If Ethan Agarwal gets his way, joggers will go for runs with virtual help that sounds straight out of a sci-fi movie. “Because we know about you, we know how fast you run,” says Agarwal, the CEO of Aaptiv, a fitness-tracking app. To illustrate the point, he imagines a user approaching a hill on one of Aaptiv’s programmed runs. Thirty yards out, the trainer guiding the runner on her workout warns of the upcoming incline. “Last time you did this slope, you did it at a 10 minute mile pace,” the voice says as the beat of accompanying music slows. “Can we do better?”
What makes Agarwal’s scenario so challenging: there’d be no live trainer on the other end – not even a pre-taped script. Instead, the startup founder wants to personalize digital fitness classes using data – and the power of an algorithm. Splice together pre-recorded bits fast and smoothly enough, Agarwal believes, and the user shouldn’t be able to tell any difference. To an Aaptiv user on a jog, it’ll seem like the startup has a virtual trainer hovering right there. Nothing remotely like it exists in the market today, the entrepreneur says. He wants Aaptiv to offer it by late 2018. “Doing this right will be really, really hard,” he says. “But we’re working on it now. It’ll come sooner than you think.”
Two years ago, Aaptiv barely had 2,000 subscribers willing to pay $10 a month for its fitness classes. Today Aaptiv boasts more than 200,000 subscribers, all of whom pay that much each month or a $99 annual fee, good for more than $20 million in revenue in 2017. And with investors now pouring millions, including a previously unreported $26 million Series B led by Insight Venture Partners, into Aaptiv in part to help it expand internationally, Agarwal’s techie vision for the fitness app of the future may not prove so farfetched.
Agarwal’s bet was on audio as the best way to communicate during a workout, and he continues to believe in the superiority of the form factor to video. He points to strength training, Aaptiv’s fastest growing category of 2017. “You download a video onto your iPad, and you put it on the floor and try to watch a video on a 9-inch screen. That’s a bad user experience,” he says. “What works better is a phone on your arm and a trainer in you ear.”
Today, Aaptiv employs 16 trainers in New York, where the startup is based, as well as Atlanta and California, paying them initially by the class and eventually bringing them on full-time. Agarwal says that many make the majority of their income from Aaptiv and that only one trainer, who moved to France for personal reasons, has left to date.
Aaptiv’s user base of 200,000 has grown predominantly from word of mouth, says its CEO, as well as through targeted advertising on Facebook, Instagram and Snapchat. On its own, the number isn’t one that smacks of smash success. HQ Trivia, a mobile game show that has picked up in popularity since October, already boasts more daily players than Aaptiv’s entire user base. Aaptiv just barely sneaks into the top 1,000 most downloaded apps in the U.S, and rests around 30th among health and fitness apps, according to data from App Annie. Aaptiv competes for times with a bevy of newcomers and, to a lesser extent, giants like Nike, Apple and Spotify.
Even if Aaptiv isn’t the next viral hit, its users might be something more valuable: consistent. Members currently take an average of seven classes each month, up from just over four a year ago, and for 32 minutes per session. (The average American works out 4.5x a month, Agarwal says, for about 18 minutes.) And while the company wouldn’t disclose its retention rates, Agarwal says its payment structure incentivizes the startup to keep users engaged, the opposite of a gym that profits the most from signups who stop showing up.
Aaptiv’s ability to bring in new customers cheaply and keep them at a high clip was what most impressed venture capital investors, says Insight Venture Partners investor Thilo Semmelbauer, who led the $26 million Series B investment into Aaptiv earlier this year, months after Insight led the startup’s $12 million Series A. (The startup raised a $1.52 million in seed funding led by Pejman Mar Ventures and Arena Ventures while still known as Skyfit in 2016).
Unlike wearable devices and expensive equipment such as Peloton’s popular home bike system Aaptiv doesn’t carry the risk of device fatigue because it runs on a smartphone, says Semmelbauer. A venture partner at Insight who previously held executive roles at Shutterstock and Weight Watchers, he says Aaptiv reminds him of Weight Watchers in its user loyalty so far. And even though Peloton and other health players are looking to expand their media offerings, Semmelbauer says Aaptiv is in a big health and wellness market with a healthy head start. “Every year that goes on makes it harder to compete,” he says. “It’s going to be an interesting battle to watch.”
Why raise so much cash when you already have tens of millions in revenue? Agarwal knows he’s in a race. Aaptiv plans to add more classes and trainers, increase marketing spend and look into international markets with the new funds. That would require a renegotiation of its contracts with U.S. copyright holders to stream popular music in its classes, for which it currently only has domestic access, and eventually translation support. And then there’s the adaptive class push. Half of Aaptiv’s employees already work in engineering; the company plans to hire more data scientists in 2018, though such talent doesn’t come cheap. He’s already signed on new executives in recent weeks from Audible, HelloFresh and Shutterstock.
Aaptiv’s most valuable asset won’t be an algorithm, at least not for a long time. Agarwal knows that: he directs Forbesto Facebook, where 21,000 of the app’s users take to Aaptiv’s members-only group to ask questions and give updates. On the week after Thanksgiving, new users who announce themselves are quickly blanketed in a virtual embrace. “Ok. Here I go. Using my Aaptiv for the first time. Got my overweight body on the treadmill,” one writes on Wednesday afternoon. More than 200 likes and 30 responses later, Aaptiv’s newest ambassador updates her post. “You guys brought tears to my eyes,” she writes. “Thank you.
Source article: Forbes