Moment 74 - Business Struggles That No One Tells You: Payal Kadakia

00:02much of the reason i started this podcast was because i wanted to shine a light on the tough times in business and i know when you're starting a business especially a business in tech um it can be really really difficult because you're sort of jockeying and pivoting to find product market fit and to figure out like what your customers want and how to deliver it and i read that when i was reading about your journey when you know you started um you quit your job in 2011 and then you go through a long phase of trying to figure out how to get people to use this thing, how to market it and all that nightmare. Talk to me about that nightmare. So we went into the market with a very clear product idea and it was a replica of what had worked in another industry. So OpenTable, which allows you to book restaurant reservations. It seemed like the right parallel to what we were doing, go on search for classes. But what I didn't realize was that there was a very big missing part in it. And I mean, I'll spare everyone like the little details of it, but everyone has to eat.

01:04Everyone does not have to work out, right? It was, and working out usually is something scary for people and it's more of an aspirational thing. It's not something that you have to do every single day. So they were sort of on different planes of people's psychology, which really became the biggest bottleneck to what ended up happening because we spent a year, we spent half a million dollars building a product that didn't work. And even though I had all this momentum, like I was saying, all these beautiful doors were opening for me and they were, and I had a lot of great, you know, what I now call false signals of success, like followers press, we ended up on the cover of Inc Magazine without launching a product. And all these things made me feel like I was succeeding, right?

01:47Because this is what success looked like to everyone else. And then I launched my product and no one went to class. It was like, it was, and no one bought a class. No one was transacting. It was crickets. It was just a really, it was, this was the hardest, probably few months of the entire trajectory because I had never really faced failure in my life. I mean, going back to everything I just told you, I had sort of done things well and I tried to make sure that this would go well, right?

02:19By doing everything that I knew how to, which was let's get the press, let's build a beautiful product. Let's, you know, get as many email addresses as possible. Those were like the obvious things that seem, you know, you would do when you're building a company. But I forgot to really ask myself if I was solving the problem I set out to. And I really think back to that moment. And even though it was the hardest, that moment is the reason I became a real entrepreneur.

02:48Like, I don't think I was an entrepreneur before that day. I was excited about solving something, but the day I failed was the day I became an entrepreneur because that was the day I really had to think deeper about creating something in the world that didn't exist. And I think it's so easy to follow the blueprints of everyone else and realize that entrepreneurship is actually about having no plan and having, you know, not following anyone else's ideas of what success is. It's about figuring out what, you know, what is it to solve your mission or your, you know, your business model that you're going after. And that woke me up. And it was a month or two period where we were trying to be comfortable. Like it was this comfortable place we were in because we had raised money. We had just come out of Techstars, but I mean, it was not going well. And I knew we were going to run out of cash if like we didn't, you know, figure out something in the next few months. And we just, I remember like after a few, few weeks of it, we sent this email literally telling people to go to class for free thinking, you know, okay, like this is going to work. We're literally paying for the classes. People have to go

03:54and still no one went. And that's when I realized we had just gone the wrong direction and I needed to like circle back up. I needed to break what we had built, just think a whole new way, re-energize my team around going about solving this problem in a completely new way, not worrying about what we had done, but worrying about where we're going to go. And that flipped everything. And I have been there now so many times where I've been okay with throwing away our past.

04:21I mean, people don't know this, but ClassPass has changed its name three times. It wasn't called ClassPass. I mean, even this time I'm talking about, it was called something else. And I've thrown away names, like I've thrown away product ideas. Like we've thrown away a lot of stuff. We've changed our pricing, our plans. And it's because it's not about that, right? It's about solving the problem in the world and moving towards that and your mission.

04:46So many entrepreneurs though, and this is probably the mistake I made when I was 18 and started my first little tech company was they get romantic about their initial hypothesis being correct. Exactly. so it's like you've got this square shape thing and you're just trying to force it into this triangle because like your ego and there's so much relying on it and you know the runway you know you're running out of cash and you just maybe i just push harder and then all these vanity metrics can be kind of confusing oh we've got lots of signals of success yes no one's buying anything but we've got traffic absolutely as you just said like i'm on a magazine but then certain entrepreneurs i think that have the humility to say in fact it's not about being me my hypothesis being right it's about creating a product market fit yeah you know and what was the moment when you started to get closer to that product market yeah and and you know one of the things I love saying about that is to be uh mission obsessed not product obsessed and I learned that through that journey but um you know we started then putting this discovery pass out there so what we did learn is that you know we started finally actually going and talking to a lot of the studio

05:49owners and talking to customers I think one of the things that happens in tech sometimes is you sit behind the tech that you don't like go and talk to real people. Right. And it was funny because I was in a tech incubator. So we showed up, we were working from like 6am to 10pm every night, but sitting in an office, we weren't actually going to class and talking to studio owners and all of that. So once we started flipping that, we started realizing that, you know, a lot of the studio owners, they were offering a free class for people who are new, they want to new people in the door. And then customers, you know, knew about all these places, but they had fear. So we were like, how do we break the fear? And so we started building this product. Our second product, which also doesn't exist anymore, was called the passport. And it was a discovery pass where you could go and try 10 different classes for 30 days. So you could go to like a spin class Monday, pole dance class Tuesday, dance class Wednesday, you can kind of, you know, it was like sort of this way for people for $50 to go and explore. This is sort of when we started realizing the whole love a variety that people had when it came to working out in classes which was the magic of

06:54what we actually discovered in our second mistake of a product is that people loved variety they wanted to really go and try new things it's what motivated them they didn't want to do the same workout every single day how did you learn that the variety point well people started going in like they started loving this pass right they started loving the 30-day pass and then they They tried to actually buy it over and over again for the next month. And you weren't allowed to because it was like a one month product.

