Trend Following in Consumer Wellness

9 key ways the world of the wellness-driven consumer is evolving.

We are living through a transformational cultural unbundling of consumer preferences driven by the rise of the wellness-driven consumer. The wellness-driven consumer is more informed and more principled than ever before and is increasingly seeking to engage with products and activities that integrate and elevate the experiences of work, health, and community.

Photo by Plush Design Studio on Unsplash

This shift has — and will continue to have — a profound shift on the global economy and on the way early stage companies are built and funded.

It is also such a dynamic, organic space crossing so many different industries and demographic boundaries that trying to understand it from a top down perspective with too many preconceived categorizations is nearly impossible.

Instead, I’ve tried to take more of a bottoms us “trend following” approach…deeply understanding a few key catalysts (people, behaviors, companies, etc.) that are driving an outsize change around how, what, and where consumers are engaging with wellness-centered lifestyles and hoping that those guide me towards more interesting people to work with and companies to invest in.

Here are 9 of the major waves I’ve been following closely.


1. Wellness Education at Scale

A day before Lambda School announced its large Series B funding round, I wrote about building the “Lambda School for Personal Wellness”, based on the idea that improved wellness has a strong impact on one’s long term earnings potential. While the tie between better health and career success is clear, I believe the impact of quality education and behavioral change at scale would blow us away in terms of it ability to drive increased collective productivity and, as a result, collective quality of life.

Within the wellness world, there are many forms an educator at scale could take but my guess is that companies will find success by bundling the product elements that have made so many digital fitness and wellness communities sticky and successful with an aligned business model that allows for scale beyond the 1% to close the massive impact gap that exists in the market today.


2. The Digitally Native Holding Company

Companies that own the relationship with their audiences by developing effective “audience loops” — scalable ways to engage customers via direct conversation and real-time demand identification that drives nimble distribution — have the potential to grow faster than ever from single product companies to Digitally Native Holding Companies capable of delivering a wide range of products and experiences to a core set of customers.

This is true for both digital and physical product companies and my expectation is that we will see a faster pace of new product development and vertical integration from early stage companies that find product market fit with a targeted customer segment as they prioritize selling new products to that core segment over scaling a single product to new consumer groups.


3. BIG Subscription

While the section above is mainly about startups expanding their product suites early in the company lifecycle to capture a bigger share of wallet, Lululemon seems to be taking a similar approach — going deeper with its core customers through a subscription model test after years of outward expansion to capture a broader set of demographic segments.

howardlindzon made the very interesting prediction that Lululemon or Nikewill buy Peloton during 2019.

I think that is entirely possible but believe that the M&A aggressiveness Lululemon shows will be largely dependent on the success (or failure) of their subscription experiment as they roll it out to a broader audience.

If the subscription model has legs, it will be a strong indication that Lululemon’s ownership of the customer is strong enough that they can push through the product they want on their terms — without having to resort to an 11-figure M&A deal — and may even spur them to build out their own digital products.

If the subscription model is less successful, they’ll be forced into a more defensive position as it will indicate less of a stranglehold on the customer wallet.

Companies like Nike, Adidas, and others across the apparel, equipment, and wellness facility markets will take a similar approach…test out new business models and customer engagement strategies, then resort to aggressive M&A if those don’t work to buy direct customer interaction points if (more likely when) those fail.


4. Substance-Backed Influencers

In The Atlantic, Taylor Lorenz wrote a piece about the Wild West that the influencer market has become…especially in categories where those influencers are paid per post and let brands dictate their work.

On the other hand, many wellness-related influencers have done an incredible job of “leveraging followers as low-cost distribution to launch their own products and services” (as Brianne Kimmel put it in our Twitter discussion). People like Kayla Itsines (Sweat With Kayla) and Andy Puddicome (Headspace) are examples at the high end of the market.

There is also an exciting long-tail, micro-influencer opportunity to help coaches, instructors, and trainers “scale their time” by providing them tools to engage, grow, and monetize their client-base and gain control over their business and the impact of companies building in this space will continue to grow in 2019.


5. Boutique Fitness 2.0

The boutique fitness segment has experienced massive growth over the last decade and with the maturity of the market we are starting to see significant consolidation — both with the studios themselves being rolled up by players like Xponential Fitness and the increasing speed of M&A on the “picks and shovels” side of the market with the recent Mindbody acquisition by Vista and ABC Financial’s acquisition of Brazilian market leader Evolution W12.

We are also starting to get indications that increasing competition from digital players and direct competitors may be slowing some of the growth for market leaders like Soul Cycle.

