Investors bet millions on two millennials who are taking on ClassPass
Jeffrey Liu and Rob Pachter have been working up a sweat lately.
In between running their company across 12 of Asia's hottest start-up cities, they've been darting to workout sessions —sometimes several a day.
No, they're not fitness freaks — though that may be part of it. They're the founders of GuavaPass, a wellness app that gives subscribers access to a network of workout studios, from yoga to Pilates and kickboxing to barre.
The pair started flexing their entrepreneurial muscles in 2015 after becoming frustrated with the lack of flexible, group workout plans available in the city they live in: Singapore.
Now, three years on, they've won millions of dollars in funding and become Asia's dominant fitness platform, with more than 2,500 studios in locations from Hong Kong and Beijing to Jakarta and Dubai.
An exercise in entrepreneurship
If their story sounds familiar, it's because it is.
Fitness studio aggregator ClassPass was born in a similar vein in New York in 2011 after co-founder Payal Kadakia started looking for an easier way to find and book workout classes in the city.
Having worked in the U.S. before moving to Singapore, ex-financiers Pachter and Liu saw the runaway success of platforms such as ClassPass in the West. But, with nothing of its kind available in Asia at that time, they spotted an opportunity.
"We saw coming from the States the explosion of consumers really being cognizant of what they put in their body, how they feel, and we felt like it was a great time to take advantage of it here in Asia," Pachter, the 32-year-old president of GuavaPass, told CNBC Make It.
Like Kadakia, they began researching workout classes in the region, only to find a "laundry list" of studios with nothing to aggregate them. They decided to create a platform to do just that, giving users access to a curated list of classes for a monthly fee while helping studios fill their empty spaces.
"That's where the whole notion of GuavaPass came about," said Pachter. "Creating a lifestyle brand and healthy living and wellness space across Asia and the Middle East, and really being a thought leader in that space."
Competitive landscape
It turned out they were onto something. Investors liked the idea, pumping $5 million into the business in its first round of financing. That's enabled the company to triple in size each year since inception — a trajectory that looks set to continue as new research from Deloitte and the International Health, Racquet and Sportsclub Association suggests Asia-Pacific's fitness industry is now worth an estimated $16.8 billion.
That success has prompted criticism from ClassPass, which claims GuavaPass and other rival platforms — like Malaysia-based KFIT — have mimicked its model. "We've had a number of people who have copied us and replicated our old model, which was actually pretty messed up," ClassPass CEO Fritz Lanman told CNBC Make It.
However, Pachter said that building their business in Asia has been an entirely different ballgame.
"Speaking from experience, you can't just plug and play U.S. technology into Asia. It's not as simple as that," said Pachter.
"[Asia's] not as homogenous as the States," he continued, noting the varying levels of tech and fitness adoption in each of the company's 12 markets, as well as their distinct languages and business landscapes.
A challenging workout
That's been one of GuavaPass's greatest challenges, 33-year-old CEO Liu, told CNBC Make It. The company had to shut down its Australia arm months after launch when it failed to take off.
"There are a lot of nuances in every market, so, for us, a lot of the big challenges were understanding the market dynamics," he said. "Consumers in Bangkok are a lot different from consumers in Singapore."
For instance, people in Jakarta prefer to make bank transfers over credit card payments, despite fast-growing tech adoption in the Indonesian capital, he noted. Meanwhile, in Manila, it's important to list studios that are in close proximity, because the roads are so congested — something that's not such an issue for users in Bahrain.
Playbook for success
But Liu said those lessons enabled them to "create a playbook" for the region, which will put GuavaPass on the front foot as ClassPass expands into Asia this month.
That "playbook" for success comes down to one thing: people.
"In order to minimize the mistakes you make it's very important to find people in the relevant geographies to help you to see," said Liu.
Pachter and Liu relied heavily on local expertise to help them understand each market before setting up shop. They then hired staff from host cities to help grow the business.
Today, their team is made up of 18 nationalities with language experts in each market. They are also fitness fanatics, which Pachter said is essential for signing up new members and studios, as well as keeping the team passionate as they face increasing competition in Asia's growing fitness scene.
"It's a lifestyle ... we encourage our employees to go out there and take classes and represent the brand and give back to the community," said Pachter.
Rhyce Lein, general manager of GuavaPass, tries out each studio partner before engaging them, often squeezing in workouts before work, over lunch or even in between meetings. He said that's been vital for building relationships and developing the business.
"It's so important for all of us who work for GuavaPass, especially those of us on the leadership team to be ambassadors for the brand," said Lein. "In working out at the studios daily ourselves, we stay in tune with current fitness trends and consumer behavior and can act fast to adapt to customer needs."
Liu added that those face-to-face relationships have also led to many referrals, which have helped grow GuavaPass over the years.
"I think from our position, when we look back at the last three years, a lot of the connections we made were from second- and third-degree connections," said Liu. "They weren't ones we anticipated but because we were always open to meeting people they would connect us."
He recommended that other aspiring entrepreneurs "take every opportunity" to build similar relationships and ask for referrals, as they may just provide the first step in getting their business off the ground.
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