How I Built This with Guy Raz - Noom: Saeju Jeong

Episode Date: August 8, 2022

When Saeju Jeong moved from South Korea to the U.S. in his mid-20's, he barely knew anyone, didn't speak much English, and had only $5,000 in savings. Today, he's the CEO of Noom, one of the most popular weight loss/wellness apps in the U.S. Inspired by his late father—a doctor who criticized the profession for treating people only after they got sick—Saeju and his co-founder built their first fitness product in 2007. Several pivots later, they arrived at Noom, an app that carefully tracks what you eat, how you sleep and when you're stressed out. Noom has hinted it may go public this year—if so, the valuation could be as high as $10 billion.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Airbnb.ca.ca. slash host. The reality was guy that we didn't have much money left in the bank. I remember we had like $2,700 and I returned to our one bedroom office during the summer. I remember we had a one tiny AC and super hot. So we all all like, wearing only the underwear. Because it was so hot. Yeah. Everyone was wearing the underwear and there's a fan. Just one fan and one tiny AC was like struggling to blow out the cold air because it's not cold anymore.

Even like one of the engineers had like the towel around his net because he was sweating too much. And I had hard to not cry because I felt so bad. Welcome to 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, how a failed idea for a stationary bike led to more failures before Seju-Jung landed on Noom, a wellness and weight loss app with millions of users.

There's a book that came out in 2009 called Nudge. It was written by two influential scholars, Richard Daler and Cass Sunstein. One of the central arguments the writers make is that it's possible to nudge people into making better decisions about their finances, their health, and even their happiness. And you can do this, the book argues, by making very simple tweaks in how you present information and options to people. The book was incredibly influential. It was almost required reading in the Obama White House.

And it also had a huge impact on business and marketing. It's why, for example, many companies are, automatically enroll their employees in retirement or health plans rather than ask them to sign up. It turns out most people want to participate in those things, but many of them just forget to check the box. I mention all this because it plays a somewhat indirect role in today's story. Because the two founders of Noom were very much trying to figure out how they could encourage small tweaks in human behavior to help people get healthier and more specific. to lose weight. But initially, that wasn't quite the plan. In 2008, when Sayju Zhang and Artem Petakov launched what would eventually become Noom, the health and wellness

space was just taking off online. Sayju's original idea was for a stationary bike linked to a smart screen, sort of like what Peloton is today. His idea eventually morphed into a cardio trainer, sort of an early version of Straba. But Seyju decided to see you. discovered that many users were looking for a different type of app, one much more targeted to helping them lose weight, which is, by the way, one of the hardest things in the world for a human being to do. But Sage-Ew and his partner Ardum wanted to try to build something that might help. So they designed Noom as a holistic approach to weight loss.

It's not a strict diet, but it uses a detailed system for food tracking and incorporates fitness, stress management and good sleep into the program. It took many years, lots of failure, a few different business models, and even some team mutinies before Noom finally got traction. Today, the app is used by tens of millions of people. And if Noom files for an IPO sometime in the next year or so, which it's been hinting at, it could reach a market cap of around $10 billion. all of which might surprise you when you hear how Sajujong got to this point.

He arrived in New York City from Korea in 2005. He was in his mid-20s and he knew almost no one. But he had a little bit of money saved from his first business, which was such a different type of business from Noom that I don't even want to give it away just yet. What I can tell you is that Saju arrived in New York, open and earnest and ready to learn, and was lucky enough to meet his business partner, Ardham, pretty much by chance. Seju grew up in Yosu, a small fishing town in South Korea. His dad was an OBGYN and his mom trained to be a professional violinist.

And when Seiji was growing up, he felt an extreme pressure to succeed. You know, in America, people speak about tiger mom, tiger, something like that, right? I would say Korea is kind of tiger society, tiger, parent, tiger, teacher, I would just say. Let me give you example. You will not believe this, but I will tell you, exact my memory. In my high school, I went to school by 8 o'clock in the morning. Yeah. And I came home 10.45 p.m.

Wow. Yes. Wow. Believe me. And it was about achievement, right? Because I guess achievement means is a status symbol. Correct. Very important.

Taking an exam like SAT test in South Korea is very important. And that is a major parameter to measure how good student you are from college. Yeah. And that test is designed that every single student take an exam at the same day at the same time and same test. I mean, I still don't get it, kind of. If you are unwell that day for some reason, stomach ache or if you are just sick, you are screwed. It's your business that you did not manage your condition well. Because they give the exact time, exact date for an entire class out of entire nation,

is taking an exam at the same time. You'll be surprised. Even the airport stopped the service because they want to make sure the student can pay attention during the test. Yeah. It sounds like it was very important to you to be a good job. student to succeed academically. Is that true? 100% yes. My family background has a little story that our family, we run the hospital together. My uncles are doctors and my aunts are all pharmacists. So the general theme of

young family is saying, we have to produce more doctors. So the pressure was like extra, to be honest. So it was your intention to become a doctor. That was what your goal was? It was a pre-set, to be honest, guy. It was pre-set. Yeah, I didn't even have thought about becoming a non-doctor career in my life. And, I mean, eventually you had to take those exams. How did you do?

I was a good student, I would say, and I studied hard, and I called a judgment day. The day arrived, and I took an exam, and I did my best. and was waiting for the result, and the result came out just like a little shy to be guaranteed to go like a medical school because all the good students go to medical school. So I was like, okay, we'll see. It's a little like shy number. We'll see, but I failed. So I couldn't get into medical college. I vividly remember that I cry so hard.

Like I closed the door and because it's so embarrassing. It's stupid. It has to be really top of the top. And I was okay. So I was going, oh, God, how can I deliver this news to my parent, right? And I just felt exactly, and I still didn't remember that that day, the afternoon, you know, the sun looks very gray, and then the world was kind of really like coming down. That's how I felt because I failed. That's the outcome.

