How Ladder Became #1 Strength Training App

Today's episode is a conversation with the founders of the company that was my very first ever angel investment, a company called Ladder. At the time, I had absolutely no idea what I was doing. I didn't know the first thing about venture capital, startup investing, technology, software, all things I've learned a lot about through Invest Like the Best and elsewhere since.

But at the time, I was betting on my friend Tom. As you'll hear Tom and Greg discuss the story of building this company together. This is a classic example of what it really takes to build something special and valuable in the world of startups. It has not been a straight line.

It's a company that easily could have died and probably should have died many times. But it has survived and gone on to thrive, reaching almost 100 million of recurring revenue and building what they hope is the system of record for fitness and health. I believe this story is a great example of what it really takes to go the distance.

Of course, the story is still being told, but I love this episode with Tom and Greg because it's an inside look at the difficult things that any founders will have to go through on the way to an ultimately great story. We try to get into all the nitty-gritty details. What went wrong, what they did to fix it, and why they're now on the right trajectory.

Please enjoy this great conversation with Tom and Greg, the founders of Ladder. So, Ladder was the first ever angel investment that I made, which effectively was a bet on Tom. This was before I had any idea what I was doing in private markets. And I've learned a lot from watching you guys build over the years.

The story is fairly amazing and unlikely and dramatic, which is why I'm excited to do this with you guys to tell the story of the business that you've built so far and where it might go. The idea, I think, for our conversation today is to show people how incredibly hard it is to build something that ends up being very valuable and the twists and turns that happen along the way.

It's amazing that you've ended where you are, but I find it all the more interesting how you got here. And of course, we'll also talk about where you're going. Maybe to begin, since not everyone will know what the business is, just literally describe what the actual product and business is.

And then I want to tell the real dirty version of the story of how you got here. Ladder is the number one app for strength training. We've built a system that's designed to make it as easy as possible to maintain a consistent routine.

We spent a lot of time thinking about personal training. Arguably the most reliable way to get to the results that you're looking for is hiring coach. Unattainable for most inaccessible for most. But personal training, if you think about how it breaks down, it's programming, coaching, and accountability.

Programming, you know exactly what to do. Someone's prepared it for you. There's no guesswork. There's no thinking. Coaching, you have an expert there to guide you, answer your questions. And accountability, you have a coach standing in front of you.

You don't want to piss off your coach, which is a really powerful motivator. Then we took those three pillars and designed an experience from ground up to get as close as possible to that experience.

How has it been so successful? Because I feel like this is almost like a Silicon Valley meme like you have a fitness app like there's 4,000 million fitness apps to what would you attribute the fact that this one is the one that seems to have come to dominate in a sea of competition?

I think it's it's going to sound simple, but it's understanding your customers and really being an engineering first business. If you look at most companies in our space, they're started by creators and they're good products, they're good companies, but the creator is the face of that business.

They make every decision and they don't have a DNA that's rooted in in engineering, in problem solving. And when you look at these apps, they're mostly just content libraries and the motion is just constantly creating more and more content.

But what we saw was nobody was spending time thinking about how to use these incredible levers to deliver an experience that actually increases the odds of you continuing on. We looked at apps like social networks and we looked at Dualingo. all these apps that we're using all these powerful motivational mechanics and pointing them at at an action.

For social media networks, it's selling your attention. For Duolingo, it's learning a language. And so, we took that mentality of how do we use software to create an experience that's totally different than what exists today that isn't reliant on a neverending content machine.

And it's been guided by our members. We spend more time than you could imagine just speaking to our members, dissecting exactly what we should focus on based on what they care about. And so I think it's just not looking at other companies for inspiration. Like we just don't look at fitness almost ever.

Just to give people a sense of scale, like roughly, you know, how many people use it? What sort of revenue does the business do? Just like give people a sense of of how big the business is.

