Jun 29, 2020 · 1h 16m · how-i-built-this
ClassPass: Payal Kadakia
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of 'How I Built This,' Payal Kadakia shares the journey of building ClassPass from a failed search engine into a billion-dollar fitness marketplace. Anchored by her discipline as an Indian classical dancer, Kadakia details the critical pivots, unit economic challenges, and resilient leadership required to navigate startup crises and industry disruption.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 30.9% of the talking time here. How this is scored →
Guy as informed peer 3.6 Guest teaching 2.0 Guest disagreement 0.3 Guy pushing back 0.9
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:06:53 Defending marketplace efficiencies against studio backlash
Kadakia firmly pushes back on the claim that ClassPass exploits studios, explaining that boutique studios lack the marketing scale to acquire customers independently.
Hardest push from Guy ▶ 1:07:53 Raz presses on Vice investigationRaz directly confronts Kadakia with Vice's scathing article reporting that ClassPass was squeezing independent fitness studios to the point of death.
Biggest teaching moment ▶ 33:44 Explaining friction in aspirational consumer decisionsKadakia corrects Raz's assumption that class booking mirrors flight booking, breaking down why cognitive overload causes aspirational fitness customers to drop off.
Guy holds their own ▶ 58:43 Raz cites Planet Money breakage modelRaz leverages external reporting to articulate how traditional gym economics depend on subscriber non-attendance, contrasting it with ClassPass's margin crisis.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Framing the Complexity of Iteration and Crisis | 4 | 0 | 0 | 0 | Guy Raz delivers a monologue outlining the operational complexity of logistics-heavy tech startups and frames ClassPass facing real-time pandemic crises. | |
| Immigrant Roots and Discovering Indian Dance | 3 | 1 | 0 | 0 | Raz asks open biographical questions about Kadakia's upbringing, immigrant parents, and introduction to Indian classical dance. | |
| Navigating Dual Identities and Academic Ambition | 3 | 1 | 0 | 0 | Raz cites childhood experiences of teasing, prompting Kadakia to explain her dual cultural identity and analytical mindset. | |
| MIT Experience, Operations Research, and Troupe Leadership | 3 | 1 | 0 | 0 | Raz inquires about Kadakia's major in operations research at MIT and how she founded a 40-person dance troupe on campus. | |
| Consulting at Bain and Transition to Warner Music | 3 | 1 | 0 | 0 | Raz and Kadakia discuss her post-grad consulting at Bain and moving to Warner Music to accommodate dance ambitions. | |
| Founding the Sa Dance Company in New York | 3 | 1 | 0 | 0 | Kadakia describes running the Sa Dance Company as a non-profit while working full-time corporate hours. | |
| The San Francisco Epiphany and the Ballet Class Search | 3 | 1 | 0 | 0 | Kadakia recounts her trip to San Francisco and the frustrating experience of keeping seven browser tabs open to book a single ballet class. | |
| Quitting Corporate Life and Securing First Angel Investment | 3 | 1 | 0 | 0 | Raz follows Kadakia's decision to leave Warner Music after receiving parental encouragement and securing an initial angel check. | |
| Onboarding Co-Founder Sanjeev Sanghavi and Early Capital | 4 | 2 | 0 | 1 | Raz highlights how unusual it is to raise capital without a pitch deck while Kadakia clarifies their initial backend scraping strategy. | |
| Techstars NYC Incubator and Rebranding to Classtivity | 3 | 1 | 0 | 0 | Kadakia details entering Techstars NYC, renaming the business Classtivity, and facing zero consumer adoption at launch. | |
| Diagnosing Consumer Friction and Understanding Behavior | 4 | 6 | 2 | 4 | Raz questions why an OpenTable-style search failed, prompting Kadakia to educate him on the psychological friction of aspirational workouts versus utility bookings. | |
| The Passport Experiment and Uncovering User Demand | 4 | 4 | 1 | 3 | Raz presses on why consumers would pay forty-nine dollars for classes studios offered free, leading Kadakia to describe packaging demand and multi-account user behavior. | |
| Launching the ClassPass Monthly Subscription Model | 4 | 3 | 1 | 2 | Raz compares their negotiated studio payout model to dental insurance, while Kadakia describes grassroots studio sales in workout gear. | |
| Scaling to a Million Dollar Run Rate and Legal Hurdles | 3 | 2 | 0 | 1 | Kadakia shares hitting a million-dollar run rate and receiving a cease-and-desist letter from Lululemon over a promotion. | |
| Fundraising Challenges, Rebranding, and Strategic Focus | 3 | 2 | 0 | 0 | Raz asks about navigating male-dominated VC rooms, and Kadakia shares her mindset regarding authenticity and confidence. | |
| Operation 2015 and the Unlimited Class Promotion | 4 | 2 | 0 | 1 | Kadakia explains how copycat competitors forced them to execute Operation 2015, rolling out twelve cities in three months. | |
| The Unlimited Model Dilemma and Margin Erosion | 5 | 3 | 0 | 3 | Raz points out the unsustainable unit economics of unlimited classes and references Planet Money's gym breakage model. | |
| Pivoting to Dynamic Credits and Expanding Offerings | 4 | 2 | 0 | 1 | Raz marvels at the numerous pivots, while Kadakia outlines the transition to dynamic credits for peak pricing and wellness services. | |
| Stepping Down as CEO and Leadership Evolution | 3 | 2 | 0 | 0 | Raz asks Kadakia why she stepped down as CEO in 2017 to hand executive management to Fritz Landman. | |
| Navigating Studio Criticism and Marketplace Synergies | 6 | 4 | 3 | 5 | Raz presses Kadakia on partner complaints and an aggressive Vice article alleging ClassPass squeezed studio partners to death. | |
| Reaching Unicorn Status and Weathering the Pandemic | 4 | 2 | 0 | 0 | Kadakia and Raz discuss reaching unicorn valuation in January 2020 right before COVID-19 shut down 95% of studio inventory. | |
| Reflections on Resilience, Luck, and Immigrant Heritage | 3 | 2 | 0 | 0 | Raz asks about anxiety, luck, and work ethic; Kadakia reflects on immigrant family roots and cultivating resilience through dance. |
Statements from this episode (25)
Kadakia: Startup Raised $500,000 Before Entering Techstars Incubator
“I raised about a half a million dollars. This was before we got into Techstars, which was this big incubator.”