07:20And we had literally gotten these classes for no money. It was very much a do this for a month and then you're going to go find your favorite studio and buy a pass there. We thought it was lead gen for the studio owners, but it ended up not being that at all. People literally were obsessed with the variety, wanted to do it every single month and not stop. And that's when we started thinking about what if we become a subscription? We weren't a subscription at the time.

07:42It was just this one month product. And we then started experimenting with this idea of a class pass. It wasn't even class pass at the time. It was a class pass. And we launched it to about 50 customers in June of 2013. And they loved it. The next month, it just kind of kept doubling. And then it was exponential growth. And it just, I mean, the sales of that took over our other products. And we just knew that the monthly subscription was the way to go.

08:10and that that was the way that this model was going to work. And that's two years in, right? Three years in. Three years in. So three years of stumbling around. I mean, I went to San Francisco in July of 2010 and this is June of 2013. So three years. Wow. One of the quotes from your book is that about failure being a data point, not an end point. And I really think that is, I wish someone had said that to me when I was 18 because I saw failure as a testament of my inadequacy or something as opposed to something I should be listening to. Right. And that's a sort of testament to your journey. And then, you know, throughout that period, though, I think we've, how was your as a founder, something again, founders don't talk about a lot, how was your mental health? Because I know there's sacrifice there. Let's see, a few things I would say.

08:58I mean, I sacrificed a lot, especially in those three years where we were trying to get the product right, and it wasn't working. I mean, I missed, I missed family things. I missed weddings. I was just not around, right? I mean, I was literally at work all day long. And if someone on my team needed me, I gave my 150% to my company. So I felt fulfilled because I was doing something I loved. Was I exhausted? Yes. Was I lonely? Yeah. I mean, I thankfully like lived with a roommate who is one of my closest, dearest friends still today.

09:34but she was the only person I would see outside of people at work. You know, it was, I was living in this like closed circuit world. And I don't, I don't mind that. Like as somebody who has been on a mission before, like has created dance shows where they're, you know, you, there's this like intensity that happens for two weeks and you go really, really intense. You know, the thing though with the dance show is though it's ends at some point, like you have the show and it's over.

10:01The thing I didn't realize about this one is, you know, it's a marathon, not a sprint. Like the dance shows can be a sprint. And that definitely got to me. And I, you know, one of the reasons I even developed this entire goal setting method was because three years in, so right when I was at this point where I realized class was gonna take off, I mean, it felt like amazing, right? I'd spent like three years. I was so focused. I'd literally like probably not talked to anyone in my life.

10:25And I found myself alone for the holidays. My sister was away. My parents were in India. And I was about to like literally be by myself on Christmas. And it was one of those moments for me. I always hated the holidays as an entrepreneur because it was the one, like it was the time in my life where I couldn't work through my, like my loneliness or through work through any of my issues. It was like the one time where everyone would go and do things with other people.

10:50And I would be that person who would finally have to realize that I was by myself. Right. Because I wasn't cultivating relationships at that point in my life. I didn't have time to. and so it was a wake-up call and kind of going back to you know my mom may have been pestering me about it for the years before at that point in my life I just started realizing wait a second like I knew Classhouse was going to take off like I just knew we I mean we only had we had less than a thousand customers but I had I had caught lightning in a bottle like it was there it was so magical I knew it was going to take over the world like it was one of those moments as an entrepreneur I could breathe but I looked at everything else and I'm like everything else a mess. My health was a mess. I could barely work out, which was crazy for me. I wasn't dancing. I was like, I was single. I, you know, I had a few good friends, but I felt like I like hadn't been there for them. And that's when I started really doing this goal setting because I'm like, I need to have a bit more, I want to make sure my priorities are more reflective of the human I want to be in my life. And how in like a practical sense, in terms of a time allocation sense,

11:49did you get from that place to living more in line with those values of connection, community, love and health so i you know i'll the details of like what i did on that session the first time i did it are in the book but i will say this so in the next six months uh after i started doing that i literally met my husband a month later really yes i decided to do a huge dance show at alvin alley six months later and i sold out a thousand uh a thousand seats at that so i got to do a huge performance you're gonna sell so many books just by saying you found a husband i know It's like, it's really crazy, but I literally changed my perspective around love and what I wanted. And I met my husband a month later, which was crazy. And I also, you know, I set goals around what I wanted to do with ClassPass. I set goals around my health and how I wanted to live and work out on a daily basis. And I did all those things. And I remember, this is always my favorite moment. Six months later, I was flying home on a plane. And when I first did this goal setting method. I had written it on a post-it note because I was on a plane and I was on another plane ride because I was always traveling and I took it out and I looked at it and I had done

13:02everything on my dream list, you know, and sometimes just writing down those dreams is the most important thing. But it was just such an important moment because I felt more, I don't, I don't want to say the word balance because that has so many, you know, wrong intentions with it, But I felt that I was very clear about my priorities and I went towards them. And I missed things too, but I didn't feel guilty about them. And I just felt so proud of myself for saying, here's what I want to do in my life and I'm going to go and do it and accomplishing it.

13:36Not just obviously professionally, but personally as well. I can do the work-in-all, to the people-sacrach, to the people,