Yeah, we're north of 300,000 paying members today. I think at the beginning of 23, we were 9,000 paying members. So the growth has been exciting. We're getting pretty close and knocking on the door at 100 million of AR.

So it's been very exciting from a revenue growth perspective, but it all boils down to we've created a product that gets people the results that they want and they stay with us.

So sort of having like laid that quick simple groundwork for what the thing is. I would love to rewind time and Tom have you talk about actually we've literally recorded podcast at the same table. I don't know do you know what year that was?

2017 maybe 2017 the beginning chapter of the business call it 2017 to 2020 or so was a struggle to sort of stay alive and you personally put so much of your time your reputation on the line to go do this thing you left a really lucrative successful hedge fund career to do it maybe you can just tell the story of those early years and what was going on and why it was such a again I want to paint the story of like 100 million AR is awesome congratul ratulations.

That's really fantastic. I'm very happy as an investor, but the more interesting part of this is is what it takes to get there. So, maybe set the stage for us. So, ladder started as a it was really a side hustle for me, I guess.

A high school classmate that I went to school with up in Boston had pitched me on a on a fitness startup. The product didn't exist yet. I think it was a pitch that I was just kind of looking to swing at at the time. Was, you know, very interested in startups and technology.

He asked me to put some money into the business, which I did. I then raised the rest of the money and ended up joining him as co-founder and president of the business. And my condition for joining the business was to move the company to Austin, Texas.

You know, for me that was less about warm weather and a change in lifestyle. It was about separating myself from safety nets and putting distance between New York and my Bloomberg terminal and kind of the the easy way out cuz I assumed it would get hard. I didn't know it would get, you know, quite as as hard as it did.

There's really two ladders or two different companies here. Same name. I would call ladder 1.0 as everything pre2020 and after 2020. The name's ladder and we're in the fitness space, but it was a it was a different team. It was a different product.

What we were originally building was more of a managed marketplace for personal training. We thought that it was about there was heavy emphasis on on personalization and a relationship with another human. We thought that was, you know, really the opportunity.

What we'd come to find out is that business would be very operationally complex, difficult to scale. You know, ultimately as you scale that business, it starts to look more like a call center and you'd be inclined to start to automate away the very human you were selling in order to build anything that had margins, you know, worthy of venture type economics and scale. So uninteresting.

But what we were seeing was that all of the innovation in the space was focused on the casual fitness consumer. We were noticing that it was all very cardiobased and we saw that this fitness enthusiast customer was really they were being ignored. Strength training in particular, there was no one selling strength training solutions.

And we got excited that there was this fitness enthusiast customer that was already working out that had a huge pain point around just planning their workouts daily. and we got excited that this is something that we can solve with software.

So, you know, we find ourselves in Austin, Texas. You by the time I get down there, I realized, you know, startups are really hard and it didn't quite look like, you know, what I had been hearing on your podcast as far as like the iterating and the learning and just um you know, it was hard. It was messy. We were kind of out of money the whole time. We didn't have really any customers to speak of. There was no signs of product market fit at that point.

Fortunately, this is where Greg answers the the picture. So Greg and I went to went to Notre Dame. I should disclose that all three of us were classmates at Notre Dame. And Greg and I reconnected in Austin, Texas. He had left banking and has now been building startups for a period of time.

It was very obvious that he had this small team that believed in him very much and it was clear that he wanted to build something very meaningful and consumer. So I kind of spent my time um you know tricking him into joining us if you will. eventually, you know, I got him under the hood and excited about um about what we were building.

And why I was so interested in startups myself is that I had this um this sense that you could you could something to happen in the startup world. It just felt like if you were willing to not stop and you just keep going. It it seemed like you could just sheer force determination, you could build something that was appealing because in the hedge fund space, I can promise you in the finance world that's not possible.

You can't just like will hedge fund returns. I think Bernie Maid off tried to do that and um and it doesn't work. It was obvious to me that he shared that same belief. We'd be in the middle of a doing something messy like a debt collector, whatever it is, something hard.