You did end up going to college. Right. You actually studied electrical engineering, right? Correct. I did. And I guess at some point you, I should mention this, you grew up obsessed with heavy metal, like hardcore heavy metal, mostly American heavy metal? Yeah, American and also European both. I mean, whatever heavy metal music is like, yeah, yes. Like Megadeth or even beyond Megadeth.

Oh yeah, this is a good start, I would say. Megadeth, Metallica is a good start. I recommend you. I mean, all the listeners, by the way, they are still very good. albums are great, still amazing. But that was just like dipping your toe. You're talking about like extreme hardcore metal. Exactly. It's just like a heavy metal 101 is a mega death, right?

And then enter into a deeper level like death metal, like black metal, like progress metal. All the metals like you can imagine. You don't want to even. You know, like it's intense, fast and like, you know, crazy guitar riff, that's my music. So how did that happen? How did you get into? like hardcore heavy metal. Well, one day I listened to,

you can accidentally listen to some like heavy metal music from radio station. And I called that and asked my sister, Hey, sister, what was that music? Oh, it's called a hard rock in America. Said you, it's called Hard Rock. And I went to the record store and then asked, I want to buy a hard rock music.

And he gave me the Metallica. And that was the beginning when I was like a nine. Wow. I'm trying to imagine you and your, bedroom at your home in the town where you grew up in Korea with a mother who was like a semi-professional classical violinist with heavy metal music blaring out of your room like what did they say they just laugh at me that's the part I really really appreciate my parent that they both were extremely generous they did not judge me badly my father never asked why do you like it my father just was like you like

the music and dad is so good and I one day I remember clearly this kind of gift that I brought him to my room and I play it's Pantera. You know Pantera? Yeah, Pantera. And he actually listened to the Pantera music with me. And I said, Dad, this is like so good. Don't you think of my desk? Yeah, it's very energetic, right?

And let's go and I have some dinner. Just like that. They respect my hobby, I would say. So you're in college. You were really into heavy metal music. I bring this up because I guess when you were like 19, you kind of started like a heavy metal record label in Korea. What was that label?

So I entered the school and I studied electroengineering because it looks very safe choice, right, in terms of Korea growth. And Korea is kind of known for, you know, a lot of good, like the tech company, like Samsung, LG. But I'll be honest, from day one, I was like, why am I here? That's all day long I was thinking. I couldn't pay attention to orientation of the program at school. And I was a completely lost guy. complete loss from like, why am I waking up? And where am I going to school and class? And I was shocked how much I have to study about like advanced physics and magnetic field, all that stuff.

And I was like, oh my God, am I going to study this? And also like, what if I become a best student? I may have a chance to go to Samsung Electronics, which is the best case outcome. It's like, oh my God, my life is like doomed. That's how I felt. So basically, you're thinking, like, I don't want to end up working at a place like Samsung because that would just be a miserable life. Right. And you were clearly miserable at school. Right, right.

And I'm assuming you were probably listening to a lot of heavy metal music around this time. Yeah. But how did the record label come about? What got you started with that? So I got into more. I mean, because I went to school in Seoul, right? So I was kind of like forced to be independent. So I received an like ultimate like freedom kind of.

Right. So I listened to metal more music. I had expectation if I come to Seoul, which is kind of like the city in my world. I can have an easy access to have metal music, which was very difficult to purchase from Yosu where I grew up. Because I, by the time, I was already listening beyond Metallica. I was listening to like death metal from like. Philadelphia, nobody care. I want to listen that.

I have to buy from like some importing, you know, record studio. And it's just hard. Yeah. Remember those days, CD and cassette tape that you have to purchase, not a streaming service? Right, of course. Yeah. Obviously, before Spotify, you... Oh, yeah.

Right, you'd go and buy your music at a physical store. And I'm assuming that in Korea, there probably wasn't like a heavy metal record store on every street corner. Exactly. So you would probably have to make a special trip to wherever that store was, right? Exactly. So I took like 45 minutes away and got there finally. And then do you have that album for like a nice, it's kind of some Norwegian band like a Dimo Burger? And yeah, I don't have it.

But you told me that like, well, now we have it. So that's why I came. Sold out. And I was like, that's it. Yep. And when can I get it? Probably like another month or two months. Keep it a try a month later, kid.

And they treatment like bad. And I was so mad about this attitude. And then I was in deep thinking on the way back. And I found a company next day. It's called Buy Hard. But just to be clear, you were not, you weren't like a studio where you recorded a death metal bands, like Korean death metal bands. It was basically a way to import records from the U.S. and Europe in a cheaper way. Correct.

So I did it as a buy heart distribution first. And then it evolved by the production. So the answer is no one, but yes. How did the business do? Because I don't think it lasted very long, right? Yeah, I have personal story that it didn't last that long, but it was quite successful in the beginning, to be honest. I was lucky that in 1999, the dot-com arrived.

The dot-com, yeah. Right. So it was a perfect time that I could convert that. I didn't need to have a retail space. I could start online. And my best friend was, like, computer nerd. And I asked him, can you? Newduo.com, it's no problem. So he made a website for you. Oh, yeah, 100%, yes.

Yes. And how did you, I mean, did you need any money to start buy hard productions, or was it just like? Absolutely. So when I started, I needed like around like 3,000 grand I had in my bank. Yeah. Because that money was a paddy cash I received since elementary school. So where were you selling, you, and you were selling entirely through the website? You were selling music to the website. Websites to have metal listeners in South Korea. And, you know, you You know what? Yes, heavy metal music will never become like major music. I get that.

But once you are into heavy metal music, brother-sister, you love it. You're right there. It's a tribe. Oh, my God. Yes. Yes. I mean, I'm not part of the tribe, but I know I recognize the tribe. But so you, you, and so what happened?

I mean, you're getting people buying these records. Why didn't the business continue? So what happened was, so the business grew really fast. And I got a call from my mom one day. And, you know, like, my mom's voice was kind of like, not normal. I can tell something wrong. She goes like, Sergio, we need to have you now. And we are going to have some family discussion.