There are a ton of directions in-person fitness experiences could go — Outdoor is one angle I’ve seen pick up pace, “Talent Platforms” not focused on any one activity type are another. Experiences that stretch beyond the four walls of a facility — wellness-driven travel, for example — is another exciting area. The multi-functional trend which incorporates wellness with work and social life (We Work, The Wing, etc.) should also spawn vertical focused entrants capable of picking off new adjacent segments over time.

Life Time Fitness’ CEO Bahram Akradi recently participated in an interesting interview with Tech Crunch which indicates that forward-thinking incumbents won’t cede ground and may have some built in advantages when it comes to building spaces that allow customers to live a more fully integrated life centered around wellness.


6. Legacy Experience Embedding

While Life Time Fitness, which occupies a slightly higher end of the market, has remained profitable over the years and is still experiencing double digit top line growth, the middle of the gym operator market has fallen out.

The gym operator market has very direct parallels to the retail market where discussion about the implications of Amazon and accelerating Ecommerce growth have been ongoing for at least a decade.

In the same way we have massively overbuilt retail space in the United States, we also have far too many underutilized gym and wellness spaces and there is an opportunity for taste-makers and community builders to scale their impact outside of city centers and into suburban and rural areas seeking in person community that is sorely lacking.

The model here would be similar to what b8ta has done with Lowe’s or…given that the instructors themselves are often the product that gets customers hooked and keeps them coming back, maybe there are some learnings to be drawn from the way a company like Faire has scaled its impact on Main St. America in such a short period of time.


7 . Internationalization

In my recent post about “Investing in Bien-Être”, I wrote that global distribution platforms, converging consumer tastes, more efficient business models, and emerging technologies are breaking down many of the geographic barriers to building passionate communities and as a result companies are being built and scaled around the world to capture value from this dynamic market.

This is a trend that will surely continue with content-related companies support different languages or cultures from the outset and a new group of companies springing up to support companies looking to go global with physical products or digital experiences.

Given my role as an investor based in Paris aiming to help companies make the Europe to USA jump (and vice versa), I’m particularly interested in this trend and will be following closely.


8. Stress and Sleep

Two books — Why We Sleep and The Upside of Stress — seemed to capture the attention of many influential technologists over the past year, which has driven a lot of conversation (within a niche community of investors and founders) around the opportunity for companies to improve our relationship to sleep and stress. I’m fascinated by the interaction of all of these core behaviors — sleep, exercise, proper nutrition, mental health, etc. — and am always trying to figure out (for myself and at scale) which are most impactful as a starting point for better health.

On that topic, my friend David Vandegrift made a great point…

…although the fact that we’ve yet to see the “Headspace for Sleep” makes me think we’ll see a lot of company formation here in the coming years.

One prediction I will make here is that we will see a lot of companies in upcoming YCombinator classes tackling these areas 🙂


9. The Digital Practice

Today, 64% of Americans want to lower healthcare costs but 80% don’t meet minimum exercise requirements. This inactivity costs the US economy nearly $30b per year in medical expenses and lost productivity. Globally, the figure is a staggering $70b. Similar figures can be pulled for nutrition, sleep, and other parts of the wellness puzzle.

It is clear that the traditional health care system is inadequate…that’s not a controversial insight to anyone.

This inadequacy is starting to be met more and more by entrepreneurs building “digital practices” that, while often still loosely tied to the existing system, are building experiences that will allow them to scale their impact beyond the limitations of the current paradigm.

Mental health seems to be the place many founders are starting but I’m also very interested in digital practices that leverage other behaviors or solutions (maybe around nutrition, fitness, relationships) as their keystone pivot point and grow from there.


Those are 9 of the major things I’ll be following closely over the coming months and believe will make significant impact on the way wellness-driven consumers live their lives…there are many more I’ve missed here to be sure.

If there is anything you’re working on or seeing that aligns with these 9 areas or that I missed and should be keeping an eye on, let me know on Twitter, in the comments, or via email (brett [at] technexus.com).

Building Lambda School for Personal Wellness

Photo by Geert Pieters on Unsplash

One of the many echo chambers my Twitter account seems to be a part of is the Lambda School echo chamber. I see multiple retweets every week from people I follow about the impact the company is having on its students and, by extension, their families and in some cases entire communities.

Lambda School is a 30 week, immersive program that gives students the tools and training needed to launch a new career from the comfort of their own home. Today, they focus on areas like software development, data science, and UX design and provide their student with:

  • Live classes from anywhere
  • World-class instructional staff
  • No cost until the student has completed the program and is employed

Pretty straightforward and at first glance, it is easy to bucket the company as another coding bootcamp with an income share agreement attached.

