Money Rehab with Nicole Lapin - Change Maker: Payal Kadakia, ClassPass Founder, on Finding Your Billion Dollar Idea

Episode Date: March 4, 2022

Payal, founder of the health app ClassPass, is brilliant— and a perfect example of a founder who keeps it real. Payal doesn’t hide the fact that it took some work to evolve ClassPass into the huge success it is today. In fact, as she tells Nicole, that’s something to be proud of. Nicole gets this lesson and more from Payal in today’s episode. 

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Today we're talking to Payal Kadakia.

Payal is the founder of the health app ClassPass. I am so excited to have her on the show because she is brilliant and the kind of example we should be showcasing when it comes to founders because popular culture often gets it wrong. Oftentimes, startups are portrayed as underdog stories where the founder has this brilliant idea and just needs the business world to take a chance on them. And that is definitely part of the story. But what doesn't get much airtime is how a founder's idea is workshopped and changed over time. GlassPass is one of the most popular health apps out there,

but it had to evolve in order to become the mega success it is today. And that is a great lesson for us all. So let's get into it. Pyle, I am so excited to have you here on Money Rehab. Before we dive in, we have a really quick round of money rehab. Never have I ever. Have you played? Never have I ever. I think so.

When I was younger. There's unfortunately no alcohol here. So if you have done something, just say I have. If you haven't, just say I haven't. This is how we start all of our changemaker interviews. And you, sister, are making so much change. OK, let's do it. Never have I ever negotiated a contract.

I have. Never have I ever sold old used clothes. I have donated, not sold. Never have I ever taken a mental health day. I have not, which is funny. But my only caveat to that is I believe in taking care of my mental health every single day. So I don't need a day for it. I like what you did there. Never have I ever been fired from a job. I have not. Never have I ever fired somebody from a job. Sadly, I have.

Never have I ever played the lottery. Oh, I have. Yeah. Never have I ever argued with a family member about money. I have. Absolutely. Never have I ever maxed out a credit card? Oh, the only time was my wedding. Yes. Never have I ever split the bill on a first date? I think I have. I can't remember exactly, but I have. Never have I ever moved for

a job? No, I actually have not for a job. Never have I ever pitched an investor. That I have many, many, many times. Okay. I'm so excited to get into the book. Of course, I want to get into ClassPass and all things LifePass and all the passes that you created. Can you tell me a little bit about what you were doing right before you started ClassPass? Where were you working? What was going on? Yeah, I went to MIT, great college, obviously worked in consulting at Bain & Company, one of like the top consulting firms. And then I decided to move over to Warner Music Group, which is a music label. I was in the digital strategy group. I wanted to really start my own dance company during that time. So I consider that this first move I made towards my dreams,

where I needed to find a way to have a side hustle, but also work. So I had a 9-5, but I danced my heart out between 5 and 10pm and all through the weekend. So that's what I was doing before I started at the company. Did you coin this term, dance-trepreneur? Someone called me that, I think, in my first year of becoming an entrepreneur, and then it just kind of stuck. I like it. It doesn't necessarily roll off the tongue. It does not. It looks better, I think, in writing than it does being said. Where did the idea originally come from? So you were a dancer and you started a dance company.

And then ClassPass wasn't called ClassPass in the beginning. I discovered this because I had an old email for you. Yes, that's so crazy to me. So we were called Class activity. And the idea in the beginning was to create a search engine for classes. So the real pain point for me happened. I was training in ballet on top of obviously my full-time job. And so I was always looking for classes and exploring different places I could go. And one day for me, I wanted to try a new class. I went on to the... I guess at that time, it was like... I don't even know what the internet looked like. I can't even remember, but it was 10 years ago. when I was on different websites, it just felt really, really messy. And I really knew that there was a class that I wanted to take. And why couldn't I just search for it by neighborhood, time, location, and get there? And it seemed obvious. And I decided to be able to go and make this company. I had to go and invest my time and resources into it and do my market research.

