The Exchanges

Q How did this, where'd you guys come up with the idea for the business? How did it get going?

A Yeah, I think the, the key is, is you have kept start with ping pod. So the predecessor business was ping pod, which is an operating business. So ping pod is a network of autonomous table tennis clubs. Uh, it was founded in 2019 by Max David Silverman and Ernesto Ebwin. I was the first outside investor in that business. Um, and the problem they were trying to solve, you had Basically, at that point in New York City, you had kind of one large entertainment destination, had to play ping pong, and then you had kind of basement dojo style clubs, and there was really nothing in between. And, you know, the reason for that was you have relatively high rent in New York City of relatively high labor costs, so the possibility of running a profitable ping pong club without food and booze was very little at that point. So we looked at that cost stack and said, hey, if we could do something about the labor piece, insert technology, then there might be a third way. To, to do this. Um, so that was the idea. Could you, could you take out that front desk, uh, type labor run without kind of onsite labor, um, all the time. If you could do that, you could extend your, your hours to 24 seven. So you're increasing capacity at the same time that you're reducing kind of your, your labor overhead. So you're working on kind of both sides of the math equation. And if you could do that, then you could do …

AI assessment note: “the problem they were trying to solve, you had Basically, at that point in New York”

Q That's awesome. Okay, I have to go back to how you funded the business, because I think you guys did a ten million series A in twenty-twenty-two, which would have been right before you launched the software. So are both of these companies under the same thing, and you, you sort of raised money with the legacy business, but are sort of using it to invest in the software business?

A We raised money that ten million dollars series A was for ping pod. Um, that was sort of before pod play existed. Um, and yes, some of the money from that was kind of the initial seeding of the, the, the pod play business. We spun out pod play as a standalone entity, uh, in August of this year, which was a prelude to raising a series A for standalone pod play, um, which we did in October. So eight million dollars series A round led by frontier growth. Um, which is kind of an OG investor in the vertical SaaS space. Um, we're super excited to kind of, you know, lock arms with them. They've been investing in vertical SaaS since 1999 before, you know, I say before vertical SaaS was a thing. Uh, and they've invested in, you know, some big names that you would, you would know, uh, from the vertical SaaS space. Uh, they, you know, focus entirely on vertical SaaS. So it's industry specific software, um, and have just deep Experience and network in the space, which was exactly what we were looking for, um, to sort of lock arms for somebody who would be kind of down in the trenches with us.

AI assessment note: “We spun out pod play as a standalone entity, uh, in August”

Q So Ben, sorry, what does a launch partner mean? What does that mean? Like, are they one of your first customers and are you charging them by number of course or number of people or how do you bill?

A A lighthouse client. We are charging on kind of a per court basis. That's the kind of primary primary model. Um, uh, we have different tiers of the offering. They have kind of a software on the offering. You have software plus hardware, and then a subset of our clients are doing autonomous mode, which also includes You know, is doing the full ping pod model, which includes door access, includes security cameras, includes monitoring by a team in the Philippines. So that's a kind of a, a different tier of, of the offering. But all of these are priced on a, a kind of per quart basis, roughly. Uh, you end up with a SaaS fee, so it's not a transaction based model. You're, we're getting monthly SaaS fees. I know you're always interested in numbers, um, just to kind of put some numbers Around the business, we are kind of approaching three million in, in contracted ARR. We have a little over 200 locations signed up on the platform. So, you know, these are sitting around between 10 and 15, um, per client. Um, again, there's a range. The software-only clients are kind of, you know, generally in the sort of two to six range, and then some of the kind of hardware-enabled clients, which is, let's say, 60% plus are in the hardware-enabled tiers. For us, are those ACBs tend to be, um, a bit higher.

AI assessment note: “A lighthouse client. We are charging on kind of a per court basis.”

Q All right. Two more here. Pickleball is the fastest growing sport in the world. Many people would say this, but a lot of clubs are losing a bunch of money on real estate. How do your customers actually make the math work without charging a hundred bucks an hour?