And I was like, oh, my God, mom, don't tell me it's about the health, right? Is it about health about you or dad? And my mom just silent, but I can't hear from the phone that she was crying. And I was like, oh, man, really? Mom, really? and then I took a train back to Yosu It took seven hours to get there It was the longest travel ever I had

Like you know the feeling of anxiety Like, mom just tell me what's going on here I mean You didn't know what was going on You just knew that there was a family discussion That you had to go home for Mom wanted to have a discussion You know, together

And my sister was already there And as usually my father was in the center of Latino table and my father laid out what happened and what's going to happen. So he basically told us that he got a lung cancer, terminal lung cancer, that stage four, very serious condition that as a doctor, he knows what's going to happen and not much time left. The message was very, he delivered that very calmly.

He didn't set the false expectation, nor he didn't give up. He said, so this is very unfortunate, but I'm going to engage with this plan, that plan. He laid out the plants with chemotherapy, but it was not easy to digest the information. Very difficult. I was into very, I really loved finally, like I could tell my dad, like, finally I found my direction that I think I have a,

you know, talent in entrepreneurship or that, right? And I felt like, dad, I was derailed, but now I'm on track. That's how I felt. But when I heard that, I felt like it's too only to receive the message. I need you to be there so I can show you, you know. And it was very difficult, very difficult. You were, I think your dad told you he had about six months.

Right. And he did survive, I think, for almost a little bit more than a year. Yeah. You were really close with your dad. He was a young man. He was only 51. You were, I think, 21 at the time of his death. I can't even imagine, Sayju, how difficult that was. Difficult. I also realize now I'm like, basically my father's departure and, you know, the last month with him was a precious gift to me and to my family. And that event completely changed the way I view the world still today. Yeah. You, I mean, as I say, this was in 2002, you were young, they were 21. And in Korea, I think all young men must serve in the military for a period of time. You have to do your national service. And it was around that time where you also began your military service. I wonder in a strange way if that, you know, if you, you know, if you.

that helped you after your father's death by giving you something to focus on, or if it was hard. I mean, your dad passes away and you start your military service. My military experience was very invaluable to me and extremely helpful to me at this moment. What happened was after my father passed away, two years after, my senior member of my part. This was like your captain of your platoon? Yes.

Yes. And he yelled at me And actually he slapped on my face It said And I went Hey, Seju Two years Stop

Morning Your dad is gone You gotta wake up Wow Wake up And I asked back Is that long Yeah two years

I think that's enough Don't you think son And I was like Yeah Two years And then I changed my perspective

of thinking on that event of the death of my father and then I paid attention if he is alive what would he care at this moment? And answer became very clear because before he passed away a second

Seju, my only departure will make you very strong, very strong. That's what he said. You are sad today but you'll become very strong. Like the bird know how to fly birds that get out from the nest sooner,

they can learn how to fly faster. And you are basically doing that right now. I'm kicking you out of nest. So do not take this event too bad. That's what he said. And he goes, I am sad personally because I know you have a great potential

and you will achieve a success. And that story, I cannot be there. I cannot watch. So I just realized it is true. I'm here with some talent, but I have more. And I don't know what else I can do better, and I should optimize and learn. So I can become a better person. So I guess this is around 2005, and after your time in the Army, you decide to come to move to the U.S. to New York.

And I guess you get a student visa to come here so you can study at a museum. Music College in New York. But I think you were still thinking about keeping your business going or doing something with that business, right? Oh, yeah, of course. I figured my path of being an entrepreneur from buy hard distribution and production. And I was looking for how I can scale that up and do better and learn. So, yeah, 100%. And so when you arrived to New York, did you know anybody there? No one, no single human, no. So when I left Korea, my mom, I told my mom, mom, I figured from Bihar production. At first year, I made more than a million dollars, mom.

Bihar did over a million dollars in revenue. Yes, and I know how to make money. I think I will not die out of starving. I will do it again. And what helped me to, once I cracked a million dollar revenue, that really changed the way I see the money. You thought, because you realized that you could do this. I mean, you know, this was a very specialized world, right? It was heavy metal, death metal. But like, you were the center of the e-commerce world in Korea. Correct. All right. So you go, so you get to New York. You know nobody. Nobody. You've got some cash with you. Do you remember how much you had with you? Yeah, I remember that I brought like $5,000.

$5,000. Below $5,000, actually. And the reason is I gave all my money to. to my mom, the what I made from by heart, and I reset myself again. To support her, I guess your dad was obviously not around. So you get to New York. I mean, it is a big city, but you were by yourself in a country where, you know, you were, it was not your native language. You didn't know anyone. Right, right. So I settled in North Massapico, in Long Island. Yeah, how do you know that? You know, I got my geography down. But you're saying you, so you didn't even move to the city. You moved to North Massapequa, which is like, how come you settled there?

Was it just cheap? Yeah. Okay, I got you. Did you feel lonely? I was completely lonely. Really, I was lonely. I even spent like 40 million with Sprint the Custom Support Center because I was lonely sometimes. They want to learn English?

But you would spend at the customer support center for... Just speaking to human. Oh, on the phone? Yeah, Sprint. You would call the customer service people at Sprint. at Sprint because, wow. Yeah, I'm not, I'm not, yeah. I'm feeling it. I did it. I wish I was there. I would have hung out with you. So you moved all the way to New York City only to live in North Massapia. No disrespect to people in North Massapagua, but that's not living the dream, not really, of moving to New York City. But that's how I started. Gotcha. All right. Okay. And from what I, from what I've read, not that long after you got to the U.S. to New York. And you got to.

an invitation to a party, right, where you would meet somebody really important, somebody who would eventually factor into your future here. Oh, my God, yes. And I guess how this happened is that, like, I read like some distant relative of yours, who was a student at Princeton, invited you to a get-together in New York with a bunch of her friends. Right. So they were looking for a bar.

