The At-Home Fitness Roll-up

In an email exchange the other day, a friend and fellow investor in early stage fitness and sports companies made the comment that the at-home fitness market may be hitting the peak of its “Uber for X” curve — meaning, tons of company formation and an (over)abundance of capital riding a wave of enthusiasm because of the success of one or two key companies (in the case of fitness, Peloton).

As with the Uber for X market trajectory, the idea is that derivative ideas will either fail to take off (Uber for Car Washes…), or if they are attractive enough, be partially eaten up by the bigger players (on demand food delivery, for example).

With the news of Tonal’s Series C funding round *, led by L Catterton, we are starting to see early indications of another parallel between the respective markets pioneered by Uber and Peloton: The Roll-Up.


Roll-ups — or what Bain has called the “Buy and Build” strategy — have become very prominent in traditional private equity and have been employed to extreme success in the SaaS world by firms like Vista and Constellation Software.

via Bain’s 2019 Private Equity Report

The strategy tends to work well when the group of companies being brought together are similar enough that they can benefit from shared, scaled out fixed “infrastructure” across core business functions but are different enough (end customer demographics, positioning/brand, geography, etc.) that they don’t encroach too aggressively on one another.

Recently, the strategy has made its way into the boutique fitness market thanks to Xponential Fitness and, per Heartcore’s Max Niederhofer could have a place in the DTC / DNVB world as well.

Anthony Geisler, CEO of Xponential Fitness, recently explained how this plays itself out in boutique fitness:

The model used to maximise the potential of each brand is actually a very simple one, Geisler maintains. “There are three simple components to all these businesses: the programming, the marketing and advertising, and the sales ‒ closing ratios, sales platforms, sales training. Once those three components are optimised, all we do is continue to deliver a great product and continue to charge for that product. That’s really the business we’re in across all modalities.”

The intersection of these two areas — boutique fitness and direct to consumer — is where the Peloton for X market sits and is why firms like L Catterton seem to be exploring the opportunity to roll up the category, initially with large minority investments in growth stage ventures.

This walk before you run approach seems to mirror the process that led TPG to initially create Xponential Fitness as a standalone company.

While it seems that Peloton has hit escape velocity towards an IPO — and per Pitchbook, L Catterton hasn’t participated in Peloton funding rounds since 2015 — other companies that L Catterton has backed (like Tonal and Hydrow) or that are currently even earlier in their life cycle stand to benefit from the type of shared infrastructure that could be enabled with a roll-up strategy while being left to innovate and provide an elevated customer experience in areas of core differentiation.

These companies are unique in different ways — novel training systems and content, passionate communities, and intelligence related to programming and recommendations are a few areas where these companies can differentiate — but all share similar “fixed” elements of the business that are required to compete in the market long term and which, if left to each company to execute on themselves, can be very capital intensive and require a different skillset. A few example areas:

  • Manufacturing
  • Global Distribution
  • Physical Retail
  • Real Estate
  • Marketing / Advertising

To date, only Peloton has gone down the path of owning all of these functional areas in-house although they’ve only just begun to expand internationally and are in the early days of creating their in-person, boutique training experience.

Building out a centralized platform to go after this opportunity would not come cheap — Peloton is not yet there on $1b in capital raised — and with their first-mover advantage, it is possible they’ve been able to grow more efficiently than those coming after them.

via Pitchbook

A firm like L Catterton certainly has the access to capital needed to go after this opportunity and thanks to the breadth of its current operations, possesses the expertise to call on to build out this platform. And with the scale, growth, and untapped potential of the global fitness market, I’d be surprised if others weren’t considering an aggressive play here as well.


Podcast discovery isn’t a company, maybe “narrative discovery” should be.

Like Hunter Walk — and millions of other people — I love podcasts…and have for the last decade or so. I even hosted a few episodes of my own podcast back in the 2010/11 time frame.

Also like Hunter, I believe that podcast discovery is pretty broken for both people new to the medium and power users like me. Discovery within podcasts I’ve subscribed to is even an issue for me at this point as many now have a back catalog of nearly a decade.