So that's really the pain point that got me to say, I wanted to solve this problem. Obviously, not just for me, but for the world, because I had also been this girl in my 20s, through those six years I was working even at Bain and Warner who had dance on the side and it fulfilled me so much. And I felt like I met so many of my friends, adults who had given up their passions and these things that really made them feel so alive when they were younger. And it was almost as if they were unable to do it when they were older. So I thought in my head, if I could make this easy for you to get an hour of your time into moving, working out, doing something you love, then I'm going to make it more convenient for you to go and motivate you

to actually get back to this part of your life. And that was always my mission. But there was another origin story I read about. It was the counter where you got mugged. Oh, yes. I wouldn't consider that an origin story. But about 2 years into building this company, my co-founder and I... By the way, the company wasn't working yet. We were still figuring it all out. We were working on our demo day presentation sitting at a coffee shop and someone came in and maced and mugged us. It was like the craziest experience that had ever happened to me ever in my life. I thankfully have been lucky my whole life where nothing like that had happened. And it was a shock to my system. And this was an interesting time in the company because

like I said, we were just about to launch our first product, which ended up not working. And so then I was in a personally down point in my life. And then the company wasn't working, which was this low of lows for me. And I had to really figure out how to get through it. And one of the things that helped me, and this is probably what you read, is I actually started going to a ton of fitness classes and trying different things. Because I realized I felt really, I felt like a victim and I felt weak and I wanted to feel strong in case I was ever in one of those situations again. I knew I physically and mentally wanted to feel stronger. And so I was trying all these classes and it was funny because that's really when we started doing our second product,

which still wasn't ClassFest. It was called The Passport. And that one was all about discovery and trying new classes. So I was sort of a customer to my own product, which is sometimes honestly the best way products are made. And then you finally came up with the ClassPass name. How did that happen? It took a few tries. It was like a little too hot, a little too cold, Goldilocks of naming.

Yeah. So once we were the Passport... And by the way, we were still called the Classivity Passport at the time, which is a mouthful in itself. We then tried a membership model because we saw so many people wanting to go back to studios and try them over again. And they fell in love with this idea of variety, which was the magic and the heart of what people really wanted in fitness but didn't have access to. And so once we discovered that, we started trying out a monthly subscription model, which started just taking off and going viral. And about 6 months into having 3 products in the

market, we realized that ClassFast as a membership was the product that was really going to work. So we decided to get rid of ClassDivity. And thankfully, I remember we got the domain of ClassFast for a few thousand dollars. It was so cheap. Oh, wow. And then I luckily had some friends. Facebook and Twitter. And Instagram was actually pretty small at the time. So I got the ClassFast handle. I always remember that because it feels crazy. People are like, how did you get that domain? And I'm like, I don't know. But literally within a week, we had every part of the assets we needed for marketing. That's amazing. And you went in, you know,

not as an entrepreneur, like from the jump necessarily. So what was harder? What was easier than you expected to any budding entrepreneurs out there? What would be the advice you give them from starting ClassPass? So, you know, obviously I knew from like my Bain days and all that, I knew how to strategize and how to make a deck. I knew how to have a good network to meet investors. And honestly, I was almost relying on those things probably too much in the beginning because I thought those were in a way the easy things for me to do. The part I didn't know, and I think honestly, it was failing that taught me how to be an entrepreneur. It was when my product didn't work.

And I'm realizing that I needed to really build something that customers wanted. I think it's very easy to have ideas. It is much harder to actually get someone to buy something that you put out there in the world and make them fall in love with it and have an experience from it. And once I really became obsessed with that experience that my customer was having, that's when really the company changed, the product changed, our marketing changed. And I didn't know that that was going to be a big part of the experience. And the other side of it, I would also say is just like building a team. I think I'm an inherently... I'm a leader that

really drives from passion. And I think a lot of people have signed up to do all the crazy endeavors I have in my life because of my sheer heart and passion. And they know I'm doing it authentically. It definitely gets more complex and complicated as you have a lot more people on your team. And that's something that some people enjoy and some people don't. Hold on to your wallets, boys and girls. Money Rehab will be right back. Now for some more Money Rehab. So getting back to your why, did you know in your heart that this was going to be a massively successful company? You know, when I knew was it was roughly around the middle of 2013. Honestly, I was doing all the customer service at the time. Literally, my customer service name was Pam. And I just remember reading emails from

people saying that this product changed their lives. And it was an email that, to me, made me feel like I had given them what dance was to me in my life. And I think when you know, you've been able to create a product that's changed human behavior like that. It was this moment for me where I was like, we figured out magic in a bottle. I can't believe it. And then I remember also a few weeks maybe later, this was the time when class was blowing up in New York City. I was in my elevator walking into my building, my house, or my apartment building. And there was two girls talking about the app in the elevator. And I just forgot to get off the floor because I was like, I cannot believe it. And since then, I remember starting to see people wear class masks on shirts and stuff that we were giving out.