And by the way, they called themselves, like, we are Princeton University, like, eating club, like, alumni. They were one of the eating clubs together. These are like these, they're like kind of like residence halls. Exactly, you can say that. Exactly. And it was all their Princeton, all their Princeton friends. 100%.

I'm the only non-Princeon and who don't even speak English properly. I was kind of an odd guy. And I was invited. And they were like very nerdy Princeton guys, right? And they were looking for, oh, we should explore New York City because we are in New York. We should not just go to bar. And I told them, hey, guys, I'm going to take care of you because that's how it works in Korea. And I took them to Korean Bar.

Oh, man. So you guys are hanging out on the town. Right. And there's a guy there named Artem. Yep. And he was also an alumni, Princeton alumni. Exactly. Artum was one of the group members there.

He studied a computer science at there. Yep. Artem Petacov. And I guess at this hanging out, like you and Artem kind of hit it off, you started talking. What did you talk about? I mean, how come the two of you hit it off? So what happened was I was sitting with like a complete prince alumni people, right? And they would not give me any like interest to pay attention to this random guy, right?

And I was trying to participate this like, you know, a lot of random topic here and there, that table here, table. And I was like, oh, I want to know about this guy, but I cannot get into. In our time, he paid attention. I was like, wow, this man has a pretty good empathy. to like me, like immigrant and nobody. Artem, I think he is the child of Ukrainian immigrants, or maybe he even came to the U.S. from Ukraine as a child, yeah.

Oh, my God. You said very well, yes. And what were you, you were saying, I've come here from Korea, and I think I want to try to start a business. That's the basic high-level comment that I had, which nobody actually care, kind of. Okay.

But he actually, he was curious about it. And I got his email, and that night, trained back to, it takes a one hour of 20 minute. Back to North Mississippi, where I came back. That night, I wrote a letter to him, email. And I received email back the next day.

I still remember. The first line was, wow, Cizu, what a great email. I never have ever received this kind of like such a great kind email. And I suggested to him, I think we should meet. And he agreed.

And he came to North Massa Piqua, not New York City, the next day. Wow. So we met and we had a dinner and then we were speaking until 4 a.m. that day. And I learned about his background as Ukraine and his immigrant life, all that. So I realized, oh, wow, probably that also helped him to understand my struggles and he has empathy. So we had a great conversation, yes.

What was, I'm curious, I mean, because you were still just learning English. Is it hard for you? It must have been hard for you. Oh, still today. It's very hard for me. By then, Mega difficult guy, mega. Yeah.

But he really paid attention, not the philosophy English, but he paid attention to my context in the value, which I appreciate. What was he doing at the time? What was his job at the time? He was tech lead at Google Map in New York City office. Wow. So this guy was a, I mean, not only did you meet somebody who was nice, but you met somebody who was a software developer. Exactly. Which is pretty great. Right, right. And what were you doing at the time?

I mean, were you, you know, you were on a three-month visa, or you were on a student visa? Correct. So were you going to classes at that music school on Long Island? Yeah, I went to school in the morning, and afternoon I had a lot of general freedom, and then I was hustling, and I was trying to figure the business extension of my buy heart. But I didn't want to do, having made a business anymore. Because, you know, how many? Many heavy metal listeners are there in Korea while the Korea is a small market. So I lost the interest to continue to do the business.

So I was looking for more. And also, when my father passed away, he left a very big question, such as, like, he always told the patient to make sure that they have a health lifestyle. But, like, majority of patients develop the conditions, and he has to do, in other words, sick care management. Sick care management. Right. So he left a very big question to me that why, while the society is pointing me out and respect me as a health care leader, I became a sick care management leader. In other words, he was saying, why are we focused on when people, why are we focused on treating people after they're sick rather than preventing them from getting sick in the first place? Exactly. So that was a big question. And this kind of comment I made and shared with Arcton by them, Arton became my best and broader level friend. So we.

hung out at least twice or three times per week. That much we were... A week. And he was, you were going into New York or he was coming to Long Island. You really were like, you guys were bonding. You were really becoming friends. Oh my God. I mean, we are like that. We are like, yeah, super. So I shared that, right? And he picked that off the story. Yeah. And he gave me the book. It's called Good to Great. Good to Great. Yeah, Jim Collins. Yeah. Jim Collins. Exactly. Yeah. So Artham told me that said you, this book probably give you some answer about the general question or about the business being an entrepreneur, what is enterprise, why? This may give an answer. And I really like the way Artiman told me then I read that book. And I was like, I awakened like,

wow. All right. So he's working at Google. He's an engineer there. It was a great job. You are kind of trying to figure out what you wanted to do. I mean, clearly, Artem is a guy that you're becoming close with, and you can see in him, somebody who you can start a business with. What are some of the ideas that you start to think about that you might be able to do? So, Artim and I, we both had a lot of over six months of brainstorming, six months. We went to park, we sat down, we write down a lot, and ideas. and then two sector came. First, education, second, healthcare.

And then we decided to, we need to tackle the healthcare. And from what I understand, you were actually working out of Artem's apartment in New York while he was at work at Google during the day, right? Yes. I want to be motivated. So I came to all in the morning, Artem and Artum had to Google,

and I was working at Artem's apartment. And often I stopped by lunch at Google's office and I had a free lunch. Oh, because they have free food. Correct. You just grab some free sandwiches. I want to say sorry to Google for that. They can afford the free sandwiches.

Exactly. And I came back again and I was working in the afternoon. And Artem, as soon as he finished his work and he brings an extra sandwich from Google cafeteria leftover, and we eat that dinner and we work until like midnight or 1 a.m. every night, including weekend. This is like 2006, 2007. and you're talking about, you both agree that there's something to do with health, health care. 100% yes, yes. And so I guess initially your idea was let's do something around exercise, getting, you know, motivating people to exercise.