But the company’s community, scope of content, level of instruction, and reputation among employers, coupled with their unique business model that allows them to scale their impact to traditionally underserved groups in an aligned fashion have combined to create a virtuous cycle that has helped them attract strong backers and drive real outcomes that (based on my limited knowledge of competitive offerings) seem quite impressive.

While it is clear that more professions could benefit from having a Lambda School-esque company (or Lambda School itself) helping to build up the next generation of talent, I started thinking about other non-job skill pursuits in life that have a material impact on long term financial outcomes and could benefit from “Lambda School for X”.

Essentially, the goal would be to target areas can you help a large number of people build new skills and behaviors that are economically valuable by bundling community, content, and personalized instruction over an extended period of time and layer on a business model that allows you to impact people across the economic spectrum by generating revenue in a way that is aligned with the student’s success.

The first place my mind went is an area I spend a lot of time thinking about — Personal Wellness.

There are a number of studies that indicate the impact more exercise, better sleep, proper nutrition, and better mental health have on an individual’s long term earning potential and my anecdotal experience suggests that I am contributing most towards my own long term economic impact when I am healthiest and most active. I’d assume this is the case for most people.

From one such report from IZA World of Labor:

From the findings presented, the evidence for positive labor market effects of sports and exercise is very strong, especially for earnings. Earnings effects range from about 4% to 17%. There is also strong evidence that the positive effects of sports and exercise on human capital begin with children and adolescents, as measured by their cognitive and non-cognitive skills. These additional skills reap returns later in life.


This is just for fitness and physical activity. If you were able to sample individuals “performing” well through proactive behavioral alterations across a broader set of pursuits that fall under personal wellness (relationships, nutrition, mental health, etc.) I’d imagine the impact on long-term earnings would be even greater. Certainly not $50k income increase after 30 weeks like with Lambda School but potentially impactful nonetheless.

There are a ton of challenges to making this a reality…one of which is the reason I put “performing” inside quotations in the paragraph above. It is hard enough to determine what success looks like for an individual’s wellness journey and tying that to potential success in a work environment is even more challenging.

The bearing of one’s ability to run a fast 5k on their ability to make a sale or write marketing copy is nowhere near as straight as the line a potential employer can draw between a person’s ability to create an iOS app during a program like Lambda School and the likelihood that they will be able to do the same at a company.

This is also an issue as it relates to the perception individual equity/revenue share agreements have amongst the general population. It is easier to get over that perception if you can clearly point to a large salary increase 6 months down the line through the acquisition of a skill that is well understood (both by the public and by employers) to be highly valuable, like software development.

On top of all of this, direct health data would be a total no-go (as it should be) for any decisions made on one’s employment by potential or current employers.

Significant challenges, certainly. But not total roadblocks, especially when considering the massive impact gap that exists for wellness-driven consumers and data suggesting that closing that impact gap could have six or seven figure impact on long-term earnings for a huge segment of the population.

As with any “this for that” company idea, copying another model wholesale is likely less impactful than starting from the ground truth principles that have enabled that model’s success and reasoning to a place that will allow you to be most impactful to your target user given the constraints you face.

In the case of Lambda School, the core edge they now possess is the Brand they have built as a result of the virtuous cycle I mentioned above. That virtuous cycle starts with outstanding instructors creating compelling content and matches that with motivated individuals that can use that content and the community formed around it to level up meaningfully. This attracts employers, which in turn attracts more compelling candidates and keeps the flywheel spinning.

The idea of brand association as a major influencing factor of long term success is well understood — Harvard and Stanford in education, Google and YCombinator in technology, GE at the height of the Jack Welch era.

If “brand is the distribution of likely outcomes that you can expect from a person”, being associated with Lambda School suggests that the odds of individual’s ability to contribute positively to a technology company is higher than if they had gone to a competing institution.

This then suggests that creating the optimal distribution of outcomes for the “Lambda School for Personal Wellness” would entail the following elements:

  1. A data driven, empirical story around the influence of improved wellness on earnings (to attract students) and on workplace impact (to attract employers)
  2. Instructor-driven content and digital tools focused on education and community that combine an intensive and personalized program (similar to Lambda School’s 30 week courses) with an ongoing, possibly life-long, program that ensures “brand maintenance”
  3. A business model that aligns you with not only consumers who can already afford gym memberships, digital subscriptions, and Whole Foods trips but with the mass market of consumers that have never been given the tools and frameworks to meaningfully incorporate wellness into their lives.

One interesting concept that could be a step in the right direction is the idea of a personal board of directors.

Applying the personal board of directors construct to the proposed model I’ve discussed, each student could find themselves interacting in a highly personalized program with multiple coaches empowered with more effective tools to engage the students at scale and over time across multiple disciplines (again, areas like fitness, mental health, nutrition, learning frameworks, relationships, etc.).