And in that same next conversation, he's talking as if our success is inevitable, you know, and we're going to build this enduring business. And I was attracted to that. I've always felt that way. And so, you know, I could just tell that Greg seemed like the type of guy you wanted to be in a foxhole with.

So, it's now it's now the end of 2019 and I'm realizing that we have this opportunity to reset and to really think about like what what can ladder 2.0 be. But in order to do that, we need to really refocus, restructure, was thinking about a you know what a leadership transition could look like.

I found myself in a position where I was our largest financial shareholder. you know, in addition to being in the company as a co-founder early days, it was all people like yourself that had put money in because they trusted me personally. And so I felt this this naturally this obligation and um you know I think my my role and mindset shifted from one of co-founder to trying to be a steward of the business.

And at that point this is the day after Christmas 2019 came to the board and proposed that that we needed to make um some pretty significant leadership changes in order to really um in order to really reset the business. And as part of that we had some changes at the executive level including naming Greg CEO.

But it felt like at that moment like you know we we had this sense of like we can go we can go build this thing now. Like our problems were hardly solved but it felt like the problems were now worth solving.

Just to put like a finer point on the situation for you personally. You've left this job. We're making a bunch of money. You're in Austin. You moved your family. You've gotten most of your good friends and your family as far as I understand it. My family. So many people that you cared about that that cared about you too uh to invest in this thing.

What did that feel like? What was the darkest point and what did it feel like for you personally? Well, it just felt like there was nothing you you weren't willing to do to to make it work, you know? And I think that's why it was um it was appealing to meet someone else that kind of felt that way that was kind of going to be in that fox.

I should have learned that lesson and said I need to not raise money from friends and family. Instead, they were the only people at that moment that I needed to double and triple down. Um you just had to go even further all in. Not sure I would do it again or or recommend other people take that path.

Why not? You have to just like know deep down that you'd be willing to do whatever it takes, you know, including like, you know, some very difficult conversations with your wife and you're building a family and, you know, you're leaving a lot on the table on, you know, a much easier, cushier, you know, hedge fund, country club type, you know, existing here in the Northeast and, uh, you know, you want to go and, you know, do something hard.

Turns out it's it's pretty hard. I think that dynamic is why ladder is here, though. I mean like your motivation was delivering to everyone in your life and like that that sits with you every single day. I don't think there was a moment where we thought we weren't going to figure it out.

Like I can't think of one day we were like it's not going to happen. Like we're we were going to figure it out. And on my side I don't have that same dynamic I do now. But it wasn't true when I first joined. Not everybody was invested in ladder.

But I had a conversation with my wife where she said this is the last one. Like if you if you don't figure this one out there are no more startups. It had been 10 years of not a lot of success tied to a lot of work. And my wife married an investment banker who was a closeted entrepreneur.

And she's been an investment banker for 18 years. And it's been a long time of like, you know, I'm going to the clubhouse. I'm going to figure it out today. Like I promise it's coming. It's coming. And that's been an enormous motivator of like, no, this is going to work.

I mean, we're there's just no scenario where we can, you know, let this not get to the vision that we we've set ourselves on. Why did you decide to join it? You know, if you think about the circumstance that you were opting into, uh he said it best, you know, no money, no product market fit, like needing a whole new team, you know, why not just like start a new company or something like why why come into this?

It was kind of this perfect moment that is very unlikely to ever happen again. I was building a company inside of a big real estate private equity business, a consumer company, which had all kinds of complexities of trying to be an innovator inside of a really established company.

But I had this amazing team of people, some that have been with me for a couple of ventures, some that I've worked with for two, five years. Really powerful team that could build anything. This is product and and engineering and and marketing, but a core group that we wanted to just keep working together and we wanted to be in consumer. We wanted to work on a hard problem.

