The seemingly rapid success of Payal Kadakia’s idea to connect people with fitness classes underlies two important points about entrepreneurial efforts: It’s crucial to find the “pain point” for potential clients to create a successful idea, but it’s even more crucial to adapt and change to create a successful company.
Born in New Jersey, U.S.A. in 1983, to parents who had immigrated from India, Kadakia’s overriding passion has always been for dance. Starting at age three, she continued doing dance classes while growing up, and when she attended MIT, she started her own dance troupe.
After graduation, Kadakia went to work for a consulting firm, fitting in dance rehearsals in the evening. As the movie Slumdog Millionaire became a global hit, Kadakia got swept up in the Bollywood craze. She moved to work for Time Warner, because the job was more flexible and could fit in around her rehearsals. As many of her college cohort went to graduate school, Kadakia knew that wasn’t what she wanted to do with her life. Instead, she wanted to dance.
However, the pain point that generated the idea for Kadakia’s startup came in 2010, while she was living in New York City, after she spent hours one evening looking for a drop-in ballet class to attend. She found booking a class difficult and couldn’t find much information on the various studio websites. She thought that other people would be having the same frustrations as she was and that there had to be a better way of doing it.
Kadakia’s first idea was to simply improve the booking systems that dance studios and gyms used. She created a registration program called Classivity, where people would book classes with studios through the website. Eager at first, she launched Classivity with a great web presence – which gained almost no traction at all. Plenty of people were looking at the site, but almost no one was booking classes using it. As Classivity’s profits came from charging booking fees, it was making no money.
In 2012, Kadakia came up the the idea of selling a one-time “passport” for US$49, which got users 10 classes at different studios in a year. The product was more successful, but ran into two problems. The first was the retention rate of customers was just 15% - motivating people to get fit was harder than Kadakia had thought it would be. And for those who were coming back, they weren’t going on to book classes through Classivity – instead they were creating fake email addresses to get the $49 deal repeatedly.
So Kadakia knew she had to change her model again. She moved to a subscription akin to a gym membership, only instead of one gym, subscribers would get access to classes at hundreds of gyms, studios, and fitness venues. She rebranded Classivity as ClassPass, and launched mid-2013.
In June 2013 the site got 35 subscribers. The next month it got 70. Users kept doubling month-on-month, and in a year more than 350,000 classes had been booked through the site and the ClassPass mobile app.
To stop fitness studios losing all of their regular members (and most of their money) to ClassPass, subscribers can only attend three classes a month at the same venue. And to motivate users, if they miss a class they’ve registered for, it costs an extra US$20.
Within a year ClassPass had expanded beyond New York City, first through the US, then to Toronto, Vancouver, Sydney, Melbourne, and London.
Kadakia was central to getting investors on-board, often opening her presentations with a dance performance. By June 2016 ClassPass had raised US$84 million in investment capital and had sales of around US$60 million.
In a somewhat controversial move, ClassPass recently raised its fees in New York City ahead of fee rises in other cities. And it has started going back to its Classivity roots – offering five and 10 visit packages. Kadakia says the increased price will allow for sustainability and for fitness venues to make a bigger profit from their part of the model.
And this is just the start for ClassPass. Kadakia says the 170-strong company is working on an algorithm to provide personalised lass recommendations for users, and eventually to move beyond just fitness – to offering art classes, writing workshops, and other hobby classes.
Although Kadakia’s company has been around for six years, it took two changes in service model and three years to start making it big. Kadakia might have started with a winning idea, growing a winning business took a bit more trial-and-error.