As an example, I spent my ride to the airport this morning looking through old episodes of the Entrepreneurial Thought Leader Series from Stanford to download for my flight. Although I’ve listened to a number of these episodes over the years, I’ve never gone back through to the beginning to fully catch up on what I missed, nor should I have to.

A halfway decent discovery engine would know that since I subscribe to the ETL series, follow @Ev on Twitter, and have a professional interest in the business of podcasting (via social engagement, email subscriptions, etc.) I would be interested in hearing Ev Williams get interviewed about Odeo in 2005 (!) when podcasting was in its “pre-Geocities” phase.

Instead, I had to scroll back through hundreds of past episodes to find the interview, which I highly recommend.

Podcasts aren’t alone in this. Creative forms of content discovery are in short supply across the web. So while “podcast discovery isn’t a company”, I’ve often wondered if narrative discovery could or should be.

Here’s what I mean.

Today, most of what we consume about a historical period or event is wrapped together in relatively precise formats and generally consumed via a single type of media — think a Michael Lewis book or Dan Carlin’s Hardcore History (to bring it back to podcasts).

And while some larger events have seemingly been analyzed from every angle (financial crises, wars, political campaigns), there remain thousands of alternative storylines within each of those sweeping periods that are under-documented. Sometimes it is due to lack of broad based commercial viability of a story, other times it is a matter of “winners writing history”, and in many cases (especially as we go further back in time) there no longer exists enough information to fully document and convey the happenings within one of these micro-narratives.

That has changed with events unfolding during the internet era, as the amount of long tail of content — blog posts, audio recordings, videos, newspaper articles, social posts, etc. — has truly exploded and the “definitive” account of something can be more personalized than ever.

What I’ve wondered is if there a market for a service that combines web-scale content collection and indexing with human curation to build out personalized event, period, or even concept focused narratives that exist on the spectrum somewhere in between the well polished book or documentary on one side and a random set of Google and Wikipedia searches on the other and are delivered in a multimedia format.

My trip back through the archives of the ETL podcast series prompted a few storylines about the technology industry that I’d love to receive a loosely structured digital dossier — full of videos, interviews, blog posts, and audio recordings — about. A few examples are the history of payments on the Internet, Silicon Valley during the financial crisis, the rise of the Chinese internet in the aughts, and the clean-tech bubble.

There are also themes related to sports, music, health, and travel where I’m not necessarily looking for a singular definitive account, but instead just want to be pointed in the right direction on my “random walk” so I can start connecting my own dots.

As you may be able to tell, I don’t have a fully developed point of view about how this would be productized, what curation would look like, how it would be personalized, or even if there is a viable business model in it.

But given the amount of high quality “dark matter” sitting quietly and under appreciated in blog, podcast, and video archives around the web, it seems like it could be the type of “shadow market” capable of supporting a successful company in the hands of the right team.

Creative Compounding

As USV’s Albert Wenger tweeted heading into 2019, there is a lot of pessimism in our public discourse with much of the ire directly or indirectly pointed at technology as both a concept and as an industry.

While there is undoubtedly strong justification for concern and – in many cases – outrage, I am fortunate as an early stage investor to have the opportunity to meet daily with founders tackling high impact problems whose default worldview edges strongly to the side of optimism. This has given me a glance at many things happening in the world of technology that are worth being excited about.

One thing that has me extremely optimistic is the continued level of creative compounding in “offline activities” that has been and will continue to be enabled by the internet — and specifically by some of the social platforms that have been (rightfully) on the receiving end of so much ire.

My favorite example of this as a sports fan and someone who grew up as an athlete in a world where the internet was just starting to impact how we trained, played, and shared is what I see daily on the Overtime Twitter and Instagram feeds.

For the uninitiated, Overtime is essentially a mobile sports content network focused primarily on high school and college athletes — many of whom already have hundreds of thousands of followers and are smarter than ever about how they build their own brands. Young, digitally native fans flock to the platform to become “early adopters” of these athletes who are on their way to becoming professional players within the next couple of years.