I think it was that. It was this organic feeling of people loving the product. And the more and more I saw reservation volume go up, I, I like just knew that we had freed people, you know, to really go after this lifestyle and really uncover what their potential could be sort of by trying a bunch of classes. I love that so much. Definitely like undercover boss in your building. But I had a name Dorothy early on as I was playing my own assistant. So do you like when when budding entrepreneurs think that there's somebody to do other things? Do you remind them that that is just not the case in the beginning? Totally. Like I mean, press that class pass like.com came to me. I would so many times pretend to be the PR person. I'd be like, I'll let you know if Pyle's available. I didn't have money to hire a PR person. It's really taking on the different roles. It's almost like faking it

till you make it. You don't want to be saying anything that's putting you in a place that you don't deserve. But I think making it sound more professional. Right. And I feel like I learned to do that with my dance company. It's just how you present things. So people take you seriously. And I think that was really important for me to do for the beginning, especially being like a woman and an Indian woman too. Like I just knew I had to really be buttoned up on all those things. Okay. But now you're launching a whole other kind of product. Yay. Life pass is out today. What have you learned from launching a book versus launching a product like class pass? So, and you know, I think launch is let's even talk about the creation, right? Like I think to

me, I really care a lot about product, right? Like what am I giving to people and how does it impact people? I think the hard thing with the book is it's harder to get that iterative feedback on it. So what I'm really excited about is now it's out in the world and I'm going to hear people's feedback. But with the product, you get to kind of put it out

and you get feedback. You put it out, you get more and you get to change it. This is like one shot and you put everything out there. And that's harder, I think, because yes, of course, I believe in this whole idea with startups, you launch every day, right?

Because you're finding new customers and new people are coming. So you should have that mentality that every customer is special. And I think this is just different because it feels like it's a lot of pressure in one moment. But yeah, I mean, I will say this, I have had an awesome team and people from my

own community, the Indian community supporting me. It's just made me feel really proud, honestly, to put this out there. And I think we were talking about this a little bit too. This has a little bit less pressure on it than a company does, for sure. So it's really just a book that I want to put out there in terms of goodness. right? Like it's advice and it's here to help people. And that's really what I hope it does. It is so much goodness. One of the main tenets of the book is unpacking how to turn failure into learning opportunities. And another one is helping readers set actionable goals aligned to their dreams. So both two really, really important pieces of goodness. What advice do you have to listeners to make sure that the goals they're setting for themselves are actionable?

Well, so first pick up a copy of the book and you can also go to lifefastbook.com actually today. And if you have the book, you can actually get the whole goal setting workshop that is at the end of this book, which is a live workshop that I teach as well. And the thing that I do in my goal setting workshop, which is different, is I start with emotion and feelings. And I think that is usually what we don't do when we set goals is because we go into this pragmatic side of who we are. We want to just get everything done. And believe me, I am right there. I know how to get things done. But I always start with a deeper intention. And the whole goal-setting method I have starts with reflecting and choosing words, dreaming and choosing words, and then going into focusing.

And I do a time diagnostic with people before we even get to the point where we're setting goals. And by the time you're at a point where you can set goals in specific areas of your life, a few things I have is... First of all, I do it only quarterly. So I don't set annual resolutions and all of that. I do my goal setting method quarterly, which gives me a time period that I feel like I can make progress, but it doesn't take up so much time where I don't have a chance to iterate on myself, which I think is so important. Another thing I would say is making sure that your goals are measurable. So you can't just be like, I want to do this more. You should write down, I want to do this two times per week because it makes it something really tangible and measurable.