Right, right, right. And I guess you guys kind of came up with this idea to start something called work smart labs, which sounds really great. Sounds like a big office with a bunch of scientists, but really it was just an idea in your head, right? Work smart labs. Right, right, right. And what was the original idea that you guys had? So Artem sold these shares to sponsor the ideas. And I also use all my money that I saved.

And then we launched the Work Smart Labs, Inc. And we instantly thought, we need to help our users can do more better fitness. We need the gym. Yeah, gym and exercise more. So our first prototype was interactive screen with a stationary bike that you can touch the screen, you can follow the guide from the screen, all that, you can copy with the other,

something like that. So it's a very similar product you can't imagine today. So that was our very first prototype. Yes. So you would be on a stationary bike, there'd be a screen. From what I understand it was like, you are like peddling along a rainbow

and catching butterflies. Correct. So you guys built a prototype? You built this thing? We did it. And it was quite successful from our beta test. How did you build it with such limited funds? I mean, was it, because it sounds complicated and expensive, but I guess it was.

It was. It was. But Artem also brought these high school friends who was a genius of genius in MIT. And then we also adopted some help from Princeton Network friends that who is very advanced in like mechanical engineering. So using all the sensors. So we were able to convert the stationary bike from gym to boring station bike to a smarter bike, right? And nowadays, like there's a Peloton, Peloton products like that competitor. So it basically built that idea.

And we launched that in 2007. It was a Peloton competitor. Obviously, Peloton didn't exist. But it was a – so your idea was we're going to gamify exercise, starting with a stationary bike. Right. And presumably you had to test this out at the gym? Right. So we hustled and found the gym in Queens,

and they allow us to install and test it out with their members. And the usage was outstanding compared to the other generic stationary bikes. So we were very excited about that ideas. And with the initial prototype and success, we thought we can now raise capital. And we try. We tried to raise capital for years and years. Nobody wanted to get involved in this. Nope.

Because this is, and by the way, this is a problem, Peloton had. Investors probably said, well, so you're going to manufacture the hardware and the software. And by the way, how big is this market? Exactly. If you're just selling to gyms, presumably that was what they were asking you. So it was clear to you that when investors were not interested in this, maybe you were not on the. maybe you were not on the right path. Maybe your idea wasn't the right idea to pursue.

So Artem and I, we completely believe in that direction, right? But after two years of straight, like getting a no from all the NJ investors or VCs or even friends, it became clear. And the reality was, Guy, that we didn't have much money left in the bank. I remember we had like $2,700. and I had a very hard time myself and I returned to our one bedroom office during the summer. I remember we had the one tiny AC and super hot. So we were all like wearing only the underwear, everybody, like so hot.

Because it was so hot. Yes, I'm not, yeah, everyone just wearing the underwear and there's a fan. Just one fan and one tiny AC was like struggling to blow out the cold air because it's not cold anymore somehow. Even one of the engineers had the towel around his net because he was sweating too much. And I had a hard time not cry because I felt so bad. When we come back, how a sputtering idea gets revamped

until it eventually becomes Noom. And why, just as the company starts to take off, a lot of people who work there decide to walk out. Stay with us. I'm Guy Raz, and you're listening to Have you. how I built this. Hey, welcome back to how I built this. I'm Guy Raz. So it's 2008, and after two years of failing to raise capital for their stationary bike, Sayju and Ardham are almost out of cash. But fortunately, Ardom and some friends who are helping out also work at Google for their day jobs,

and that leads to a new idea for an app. Because they were working for Google by the time, they heard Google is responding on iTunes store, the Android app store. So we had a meeting again, guys, we need to drop this hardware thing. We need to do what we are good at, which is software development, and we can move fast. And that was day that we are going to all in application business. And that's how we devout card trainer. As soon as the app store opened, we, we. were one of the first

application was available at the store. For the Android phones? The Android app app store. Yes. And this was called a cardio trainer. Yes. And the app was, from what I understand, it was designed to track running and bike rides.

So what, I mean, this was kind of pre-strava, right? Exactly. But it was sort of like a proto-strava, if you will, a little bit, right? Yes. That was designed for like using GP. He has a setometer to monitor cycling and running over mobile. That was our product.

And people were using FitBits already and that was out there. But now you could just put the app on the phone and it could more or less do a version of the same thing. That's right, Guy. And by the way, to finance that app, I guess the biggest cost was the engineers, right? But everybody was presumably they were all kind of working for nothing. Exactly. And also we were well funded by they were all. working for Google. And then once we realized this is actually working and we became number one at the

market and they will start working for Google and they convert to full time. I guess it was adopted by lots of people. I think by eight months it was like the top most downloaded fitness app on Android. Yeah, we received like five million downloads within six months by then. And by the time that was a record breaking number. Because the smartphone, was not adopted that many. But basically if you buy Android phone, then you have our product almost. Oh, wow. But still not making money from it because it was free.

Yeah, exactly. That's how we actually received the first ever venture capital money, too, because we became the known egg maker at fitness category. I got you. Okay, so this is the point where you get some VC money. So you can keep kind of plugging away at this thing, right, this cardio trainer. Yes. And then we need to figure out what is our business, right?

And then we launched a premium service is that people can buy extra features, all that. The conversion was not bad, but not great neither. And the bigger problem was it did not answer our promise. The promise is our mission that are we helping our users get better in terms of overall health? That bothers us more than we are not making money enough. Do you see? You bothered you more that people were not actually really engaging with it? People engaged a lot.

The problem is we reviewed our data and we were kind of like surprised. Majority of our users, 90% plus more, our users are not using the major features, which is tracking their running or cycling. They are actually using our product for parameters. They were counting their steps to it like a Fitbit. Yes. We were all like shocked. Why are you not using our main features? This is designed for Because they weren't cyclists or runners probably. They are not. Yes, you're a right guy. But there's a massive adoption of our product, right? So we asked why are you using our product for step counting? Why do you need to count your staff? And majority of users answered because they want to lose weight. That was a real like aha moment for us. And this insight that the users, many of the users were just using it to count steps because they wanted to lose weight, inspired the team to come up with a second app, which I guess was a calorie counting app that you called calerific.