But we had a group of people that were not at a stage of life where they could take zero salary and start something from a garage. People were starting to have kids, you know, life is starting to happen. We got spouses and so just starting something from scratch. And we thought about it. It just seemed like it was a hard task to keep the group together.

That was my number one focus is like keep this group together. It's special and I wanted to hold on to it for for dear life. So like that's what I was solving for consumer and bring my most important people and let's take another swing together.

Talk about what a given day was like in when you guys joined forces there's still this mess to clean up and then there's this thing you have to go build and it's like two sides of the coin. How what would a day look like in those early days?

It's literally like late March 2020 when we've zeroed in on the concept for this this new product and we're having to go fully remote. the teams knew. So, everyone's working from home other than Greg, myself, and and Johnny. And the mornings were for the messy stuff.

It was um you know, just figuring out how to untangle some of the situations we found ourselves in, debt collectors, actually just trying to to kind of fix things so we can move forward. And in the afternoons, we're actually building product and Greg's focused on, you know, winding the team up and, you know, iterating on what we're about to build and launch, you know, a few months later.

Um, we're raising money kind of at any moment during that. Like I'm spending every moment redialing people that are already investors and reaching out to new people. What I what I remember most though about those days cuz it was it was hard but it was also so exciting.

And I think about um you know at night at like 10:00 we would finish the whole world has stopped. Everyone's at home. We've been in the office grinding since 6:00 a.m. And at 10:00 it would be like all right like whatever win we had that day let's celebrate.

And it was like um you've seen that scene in Good Fellows when they're all in prison. And when wise guys go to prison, it's not like everyone else. They got lobsters coming in and slicing the garlic. Yeah. Slicing the garlic with the uh with the little razor blade. You know, for us, our version of that, we're cooking steaks on the grill.

We're smoking cigars in the office cuz no one else is coming in. Uh I'm shaking martinis up there. And uh we're high-fiving about raising $10,000 checks. That was exciting cuz frankly it felt more like the startups that were romanticized by the you know podcasts and books and you know all the kind of fun stuff.

But it it was survival and like when you're in a moment where it literally is survival it's not hard to know what to work on where it wasn't hard for us to know what mattered. We needed to not run out of money. So Degan was spending time trying to solve that problem.

We were in debt and owed a lot of people a lot of money and it's a startup so it's really hard to get a clear picture of the financials and where money is going and it was the first thing I worked on was like where's where's the money going. We put that piece together and you know no one can really see this or is looking at it and you realize like money's going in different places that we're not totally aware of and mission number one was like figure out the cash flow and we got we got visibility into that and then we had we had some money that we owed to people and we owed some like hardcore creditors like American Express who like doesn't really mess around and I learned and Degan learned all about how to negotiate creditors and that was a new skill set for me.

What's the key to that? What's the lesson? uh begging you money. Like when when you get them to really believe and it was true that there's a chance you get zero, there's a door to negotiate. Like we were negotiating with big creditors at 20 cents on the dollar.

And we knew the list of groups that we owe money to and it was like it was like sales. We're like, "All right, we got to go one by one and figure out how to close the door on this and not let it overhang the business." And so raise money, get money back to the right people, clean up the house to survive.

And then we had this moment around this time where it's like we have this existing existing business. It's not it's not working. There's some insights that are coming out of it, but it's really not working. Um, but we're still trying to maintain it. So we're kind of living in this like in between moment of like keep that thing alive so we can pitch something to to folks on the outside, but also like what are we going to do? Like what are we going to build?

isn't this like there's no path in this thing that that we've built. So there are really funny stories uh where Degan was pitching, I'm pitching, and you're basically trying to figure out what the investor likes and you're like, "Let me tell you about this one to one business we got." It's like super excit Oh, you know, like that like we're thinking about this social concept and you're just kind of living this world of figuring out how do I make it through?

And there were enough wins like the the micro wins on survival felt big to us and there was enough to like celebrate to keep going and wake up and go do it again. If you were to teach a class on fundraising for startups now, you you you've done this as masterfully as anyone with the with their cards you were dealt.