As relationships build, coaches and other community members (who would have hopefully leveraged the program to find personal and professional success) would join an individual’s personal board of directors and gain a formal share of future earnings with some kind of vesting or performance-based caveats baked in.

This community of empowered, intentional, and long-term oriented individuals that go on to make demonstrable impacts on the places they work and the communities they serve would become the core asset upon which the flywheel would spin, attracting all of the other pieces at an accelerating rate.

I’ll admit that it seems far less of a slam dunk business model and sellable ROI to students, instructors, and employers than what Lambda School has done…and this whole post is the result of a couple days of brainstorming 🙂

The reality, however, is that we face a massive impact gap between the types of tools, information, and technologies that exist and the number of people able to harness them to to improve their health and wellness in ways that drive long term improvement in the lives of them and those around them.

While closing that impact gap may come with uncomfortable criticisms rooted in perception of things like income share agreements (which are often rightly criticized) and a leap of faith to move away from well-understood business models that have been so effective for so many companies in the wellness market, the amount of value waiting to be unlocked is massive.


Get in Touch!

As an investor focused on companies that elevate human well-being performance, experience, and opportunity, I’d love to work with more companies closing the health and wellness impact gap…whether it looks like the model described above or not. If you’re building a company in the space, you can get in touch with me via email (brett [at] technexus.com) or on Twitter.

Investing in Bien-Être

Why there is a massive opportunity for next generation companies to build around the wellness-driven consumer.

Photo by Meghan Holmes on Unsplash

We are living through a transformational cultural unbundling of consumer preferences in personal and professional contexts.

From:
One-size fits all brands, media, and retailers leveraging economies of scale for mass market exploitation.

To:
Global networks of niches and tastemaker-driven communities redefining the customer experience and creating entirely new systems of meaning for consumers.

This new era — centered around the wellness-driven consumer is fundamentally reshaping and expanding addressable markets, creating massive opportunities for emerging companies building communities and experiences that improve human health, happiness, and opportunity by reshaping the way we live, make, move, and improve.

The wellness-driven consumer is more informed, more principled, and in search of more lifestyle control than ever before and the impact this is having on the global economy is already well underway.

  • Wellness-related spend now accounts for over 5% of global economic activity and is growing at almost 2x the rate of the broader economy.
  • Americans spent $19bn on gym memberships last year — and a further $33bn on sports equipment.
  • 90% of Americans place a priority on buying things that reflect their values.
  • Over half of Millennial women are working on some sort of side hustle.

The list of stats confirming the scope and scale of this shift could go on forever and touches people across age groups, geographies, and socioeconomic lines.

With global distribution platforms, converging consumer tastes, more efficient business models, and emerging technologies breaking down many of the geographic barriers to building passionate communities, companies are being built and scaled around the world to capture value from this dynamic market.

While this represents just a small subset of the companies serving the wellness-driven consumer, it is clear that global-scale is increasingly possible and necessary.

But things are just getting started and there remains a massive impact gap despite increasing consumer spend and a mind-bending amount capital that has gone into companies in this space.

  • 64% of Americans want to lower healthcare costs but 80% don’t meet minimum exercise requirements.
  • This inactivity cost the US economy $28b in medical expenses and lost productivity. Globally, the figure is a staggering $70b.
  • 61% of employees are burned out on the job thanks to a variety of factors.
  • 163m Europeans experienced activity-limiting musculoskeletal pain in the last week.

Again, the stats indicating how far we have to go could stretch for pages.

The speed with which consumer priorities have shifted in the last decade, the room for improvement we have as a global society, and the nascency of enabling elements like ecommerce and machine learning should be enough to get any entrepreneur or investor excited.


About the “Digitally Native Holding Companies” of the future, David Perrell wrote that the winners will be built around audiences, not industries.

The audience that is the wellness-driven consumer is growing in influence and impact across almost every axis imaginable and is changing the way every industry thinks about the way it serves customers and employees.

As the world of venture capital continues to evolve and enters what could be called its 3rd Wave, I believe many of the best emerging firms will be built by backing companies that excel at addressing those audiences and expanding their influence within them in a way that is aligned with the end consumer and that is sustainable.

Like Homebrew’s Hunter Walk says, “your thesis is your portfolio page” and I’ve been lucky over the last couple of years to work with a number of founders, practitioners, investors, corporate executives, and many others who have a passion for the wellness-driven consumer and look forward to doing the same for many years to come.

If you are working on something or investing in companies that improve human health, happiness, or opportunity, I would love to talk. You can reach me at brett@technexus.com or on Twitter at @brettbivens.