Correct. So we made, this was a big decision for us because we were literally number one at fitness health category and Android market for three years straight. And we were kind of like the company for fitness. But we are in a very early stage by then. Early stage means we were looking for what is a product market fit that can deliver a long-lasting business? In other words, being number one was great, but you knew that that didn't necessarily tell you that it was going to be number one for 10 years. Exactly, exactly. From what I read something in the story, and I'm not.

sure if it's apocryphold. That basically at that moment, this is around 2010, you guys, the founder, started to feel pressure to optimize for revenue first rather than results. Is that true to that story? Yes, it's true. And it's a fair, right? Look, investors, their job is they need to make sure their portfolios are returning the money.

and we told our investors, we are going to retire a cardio trainer and we'll build new product, which is Calar County product, colorific. And I remember by the time our investor were like, what are you talking about? We had a very intense conversation.

Yeah. Because they didn't want you to retire the cardio trainer? They thought that was the promising app. At least, I mean, we were number one. Literally, we were number one at fitness and health category. But we were boldly enough that we said we are going to retire the product. We will stop providing the service further.

We will retire it. Why wouldn't you just transform the product to the calorie counting to calerific? Instead of creating a brand new app, why wouldn't you just change the features within the app? You already had the downloads. I think you're right. And I was wrong. Yeah, I should have been there. I should have been there saying, what are you doing?

You've got 5 million downloads of this thing. You want to start a brand new app and try to attract five million people from the start. That's hard. Where were you, Guy, Biden? We needed you by then. All right. So a brand new app, and you sunset, the cardio trainer app. We did.

We sunset. And did people adopt the calerific app? Did that have the same adoption rate? We literally launched the caloric with no marketing buzz. We were probably naive by then. we launched a product, we firmly believe that if the product is good, people will somehow just download it. And matter of fact, the colorific actually received a ton of download.

It became a top downloaded application within three months right after we launched. So again, prove that we know how to make an app, but we need to figure what is this then. How can we use technology to help population health? And then it comes up, you know what? Rather we have a belief or try this way, that way, it must be holistic way approach. That was the new like aha moment over caloric effect. We have to build a product is approaching in a holistic way to end users. So we against sunset, the color effect.

And then we put together holistic approach service in 2014. That was a beginning of like, we need to help our users learn about these four major pillars, nutrition, fitness, stress management, and sleep. And behavior change is very powerful. That was a beginning of like a aha moment for us. And we launched in 2014. All right. So you begin to really dive into this. And one of the things that you guys managed, because you, as you mentioned, you changed your name.

to Noom. So you went from Work Smart Lab to Noom. And Noom, I shouldn't, I should have known this. I felt like such a bozo when I didn't realize it. It's just moon backwards. It's all good. A lot of people ask like, why Noom? And I go like moon backward.

And I'm, oh, I see. But the deeper meaning of moon, why the moon? Because we see Noom's approaches. We are here to support our users of a lifetime. And behavior change and also healthy lifestyle is a journey. We get that. And night, when we get lost, we look up to reorient ourselves, and the moon is right there. We want to be the moon for our users.

The problem is we could not trademark moon, so that's why we flip around the Noom and we became Noom. So here's what I'm wondering about, right? I mean, you're talking about an age-old challenge. I mean, this is like in all of human history, the sort of cracking the code of weight loss, let's just be clear, it hasn't been cracked, right? I mean, it's like there are all kinds of things that we haven't cracked, addiction, you know. We know more about it, but it's a much, much bigger challenge today, you know, weight losses. So you are entering, you guys decide to enter the most challenging, one of the most challenging spaces because there's no. even now, there's no simple answer.

There's no button you can push and say, push this button, you will lose weight. And so I just wonder the conversations you guys were having. I mean, you keep saying you were naive, but I mean, you guys were naive to think that you could maybe push this, you know, push this huge challenge a little farther. So the problem is it's simply difficult

to adopt healthy lifestyle if you don't have a good guidance. And also, changing behavior is powerful, yet it is difficult. That is why that we invite our people who join Noon that we ask, are you fully motivated and you have a conviction, full conviction to stick with a mission and deliver because we believe we can provide better behavior changing program. A lot of our users are exposed to either chronic conditions. Let's talk about grand level.

Yeah. USA, 45% of adults are already diagnosed at least one chronic conditions. 45% of U.S. adults have one chronic conditions. So that like hypertension or diabetes or some other condition. Correct. And 72% of American adults are either obese or overweight. So we get a great issue. inspiration from the good school. Good school means we are empathetic teachers. We welcome the

student who want to learn. We understand where they are. We don't judge how good, how bad they are. Some students are very introvert. Some student needs extra motivation. Some student needs like a very hold of carnival. Some students do not want that because they feel like policing about by the teachers, and it actually can actually hurt the motivation. So it's just simply difficult to define how human behave about the weight because everyone has different background and different stage of where they are. A lot of our users just told us that wet law is so difficult and they failed in the past. It built a very sad and also stigmatized experience.

Your self, you feel like you're just constantly. defeated. Mm-hmm, which is very difficult. Right. The reason why we choose weight management is because weight is one of the greatest barometer over your health. I want to jump in and ask you, I mean, look, there is no question that people who are overweight can have some impact on their health conditions, right?