What would the lesson plan look like? One of the biggest lessons particularly from that moment is like selling people on like your your conviction in that moment we were selling both like the product that we were about to shut down, but we didn't really even have visuals yet for the new product. So, it was as much just like selling the team and the conviction on what we were about to build.

Like I think like the best example of that is a story about um another friend of ours named we'll call him Bill in March of 2020 trying to kickstart a round but no one's going to lead this round naturally cuz who would who would lead a round in our business at that moment. And so I was about to lead another inside round where basically like I'm pricing the round and uh passing the hat to you know to all the boys and whoever would listen.

And um and so what what happened there was now I need some more cash. I think Braden knows like how many times I wrote check in into the business. But I kept um this was another example of being like all right the only way to get this going is to write the first check and then you know and and lead with that uh with that conviction showing that you were you know had skin in the game here.

Again at this point I'm trying to figure out how to sell anything that's not nailed down. And so it's you know 401k put that in done. Uh what else can we do? And um this story here is funny because I'm looking at kind of the line items on the balance sheet if you will. I'm like, "Oh, permanent equity."

And uh that's that's Patrick's friend, Brent Behore. And uh Brent came and told his story on this podcast. Uh he has an unbelievable strategy, and it's called permanent for a reason. And that, you know, he buys these family-owned um you know, awesome businesses and then holds them forever.

And so you're not, you're not necessar there isn't like a liquidity profile here. But I read the documents and it said that if you found another LP to sell to that you could sell. And so I called Brent and said, "Hey, I need your investor list." And he's like, you know, the market S&P is down 35%. We're in a global pandemic.

Like, of course, I'm not giving you my investor. You're you're my smallest investor. Like, you think I'm But he does me a solid and he's like, "Hey, you should call Bill." Bill's a friend. He's Patrick's friend. You know, Bill, another Notre Dame guy. So, I call I call Bill and uh and Bill's a gamer.

So, he's just like, "Uh, what are you looking to do? When do you need this by?" And he's like, "What are you thinking? Like, how do we mark this?" And I'm like, "Well, the market's down this, you know, what about down 10%." And we and he's like, "What about down 50?" and we do the dance and we end up kind of somewhere in the middle and I'm like you're done but I need the money tomorrow and he's like I'll send you the money tomorrow and I'm investing in whatever this is going into.

He doesn't even really know what ladder is but he's like but I'm in and like I think the the point there is like just like in particularly those early days it's important to have skin in the game in whatever way you can. Like and I think you know for us it was about um being able to show that level of like conviction and urgency like Bill didn't need to see a deck. We didn't have a new product yet. He knew you were involved and he was just like if you're willing to do this like you know I need I need to be involved too.

So he bought your steak and then also invested in the round that you were that you were investing in. I think he matched what he was what he was sending me which was which was awesome and that kind of kicked it off. We're glossing over a lot. Maybe we'll keep returning to fun. I love that story. Um but let's get to the point now where things are starting to feel like okay now we have to build this next thing.

Maybe this is a good opportunity to ask you what you now know about the world of like fitness and people that want to get fit like what becomes your northstar for what product can we build here that's scalable that can get to what it's become. Yeah. It was no magic bullet that said go do this and you'll and you'll win.

But we spent a lot of time the first two three months I was there trying to dissect the current business. And the current business was this onetoone essentially marketplace connecting independent contractor coach with a consumer who is looking for personal training. And we're we're kind of studying the behavior and watching what's going on here.

And what I noticed was like the coaches could set their own price and like some people had crazy high prices, some people had more approachable prices. And they're building this as customizable program. like I'm I'm building it for you based on your very specific goals and that's why I'm charging you this amount. And on the back end, we could see that, you know, it really wasn't personalized.