And the other big thing I would say is about... It's about getting to the first step in what you have to do to reach the goal. So if you're looking to learn a new class or sign up for something new, you might not even become a master at it that quarter. But it literally might be as simple as spending 2 hours this week researching where I'm going to go, going to the next first class they have, and seeing if you enjoy it. And that's it. And honestly, that is actually more than what people usually do with their goals, right? Just even getting to that first class. And I think a lot of it comes down to breaking it down well and making sure your goals don't seem like a to-do list. Because if it's a to-do list, you're never going to be motivated to do it. No, not at all. And I love that you measure

to metrics with your goals because you do that in business too. You don't come up with, you know, goals for a class pass and say, I just want to do better. I just want more users or more press. And I think it's really important to measure to personal metrics too. Otherwise, you're constantly in the risk of feeling like a failure because of what is success. Right. Exactly. Even if you're single, it's like... Even being like, I'm going to go on 3 dates this quarter. At least you feel like you are making progress. I think usually... And I think this is the biggest thing I've actually learned as an entrepreneur is doing the little goals are what gave me the confidence to take a bigger leap in my life.

ClassPass started with me putting on a 100% dance show in the middle of New York City when I was 24 years old. It was a small step that led me to feel like I could execute. And it gave me confidence to do the next part of it. And that's really what I want people to do is build up the confidence of, I set a goal and I achieve it. I set a goal and I achieve it, which makes you dream bigger, feel better. And instead of feeling like you said, like a failure the whole time, because you don't know what you're aiming for. You've got some vision over here, but it needs to be broken down into steps. Yeah. I think that's how comparison can be the thief of joy, especially on social media. And this has happened to me over the launch of a few books where I always felt like a failure until I actually really broke down what success was to me.

Exactly. How many press interviews? How many sales? Like, what is success here? Because otherwise it's never enough and your brain never gets to the other side of success because you're constantly moving the goalposts. Right. And your success is different than someone else's. And if you don't define what yours is, you're right.

You're going to be chasing more and more numbers because someone else has more and more numbers. But it's really like, what does progress look like to you? And why? Let's go even deeper, right? We have a book out. Why? Why do we have the book out?

What's the impact that book's going to have? That's going to be so much more important than any press interview you could do, right? Like we have a book out. Why, why do we have the book out? What's the impact that book's going to have? That's going to be so much more important than any press interview you could do. Right. And I think it's about remembering that why, because that's the joy that you really are cultivating in you and other people. Yeah. And when you see other people who might be in the same space as you launching something else or on a yacht or having a conference or something like that, you're like, wait a minute. I feel like I'm not doing anything with my life, but on a yacht or having a conference or something like that, you're like, wait a minute. I feel like I'm not doing anything with my life. But was a yacht on my list or was a conference on my list? Maybe it wasn't on my list. In that case, no. I'm on track for my own

list of goals because I think goals have price tags. And especially in the finance world, right? You can't just randomly say, I just want a million dollars or $10 million. Like, what do you even do with that million dollars? I don't know. Maybe you need more than a million dollars. If you don't know how to use your time, you definitely don't know how to use your money, right? Like, I mean, time and money are both very equally important resources.

And if you aren't spending your time wisely, how, you know, it's very similar to how are you spending your money wisely. And I think back to what you were saying, it's knowing how you want to spend your time in a worthwhile way, not how other people are. And if you're very specific about your goals, I think this is the other important thing, is it's much easier to not get caught up in what other people's goals are, right? Because you won't, you're like, I've got my plan. I don't have time to look at what everyone else is doing. I am

moving forward, right? It's that, you know, what's. I'm always so bad at these phrases, but it's like, whoever's in front, keep going. You're not going to be looking back to say who is right behind me if you know where you're going. And it also, I think, prevents you from feeling guilty. Because a lot of times we feel guilty doing what we love. And I think when you just have a very clear set of priorities, it's so hard to make you budge. For today's tip, you can take straight to the bank. If your business or product idea isn't foolproof, you don't need to abandon the dream altogether. As Pyle shows us, a really important part of being an entrepreneur is workshopping more ideas and allowing some flexibility in your concept so that you can improve your product. Pyle doesn't hide the

fact that she had different ideas and even names for ClassPass. She embraces it because it shows how hard she worked to evolve the product into the huge success it is today. So don't gloss over the things about your product that you think will be unpopular. Instead, put those on the table first so that the people around you can help you close those gaps. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert

for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.