A You do have to get the real estate. You have to get the real estate, right? Um, we're playing a part in that, right? So we, um, Some of the clubs that we're supporting are doing less from kind of a staffing standpoint, uh, because they're working with pod play. Uh, I think the other aspect is working on kind of the revenue side. So some of the features that we offer, like kind of the, the videos and replays functionality, those can be monetized. Uh, they can be monetized with sponsors. So we always look at, you know, we want to say, we want to compete on ROI, not price. Um, and kind of that ROI, the components of that is like, can we enable new lines of revenue? For a club? Can we kind of reduce costs through kind of reducing kind of like labor overhead and introducing efficiencies? And then can we improve the user experience? We do think that kind of the best clubs are going to win based on user experience. I think in the early days of pickleball was enough to just have your doors open was a competitive advantage because, you know, the demand was so far exceeding to the supply. But as those balance, uh, we do think that the, the best clubs are going to win on kind of user experience and, and community over time. And if, as You know, the more we can kind of enable that, the more we're going to enable those clubs to be profitable.

AI assessment note: “reduce costs through kind of reducing kind of like labor overhead and introducing efficiencies”

Q Well, what does that mean, though? I mean, if you're, are you charging 60 bucks an hour, 70% utilization, so you're doing a 100,000 bucks a year in revenue, or what was it? I know you maybe feel small now, but I'm curious how it started.

A Yeah, no, no. Pricing is anywhere from, call it, 20 to 50 dollars per hour. You have kind of private pods, which are sort of a private space where you have your own pace, your own space that has kind of one hourly rate. Then you can, uh, get a, a table in a open pod, which is, you know, a shared space where there are kind of other, other people, um, in that space. But, you know, I think the best way we look at kind of what is the average revenue per hour used. Um, which is probably kind of the way you're, you're thinking about this. Um, and that in those days was about like 30 dollars, um, per hour across everything. So, you know, there, there are different ways that you're taking revenue and it's not just a pay to play model. You've got memberships, you have other sorts of things, but we always looked at it from a kind of the, the price volume relationship is how many hours do you have available? How many of those hours get used and how much do you get paid per hour? During that.

AI assessment note: “Pricing is anywhere from, call it, 20 to 50 dollars per hour.”

Q So, hey, quick things. I want to wrap up with you rapid fire. If we can just three questions here. Number one, you're building ghost gyms. I mean, they're sports facilities with zero staff, right? Is this the future of fitness in your opinion? Or are we just sort of willing to kill the social aspect of sports in terms of the admin staff for the sake of higher margins?

A Yeah, I would say you're not getting rid of kind of the, the social aspect of it. You are, um, uh, yeah, and I would not call it kind of a ghost gym, right? So, you know, when we started out, people said, hey, are you going to lose the human touch? Well, the human touch can, isn't necessarily a positive, uh, if the piece that you're, you know, if you have kind of front desk and we, we serve plenty of staff facilities and it It's difficult to kind of like get really good front desk people because the best people kind of move on to something else. So the goal was like, can you kind of free yourself of that constraint and replace that with kind of like walking into the, when you walk into kind of a pod play facility, you should be walking into the future, right? It shouldn't feel like less. It should feel like more. And in addition to that, you're giving people flexibility, you're giving them proximity, all the things that kind of they want in this day and age. So I, and those resources can be redirected towards community building. Right. So it's not like there's, there's nobody on site, but it's just, you know, instead of a front desk, it might be a coach. It might be somebody who's kind of like organizing events and see redirect that energy and resource towards, you know, more valuable activities.

AI assessment note: “you're not getting rid of kind of the, the social aspect of it.”

Q Very cool. Okay, so what, what email do you send your LPs? You say we're shutting down to go build Ping Pong or Ping Pod in, in, in 2019, or what that story looked like?

A There, there are a number of stops in between for both, both Max and I, so that was, that was back in the kind of mid, mid 2000. Um, we both had multiple stops before, um, getting to sort of Ping Pod. I, prior to, to joining Ping Pod, I was running digital fund services at Figure Technologies, which is a big sort of blockchain holding company, actually recently went public. In, um, uh, in Q three, it was September of 20, 25. They went public. It's been a really nice IPO. I was working there with, with Mike Cagney. How I met Max was being a seed investor and in his hedge fund, the one that we just, just talked about.

AI assessment note: “There, there are a number of stops in between for both, both Max and I”

Q Interesting. Okay, well, let's, let's talk about growth. Before the show, you said, Nathan, one of the ways we've really grown, we've really leaned into building in public. What does that mean?