It was like big bucket personas and like the names were like uh Sally Pilates, you know, and that was being built as super personalized programming and charging like you would work with a coach. But we could see like these big bucket personas. were like, "Okay, like maybe personalization isn't the secret here, but it's having good programming that's relevant to you."

And that same moment, I went through the list of coaches, and there weren't a lot of coaches that were making a lot of money on this, but we had a couple that were making four or five grand a month. And uh and I spent time with them and I asked them like, "What are you doing differently? Like, how are you making this a thing when everybody else is is struggling with it?"

And we had one in particular and I was like all right so like you're making four grand a month your earnings aren't growing like what's going how did you get there and like uh why isn't it growing anymore and Lauren was a trainer in New York like a high ticket trainer in person and she was filling up all of her downtime with online clients with with ladder and we had no idea how to grow.

She figured out like I had this Instagram profile. She had five or 10,000 people and she was telling a story to her audience and they were coming in but she filled up all of her time and she couldn't take on any more clients. I'm like that's a bad business. Like you've capped how big this can get. You the constraint is human human time.

So these two insights of calling on personalization, kind of watching what Lauren was doing and seeing how she was growing and piecing those together into what became like a trial test or an MVP of this vision. We didn't know what we would build, but we said there's something in these concepts.

And in February 2020, we said, "Okay, uh, you can't take on any more business, Lauren. Like what if we jimmy rig the existing app?" and we created an experience where there could be more than one person in there. You're going to program for a group of women. You'll go out to your Instagram audience and you'll say, "Hey, this is for I'm in New York, you know, busy women in New York, kettle bell training.

I'm an experienced coach. I'm going to give you new workouts every week. It's not customized, but very specific persona that she was talking to. And we're going to have this chat in the app where we all can talk to each other." And the app looked like like the functionality barely worked, but the concept was was clear.

We're in process of dying in this moment. She went out to her Instagram audience and we had like a 100 people sign up at 100 bucks a month very fast. Like that was the most exciting thing I'd seen yet, you know, other than getting wins against American Express and her creditors. And that was awesome.

We're like, okay, there's demand. Like Lauren's audience, they came in like very clearly like there's interest in this concept. So that first month it was uh we were just watching what was happening because there was nothing else to look at from a a product perspective. And I think what the most amazing and impressionful thing to me was these people had found each other in the app.

They were similar personas. They lived in a similar place, busy women following the same workouts every day interacting with the coach and each other. They'd never met each other, but they started posting on Instagram about Lauren and Ladder. And then we saw them meeting up in New York at the park together.

They had never met each other before. And that was like magical. We're like, we have this community elements and social and they're happy. And we had never seen anything like that in the original version of the product. So all these like little glimmers of hope on this concept of programming that's not personalized, but it's high quality.

It's meant for a specific persona. This social accountability element. all these things were like bubbling up as real tangible proof points of something that could be interesting to to go work on. And that group like the renewal rate was like 90% plus like people paid again. We're like damn like they're doing the workouts and they're staying with us.

And if you looked at the app, you would go this is garbage. But like the promise was being delivered uh on what we were proposing. We ran one more trial with another coach. It was the exact same outcome. I talked to almost all those women like on the phone. It was like who are you and like how did you find Lauren? Why did you go into this app? What problem were you trying to solve?

And we talked to all of them and built a relationship and like all those were inputs. Did anything surprise you in those conversations? It validated a lot of things we were learning in in real time. It's like why did you join? I'm tired of thinking about what workout to do.

I'm already into fitness, but I spend time actually planning this. It's a painoint for me. I don't want to go spend $1,000 on a coach. I need something more approachable, but I need help with a plan. I need to know that I'm doing the right thing. I want a coach that is helping me and have confidence that it's the right thing to do.

That was a real thing. And then we saw them meeting up and they would say, "Oh, I met someone just like me." And they had the same pain points and they become a friend and we work out together and that was magic. Uh and so all these little kernels just speaking and forming a picture that got clearer and clearer and clearer was the was the beginning of what that what that product would be.

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