CLASSPASS

Payal Kadakia was an Indian-American dancer and management consultant at Bain who wanted to find a ballet class in New York City one Tuesday evening. She spent 30 minutes searching online and gave up.

That frustration became the idea. Her first version, called Classtivity, was a search engine for fitness classes.

It flopped because search alone wasn't enough. People don't just want to find classes.

They want someone to remove the friction of booking and paying for them.

The pivot to ClassPass was the breakthrough: one membership, access to everything. Kadakia launched the subscription model in 2014 with 39 studio partners in New York.

The first plan was unlimited classes for $99/month. Demand was overwhelming.

Members were taking 10+ classes per month, which destroyed the economics. ClassPass was paying studios more per member than it collected in subscription fees.

The credit system replaced unlimited in 2016. It was controversial.

Members who loved unlimited were furious. But the business couldn't survive paying more than it earned per customer.

The credit model let ClassPass control costs while giving members flexibility.

Credit-based subscription marketplace. Members pay $49-199/month for a pool of credits.

Each fitness class costs a different number of credits based on the studio, time, and demand. A hot yoga class at a premium studio at 6pm might cost 12 credits.

An off-peak Pilates class might cost 3. This dynamic pricing fills empty spots efficiently.

Studios get paid per visit, typically at a significant discount to their walk-in rate. A class that costs $35 at the door might pay the studio $10-15 through ClassPass.

Studios accept this because ClassPass fills seats that would otherwise be empty (zero revenue). The marketplace takes the spread between what members pay and what studios receive.

ClassPass also added gym visits, beauty services, and wellness experiences to the platform over time.

The ClassPass app and membership. Members get a monthly credit allocation to book classes at 50,000+ studios, gyms, and wellness providers in 30 countries.

Categories include yoga, Pilates, cycling, boxing, barre, HIIT, swimming, climbing, meditation, massage, facials, and cryotherapy. Dynamic credit pricing optimizes utilization.

ClassPass for Corporate offers companies bulk credits to distribute to employees as a wellness benefit. The Live feature (launched during COVID) provides virtual classes for members who want to work out at home.

The app includes reviews, class ratings, favorites, and personalized recommendations based on workout history. Post-Mindbody acquisition, the platform is deeply integrated with studio management software for seamless booking.

The Mindbody acquisition in 2021 was the growth strategy. Mindbody operates the booking and management software used by 58,000+ fitness and wellness businesses.

ClassPass brings the consumer demand side. Together, they own both sides of the marketplace: the software studios use to run their business and the app consumers use to discover and book classes.

Post-acquisition, ClassPass has expanded into corporate wellness (companies buy credits for employees), international markets, and new categories like beauty, spa, and outdoor activities. The integration with Mindbody's software means ClassPass can see real-time availability and pricing data that competitors can't access, creating a significant competitive moat.

Unit economics haunted ClassPass for its entire life as an independent company. The fundamental tension: members wanted unlimited access for a flat fee.

Studios wanted full price per visit. ClassPass sat in between, trying to make both sides happy while keeping some margin for itself.

The unlimited plan was a money bonfire. The credit system was better but still thin.

COVID was the other existential crisis. When studios closed worldwide in March 2020, ClassPass had zero product to sell.

No classes, no revenue. They paused all memberships.

The company laid off more than half its staff. CEO Fritz Lanman called it the hardest period in the company's history.

The fact that they survived at all is a credit to the deep pockets of their investors.

General Atlantic, L Catterton, and Temasek were the big-name investors. General Atlantic led the Series D.

Thrive Capital, the firm run by Josh Kushner, invested early. GV (Google Ventures) came in too.

ClassPass was one of the most well-funded fitness startups in history, raising over $549 million before being acquired. The investor bet was clear: ClassPass was building the "Spotify of fitness" where one subscription gets you access to everything.

The challenge was making the unit economics work, which they never fully did as an independent company.