A So, I mean, let's talk about the transition from kind of ping pod to, to pod play, right? So ping pod was the predecessor business. That business now has 20 plus locations. So it's been successful. It's franchising. Um, our ambition was always to build a technology platform that would not just serve ping pod, uh, that would serve other like-minded kind of venue operators. And we saw a gap in the market for sort of modern club management solutions. You want a modern mobile first, really good user experience, uh, and then combining kind of hardware and software. So, uh, enhancing the kind of in-club, um, playing experience. We do things like, like digital scoreboards and video replays. Uh, there's a viral component to kind of video replays that, that goes social.

AI assessment note: “let's talk about the transition from kind of ping pod to, to pod play”

Q about this, I always think about bits and atoms, right? You're building bits, and your business is both of these things, but you have the unique intel to see which courts are making the most revenue per hour, or per day, or whatever, per court time. If you had a bunch of money, unlimited money, I mean, wouldn't you go roll up the best performing physical courts around the world?

A So, I mean, it's an interesting question. It's like, what business do you want to be in, right? So if you're in kind of the physical business, there is, um, I think there is more kind of variability that's associated with that. And so we are excited to be kind of supporting physical businesses. I think it's, uh, I wrote a blog called, you know, building digital tools for physical spaces. Um, you know, would you think that there are particularities and kind of domain expertise that's required in order to kind of build, build, uh, a tech stack? Four physical spaces that's different than, you know, building a purely digital product. So a purely digital product, you know, is attractive to a lot of people because it can sort of, you know, scale to infinity and you sort of, you know, are free of kind of the constraints of time and space. It's also way more competitive, right? So if you're going to, you know, try building another social network, it's very difficult at this point because it is one of the most Attractive models out there. Whereas, um, if you're building for kind of, you know, things that have these physical characteristics, it's not as, it's not as flexible. Um, but if you can build a really valuable product for, for that market, it's incredibly sticky. Uh, and it's incredible, that incredibly valuable to the people who are, are running those businesses. And I've just a…

AI assessment note: “if you're in kind of the physical business, there is, um, I think there is more kind of variability”

Q Okay. I have to ask about this. Don't kill me for this, okay? But my research team basically said, you've talked about this publicly, that there was a black swan event at the hedge fund. Was that the point where you said, ah, there could be more to life than managing money all day long? Can you maybe dive into that a bit?

A We definitely got, it got Took a, a large drawdown, and this was, um, kind of a, a real learning experience for, for Max, uh, and myself. Um, I think you learn a lot about people when you go through kind of adversity together. Right. The way we came through that, I think we treated our investors incredibly well. We got on planes. We went and kind of like talked to everybody about kind of what happened and everybody was very understanding. And a lot of those investors kind of made future bets on us as well, or kind of gave us, uh, another chance. Um, because we, we behaved very well through kind of a period of, of, of adversity. So that was kind of the biggest, biggest learning from that experience is like, how do people comport themselves in, you know, it's easy to kind of be a good person and kind of comport yourself well when everything's going well, but you really learn things about people when you go through adversity together. And I think Max and I were sort of, you know, we'd forged our bond kind of for life during that period of, of adversity. And, um, it's great to kind of be In the same boat together again.

AI assessment note: “Took a, a large drawdown, and this was, um, kind of a, a real learning experience”

Q So So Ben, sorry, just to be clear, when did you write your first line of code for PodPlay that we're looking at on the screen, and then what year was your first paying customer for PodPlay?

A Yeah, so first line of code was, this technology was originally, um, written for PinkPod, right? So the, the software, the hardware, the whole package that we were putting together was the technology that powered PinkPod, right? So first line of code is in, in, in, in, in, first outside customers we took in in the summer of, of, of, of, of, um, that was when we formed PodPlay as a wholly owned subsidiary. Um, you know, we put the whole tech team in there, myself on the, on the business side. Uh, the tech team is led by a guy named Elliot Rifkin, who's one of, one of our co-founders. He's an amazing guy, comes from kind of a, a background in the fit tech world. Uh, he spent the bulk of his career at a digital agency called RGA. Um, his big projects there were the Equinox mobile booking app and the Nike plus running up. Um, so he's built really large scaled Kind of global consumer facing apps and about 90% of our tech team has ties to those two, two projects. So our hiring strategy has been to kind of go pick off all the best engineers, product managers, and designers, um, that Ilya worked with in, in the past and kind of reassembled them as, as a dream team. So yeah, it's way, three, we launch, watch pod play as a wholly owned subsidiary, um, to license the whole tech stack that we built to power pink pod to other, uh, Like-minded operators. And the real catalyst for that was, w…

AI assessment note: “first outside customers we took in in the summer of”