If they change their diets and their exercise regimen. We know that. That's a fact. And it's not to take away the personal responsibility side of it. But we also know that there are significant genetic factors involved. That there are people who are just genetically more predisposed to retain weight, to increase their weight. It doesn't matter what they eat. It doesn't matter if they eat, you know, more or less the same foods as somebody who is significantly, you know, lighter than they are. Just genetically, their body, processes and converts that food into fat in different ways. And again, it's not to say that people can't have an impact, but for a significant portion of population, it doesn't matter how hard they work, right? I mean, it's just going to be almost impossible. Well, that's why we build the muscles by approaching behavior change, help our users to understand how to read their body signal, how to read their mental signal, and then build a completely

customized foundation to start from there. We firmly know one-size-fit-all approach is not working for population health management. That is why technology can do a good job to support our platform we can be scaled but also customized experience. I just want to take a moment and kind of explain what Noom was at this point in 2014 because I know it would change a little over time but in 2014 it was basically a freemium app right so if you joined for free you could log your food and track your calories and things like that but there was also kind of like an AI component right like Like if you paid, what, something like $10 a month, you would get computer-assisted coaching.

Is that more or less right? Yes. But we learned two things. Number one, when users are receiving a good right guidance, it does work in terms of improved retention, engagement. That way, they get a better outcome. So we learn that number one. And number two, we also learn there is a glass ceiling with just AI-based service. we cannot do better than we hoped.

In other words, we tested with a human coach by then. We put the human coach, and that version delivered better outcome, and that was the beginning of intervention of human coach. Yes. This is a human coach on video? We did video, we did a phone call, we did a chat, all different type of intervention

and all deliver better results. So that helped us to understand. And then we figured probably yes. And actually it became clear empathy cannot be made up. Empathy cannot be recreated by a computer. And that is the important component. All right. So one of the things that you did was you managed to secure a grant from the National Institutes of Health to actually study binge eating.

And this was a – and it was I guess it was like trying to sort of use technology. to see if you could figure out the connection between binge eating and human psychology. Correct. Tell me what you found out from this NIH-funded study. We learned from doctors at the Mousine Hospital that psychological support is the key to overcome the barrier of unlock the healthy lifestyle. So I can say the current version of Noom, the real inception was started in 2014, but we invested in two years to be ready with a human coach and psychological component over two years and then launched that. All right. So you are developing this plan. And at the same time, you're under some significant pressure from some investors, rightfully so, because they're not, it's not clear what's your path to profitability. is. And in 2016, you kind of abandoned this freemium model and essentially say, this is going to,

you know, we're going to make this work, we're going to ask people to pay for the app, to subscribe. Was that, and I imagine that there were probably many users who were not happy about that. And you had to expect that that was going to happen. We had a moment that we need to put the price wall. That is the way we can, without. who are not ready to commit for adopting healthy behavior. And that is the way also as we are a product company, we can actually gather higher quality data in order to build a better product.

That was the reason that we abandoned, completely abandoned free features and relaunched the paid version comes to a human coach, but I want to tell you one more thing. Because we also didn't have any real business, and because this is a big move, I lost many people. who did not believe in our direction. You lost many investors? No, investors, yes.

They gave up or they sold up their ownership to really like almost none. And I lost many product people by the time. People left. Our who did not believe in the direction, they left. They did another pivot and this direction says, I'm not sure. And then we lost a handful product people by then. I remember. Because they were, because they felt like, hey, this is always supposed to.

to be a freemium thing. Yes. And that happens. People join companies and they get mad when those kinds of changes are made. And, you know, it's a perfectly legitimate view to hold. But obviously, companies change. They have to change. And also, I take the blame because, you know, Guy, sunseting the product that we create

from the nothing and we have to sunset that, it's actually quite difficult experience. It's very emotionally difficult. and you need to again start a new code writing from scratch and that's not easy. So I understand that and that we lost a few key, the product people by then. I remember we had a very quiet dinner altogether, the Survivor's Dinner.

And I told them that we keep moving on. We are not compromised company mission. This is direction. There's a lot of data that this will work. and thank you for staying with us and see you tomorrow morning. When we come back in just a moment, how tomorrow morning came and Sayju and his team continued to reinvent and retool NUMM. Stay with us. I'm Guy Raz and you're listening to How I Built This.

Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2016 and Noom has switched its business model from a freem app to a subscription service. And as a result, Sayju has lost some investors and some employees. I mean, part of me really just wishes you stayed selling heavy metal music on the internet. Like, part of me is just getting anxious thinking about how complex this is because the value proposition effectively was, look, you may have tried other weight loss programs. We think this one has a better shot at success for you. Now, you're not promising that people are going to lose weight. You can't.

That's not possible. You cannot promise people that because it's up to them. But you can promise them that you will give them, let's say, better tools to do that. That's still a lot of pressure. Thank you for your empathy, guy. I feel and I appreciate the comment. And let me be frank, probably we were, again, naive, but we were so, I don't know. I mean, by the time we were kind of maybe rightly stubborn about it, we said, like, look, I mean,

We are very confident we can build a great product software. We're kind of, you know, when you are young, you can't have overconfir about your ability about what you are good at. So our team was like, we know how to make an app. We know how to make a software. But we have to figure which mountain we will like climb up. And it was not a fitness. It was not a just diet.

It was not like just one thing. And we figured it has to be holistic approach. And we figured, oh my God, we have to like really crack this pandera box. And we just opened that up. And when we open that out, we're kind of like scared at the same time. Holy moly, we just figured if we do better, we can finally deliver healthy outcome and we can shift the paradigm. Preventative approach can be the prime.

Right. So inevitably as you grow and as you get, I shouldn't say inevitably, but oftentimes when a company grows and gets bigger, it becomes a bigger target. but oftentimes that is perfectly justified, right? I mean, you know, Uber is a big company, big target, so is Tesla. And you guys were slapped with some angry users and eventually a lawsuit because when you went to the pay system, some users said, hey, wait, we were charged for a subscription and it was hard to cancel it. You actually addressed this in an open letter to the users.

What happened? Was it just a bungled kind of role? out? Why did you get in a situation where people were, you know, lots of people are complaining about this? Well, I mean, first of all, that we care every single user's voice and we are happy to put this behind us. It's settled now. This is now settled. We are paying attention as this is a consumer-led healthcare company. For sure, we are paying attention to every single voice. We do actually do. And we want to make sure that our bar, of customer support experience

and even like cancellation is like high enough. So matter of fact we invests a ton into that the opportunity and now the 100% self-cancellation is right there you can, you have three click then you can cancel that. We made it

very clear that we are right there to support if the program need to be paused or canceled because we are here to support whenever you are ready. So we'll continue to invest into our huge experience should be good and we will not compromise the bar. All right. So let's talk about what makes this different, right?