Kadakia: Dabble Rebranded to Classtivity Due to Chicago Trademark Conflict
“We actually had to change our name because there was a company in Chicago that started selling classes under, under the name of Dabble. So we had to actually overnight change our name and we couldn't think of anything, so we, like, literally were just scouring…”
Kadakia: Classtivity Received Zero Bookings For First Ten Days Post-Launch
“There was crickets, meaning no one went to any classes. We had probably 10 days go by before we got even one reservation.”
Kadakia: Classtivity Burned $500,000 Over 18 Months With Zero Traction
“I mean, you know, we had once again, like close to, it's been, by the way, about close to a year and a half, right? We had probably spent close to a half a million dollars at this point, and it's crickets, and I didn't know what to do.”
Kadakia: Early Users Refused Free Fitness Classes via Email Promotion
“I remember, you know, we launched this promotion where we literally Send an email saying like, go to class for free and still no one went.”
Kadakia: Fitness Booking Struggles Because Working Out Is Aspirational, Not Utility
“And so something with like airline tickets, like you already made the decision to go, or if you're going to go eat, you're going to eat. Eating is, is a utility. Like you're going to eat. Right. And that was the difference where working out and going to these …”
Kadakia: Classtivity downsized its team 18 months in to conserve cash
“Yeah, a year and a half in, we decided to work, go in a different direction. I mean, we downsized the team. I had to save cash, and I wasn't done, you know. I wasn't done trying to solve the mission.”
Kadakia: Under 15% of Early Passport Users Returned to Same Studios
“We saw less than 10 to 15% of people go back to studios.”
Kadakia: 95% of Surveyed Users Demanded a Recurring Monthly Subscription
“So we did a survey with our users where we asked them, you know, if you could go back and do this product over and over again, use the passport month over month and visit your favorite studios, you know, would you do it? And 95% of them said, yes, I would.”
Kadakia: Classtivity had roughly 2,000 Passport customers before pivoting to ClassPass
“We had a total of about 2000 customers on the passport before we pivoted to ClassPass”
Kadakia: ClassPass revenue overtook Passport revenue within three months of launch
“By month three of having the class pass out, we, it took over the passport revenue, and we knew that that was the model to focus on.”
Kadakia: ClassPass Listed Fitness Studios Without Agreements to Prove Demand
“There were certain studios that we just put on the platform where we didn't have like full agreements with yet. Because we just wanted to test and, you know, we started sending them so much traffic that they would call us up and say, Hey, like, who are you guy…”
Kadakia: ZocDoc Founder Cyrus Massoumi Helped ClassPass Raise a Bridge Round
“And so I thankfully, you know, raised a bridge round from, actually Cyrus from ZocDoc helped me
Raise that round, which got me into, got me through to January, which is when I officially closed my seed round that was going to let us launch in other places.”
Kadakia: Lululemon Sent ClassPass a Cease-and-Desist Over Gift Card Promotion
“And one day
I get to the office, and there's like a letter on my desk, and I open it, and it's a cease and desist from Lululemon.”
ClassPass users averaged five to six classes monthly on 10-class plan
“We were seeing our average around, you know, five or six classes per customer.”
Kadakia: ClassPass Raised a $40 Million Series B Six Months Post-Series A
“Six months after my series A, I raised a forty million dollar series B, right?”
ClassPass expanded to 20 U.S. markets by January 1, 2015
“By January first of 2015, we were in 20 markets around the U.S.”
Kadakia: ClassPass Negotiated Studio Payouts at 50% of Pack Rates
“The way we were doing a lot of the discounting was it was a 50% off of their 10 class pack rate.”
Kadakia: Lower Pricing Tiers Cannibalized Profitable Users and Worsened Unlimited Margins
“When we started doing was introducing lower, lower packages. And then what happened was, you know, our really profitable users were obviously choosing the lower packs, which made the unlimited package even get worse in terms of our margin. Right. And the peopl…”
Kadakia: Founders Must Be Mission-Obsessed Rather Than Product-Obsessed
“I've learned this, you know, to be mission obsessed as a founder and not product obsessed. It's not my product that makes us, it's us actually creating a solution right to the problem.”
Kadakia: Unlimited Tier Cancellation Backlash Far Exceeded Actual Business Impact
“The noise was bigger than the impact it had on the business, for sure.”
Kadakia: Aggregator CAC is More Efficient Due to Higher Lifetime Value
“The synergies, right, of a company like ClassPass being able to do customer acquisition for an entire industry, right, where a class is, you know, 25, 30 dollars is just obviously more efficient when we're selling a product that has a bigger lifetime, right? W…”
Kadakia: A Marketplace's True Product Is the Offline Experience, Not Tech
“Our teachers are our product, right? I always say this. It's not, you know, our product is not this technology we built. Our product is this class that someone goes to, right? Offline. It's the experience they have with our instructors in our studios”