In January, Cesar Carvalho
moved to the United States to accelerate the expansion of his company, Gympass
. This June, the company’s market value surpassed a $1B valuation, following a $300 million funding round led by Softbank
The initial business model arose out of Carvalho’s practical needs during his time as a consultant at McKinsey. During this period, the comings and goings between clients across Brazil and the office made exercise nearly impossible.
“At one stage, I was paying memberships at three different gyms at the same time but I only rarely managed to use them. Then I thought of a monthly fee that would give me access to any gym, regardless of where I was - so that I could keep up a physical activity routine, even with all the changes at work. What we found out later was that companies would be willing to invest to [incentivize staff to exercise] by accessing flexibility at attractive prices, which makes employees who have never done physical activity start doing it,” he told Forbes
According to Carvalho, 70% of Gympass users did not attend gyms before joining the service. The original business plan for Gympass, which today has over 2,000 corporate customers, was to sell access to gyms to end consumers with daily passes.
In 2017, the company entered the United States; where the market size and stage of development requires greater emphasis on talent and innovation. To address these demands, the company will have more than doubled its technology staff by the end of the calendar year; with 230 hires to enhance user engagement and retention.
“Investment in technology is important in order to keep the user base active, but is also key to the growth of the company’s network of more than 47,000 accredited gyms - in the United States alone, the company will be targeting 35,000 gyms, studios and fitness companies - as well as the portfolio of corporate clients” (Forbes
The more gyms the startup enlists, the more attractive their proposal becomes to HR departments of potential customers. While the gym benefits from a greater influx of people, the end user receives additional options for gym locations.
“People always talk about the chicken-egg [dilemma], but in our case we have the egg, the chicken and the perch, because we’re a three-sided business that needs to focus on corporate HR departments, gyms and users. That requires a rather large investment,” Carvalho notes.
Within the next year, the company hopes to scale the resources from its recent mega-investor, Softbank.
“Having a fund like SoftBank by our side is a significant seal of approval, a confirmation that we are on the right track. Having a leader in global technology investment also works as a validation for people who might want to come to Gympass.”
The company’s international expansion currently has its sights set on the U.S. and Asia in the near future. According to Carvalho, Brazil is still one of the most relevant markets for the firm and is a country that will undoubtedly benefit from the global expansion.
“We are at the beginning of a relevant technology development cycle not only in Brazil, but in Latin America. We see angel investors to more advanced stage funds all entering the market, exit deals and IPOs of companies providing good returns to their investors. There has never been such a good moment to invest in Brazil. All parts of the ecosystem are now there and the speed of growth will only increase from now on,” he said.