So let's say you're doing Jenny Craig or Nutra system, right? You get, depending on how you sign up, you get meals sent to you and you heat them up and there's shakes or powders or whatever. And there are all kinds of competing systems like that, which can work for some. some people. Yours is different because yours is about nutrition, fitness, sleep, and behavior. Yes, stress management. Stress management. Okay.

So you get those four things. And on the app, it says, look, we're not a restrictive diet program. We don't tell you to restrict diet, but you must. I mean, there's a simple fact, like the simple math around gaining and losing weight is you take in a certain number of calories. And if you take fewer calories in, you know, it's going to have a different impact. I mean, the math is kind of clear on that, right? Yes, yes, yes.

So, I mean, let's just talk about the food side first. Sure. When you sign up, I know you sort of categorize food into three colors, right? Green, red, and yellow, I believe. Mm-hmm. And green foods are really the ones that you should focus on the most, right? Those are like basically vegetables, fruits. Yes.

And red is like meats and proteins and fats and. And yellow is like carbohydrates more or less. Mm-hmm. That's true. And so I'm on it. Let's say I want to lose 20 pounds. Let's say I want to lose 30 pounds. How, I mean, does it tell me exactly what to eat at every meal?

We don't. We don't want to present that we dictate what you need to eat. This opposite guy. We don't want to restrict, you need to stick with some supposed to meal or diet. because that creates no more stress to our end users and also it's very hard to stick with and look

eating is not just eating we are human we are social animal there's a lot of like the interaction while you have a dinner or gathering and you eat together and it's very difficult to stick with one diet and it's not sustainable

so we do not approach that way we rather guide our users build the muscles that can be more cautious and be mindful about what choice they have about intake, what they eat, what they drink, and how they rest, how they burn the calories. The thing is, if we limit our users,

there's enough study from our experience, if we limit our users, do this, not that. They may work for maybe two weeks, but it cannot work more than that. And that creates, as we know, and which makes me sad, yo-yo. By the way, we actually wanted to update our food color system from red to orange. The reason is because we use the red, people associate red color that means, oh, this is bad, this is warning, blah, blah.

It's not true. Red category food is we need to pay attention in terms of volume. We don't want to ban any. The thing is, you need to be moderated, and especially red category food. but unfortunately red color coding is sending a wrong signal the message to our users. So we actually agreed to color to orange by the time that you listen. It might be already orange. So that's the way we adapt.

But I want to make sure that we provide the guideline is actionable today. All right. So you really, the kind of the growth and also your ability to attract capital really kind of takes off. I mean, I think you did a series C. in 2016 and a series D in 2018. I think over the course of Noom, you've, I think you've raised more than $500 million. Is that, or more than that, almost a billion dollars, I think, right? Yes.

I mean, a lot. You've had, tell me about the pandemic. What happened during the pandemic? How did it, what did it mean? I mean, did it, did you see a very rapid increase in user adoption? during the pandemic? So COVID-19 time, what we have learned, a lot of people are, they understood either they had to or media spoke all the time that you need to build immunity better.

You need to pay attention that you are in good health. So many people are looking for how to get healthy. Many people too want to have like, I want to manage my chronic condition. I want to have very healthy lifestyle. When I say healthy lifestyle, that means mind and body both. My father was a renowned medical doctor sacrificed entire his life until he passed away. And the last word he left, why did I help sick people only? That big questions.

And somehow, luckily, Noon figured, and we are answering that. We did not figure everything, but we are in the path that. Vanative approach is primary. And we firmly believe this trend will not go away. It will become even stronger and become a primary in health care. Yeah. Sage, when you think about, you know, this journey you've taken from Korea, from South Korea, to, you know, your beginnings and sort of e-commerce to coming to the U.S.

and meeting Artem and starting this business, which initially was about fitness and exercise and was going to be like an exercise machine to what it is now, you know, a company valued it right now over $10 billion. How much of that do you, how much of where you are now do you think has to do with your skill, your hard work, and how much do you think is because you got lucky? I think we are extremely lucky for sure. I think we are extremely lucky and I cannot express how much we are thankful. like angel investors, our people,

while we were managing like no revenue business, the brilliant smart people stayed with us and remember the night that Survivor's dinner night was like, I don't know how I can describe how I'm thankful and we are thankful and how much luck we received. And as we received the luck in the past,

we expect if we continue to stick with our mission and do good job, I believe that we shall receive more luck as we deserve in the future. But, you know, we don't run the business based on the luck. We work hard. And when the luck arrives, then we will be grateful. That's Setsu Zhang, CEO of Nume.

His co-founder, Artem Petakov, is the president of the company. By the way, one of Saju's preferred ways to jumpstart his mornings, turning his speakers up to 11, and blasting out Lamb of God, one of his favorite heavy metal bands. And if you aren't familiar with them, here for your listening pleasure, that's a good morning rock and song.

I'd get up to that. Hey, thanks so much for listening to the show this week. If you want to contact the team, our email address is hibt at ID.wondery.com. If you want to follow us on Twitter, our account is at How I Built This, and mine is at Guy Raz. On Instagram, we're at How I Built This,

and I'm at guy.org. This episode was produced with music composed by Rumtine Arablewe. It was edited by Neva Grant with research help from Claire Murashima. Our audio engineer was Maggie Luthor. Our production staff also includes Elaine Coates, John Isabella, Liz Metzger, Casey Herman, Carrie Thompson, Catherine Seifer, Alex Chung, Chris Messini, Carla Estabez, Josh Lash, and Sam Paulson. I'm Guy Raz, and you've been listening to How I Built This.