We have a mission that doesn't go away even in Corona times, right? We're actually trying out different types of classes on there from cooking classes and other, and like comedy and things because we don't know. it's going to work. So we're back to throwing some things at the wall again. And I think that startup blood is in our is in our DNA. And there's going to be some adjustments that are going to be made. And we'll have to see how customers evolve with it. You know, I think there are roughly two types of, there are many types of entrepreneurs, but there are roughly two types of entrepreneurs. Those who really kind of deal with stomach churning anxiety, right? Like bathroom floor,

fetal position, crying, freaking out. Is this going to work? right and then others who are just naturally more even keeled like they just they're okay they can handle it i would put myself in the anxiety-riven bathroom floor crying model to be perfectly honest but you you just seem to me to be just i don't know you don't i think once you've been through the bathroom floor model uh three four times you just start feeling more resilient to it and more confident in the fact that you're going to get through it that, you know, we've been through so many ups and downs as a company, you know, I think there is like close to nothing to like that I feel like we haven't been through. I mean, outside of a global pandemic. But, you know,

I think that's, that's really what it is is we've been through a lot, you know, and I've fought every single day to come up with a solution, you know, every single time I could. And, and I think that's, you know, the advice I always have is like, as long as there's a dollar. in that bank account, you have time to fight and you have money to fight. When you think about, it's been 10 years since you launched this thing, and we've got a billion dollar valuation in January, which is incredible. And we're obviously in a difficult moment now, and it could last for a while. But when you think about the success and the trajectory of this business,

do you know, how much do you think this has to do with luck and how much do you think it had to do with just your insane work ethic and skill. I think it's all about making luck happen to you in the sense of positioning your cards right, right? In the sense of when opportunities sort of present themselves, you either have to decide to go with it or not. And I think like this is part of why, to me, class pass is so important to people

is I kept dancing. And I say that because dancing connected me back to like the center of everything I was building. and I really want other people to always have that center in their life. It gave me clarity. And so I think having that clear thinking, help me guide my decisions, help me listen to myself, help me sort of put together, wait, like people are saying this and my data is showing this.

So this is sort of gray still, but I'm going to go with this decision. And, you know, I even think about my parents. Like, I mean, my parents came here with nothing, you know? And literally, like, for them to know that their daughter built a company like this is like something that I will always feel like is the most rewarding part about this. That's Powell Kedakia, co-founder of Class Pass. By the way, Powell still dances and you can actually see some of her incredible choreography on YouTube. One of Powell's videos of her dancing at her wedding reception has more than three and a half million views. And thanks so much for

listening to the show this week. You can subscribe wherever you get your podcasts. You can write to us at H-I-B-T at NPR.org. And if you want to tweet at us, it's at How I Built This or at Guy Raz. This episode was produced by Rachel Fockner with music composed by Rumtine Arablui. Thanks also to Candace Lim, Darith Gales, Julia Carney,

Neva Grant, and Jeff Rogers. I'm Guy Raz, and you've been listening to How I Built This.