What is most striking to me about Overtime is how it has become an engine of creativity for young athletes looking to make a name for themselves. The tweet below sums it up.

To bring it back to Wenger — who wrote the highly recommended World After Capital — many things that used to be scarce have now become abundant. In the case of Overtime, young athletes 25 years ago had very limited access to the exploits of top NBA and college players, let alone their peers. They’d be able to watch ESPN to catch a few highlights but the long tail of truly interesting stuff happening in small college and high school gyms across the country was totally under the surface.

Now, players can derive essentially unlimited inspiration for dunks, passes, and celebrations by spending 5 minutes on Instagram. The internet has unlocked the ability to access all of that long tail content, making our attention the scarce resource.

Effectively curating that firehose of information to help users spend their attention in positive ways has become an almost unsolvable challenge for many of the broad-based networks on the internet. As a result, we are starting to see the pendulum swing towards networks of niches and tastemaker-driven communities where masterful curation is a core part of the experience.

Overtime is one of these tastemaker-driven communities that has figured out how to build passion among its base and kickstart a segment of “creators” whose output compounds in quality over time thanks to continued feedback and competition from one another and from the millions of consumers their incredible feats of athleticism reach every day and it is one (of many!) things that has me excited about what technology is enabling us to accomplish.

Request for Product: “TalkThrough”

I find myself walking by myself a lot — taking my dog out multiple times per day, 40 minute walk to work a couple of times per week — and have increasingly been trying to use those free moments for productive reflection, planning, and thinking about problems I may be trying to tackle either professionally or personally.

What I am yet to find is a handsfree (or mostly handsfree) solution where I can leave my phone in my pocket and “talk through” whatever it is that is on my mind through a set of pre-structured questions that are either recurring (ex. 5 daily questions reflecting on the day before) or ad hoc (ex. as a founder, creating a list of common investor objections that I can vocally bat around with myself).

I’d be able to move through the various questions (and maybe even move to different question sets entirely) only using voice commands (“next question”) and the notes would then be transcribed, indexed, and made available in whatever my personal system of record is (I use Bear App).

There are a lot of things that almost work. Evernote supports transcription pretty well. Companies like Otter.ai have built great voice note taking apps. You can even create workaround with products like VideoAsk from Typeform. And based on this tweet, it does seem like there are people already working on this idea.

Everything I’ve seen still requires a decent amount of tapping on my screen, something I’d prefer to stay away from in moments where I am trying to think deeply on a subject. So this initial application or workflow to may lend itself to being built primarily on top of AirPods.

On Product Hunt, I saw an interesting comment from the creator of Listen App who noted that “podcasts are tapping into the last frontier of human attention: multi-tasking/on-the-go attention (70% are commuting)”.

What I’m looking for is something to tap into that same attention gap for moments where I am looking to “lean forward” (create content, think deeply, etc.) instead of “leaning back”, which I already do plenty of via my addiction to podcasts.

If you are building anything in this space — or even tangentially related — get in touch, I’d love to learn more!

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).

3rd Wave VC — Precision Capital

Photo by Andrea Sonda on Unsplash

Venture capital in its traditional form is an amazing product for the right companies (and a great career path for the right investors). This is proven out in the data, as the industry’s impact punches above its weight relative to how much capital is deployed in the sector. A 2015 Stanford study found that VC-backed companies were responsible for 57% of the market capitalization of all US companies founded since 1979.

Over the last decade, institutional investors and corporations deploying capital have looked to the technology sector for growth that they’ve struggled to find elsewhere and at the same time, as the common trope goes, every company new and old is now a tech company.

This expansion of interest from investors that back VC funds and the seemingly consensus perception of an increasing market into which VC dollars can be deployed has led to the record influx of capital into VC firms that anyone reading is likely aware of.

But venture capital can be a very blunt force tool and one element of the “every company is a tech company” market expansion that many LPs, VC, and founders under-indexed on for a long time was the idea that some of the technology and technology-enabled startups being built would be better served with more targeted financing arrangements more suited to the markets they operate in, the products they are building, and the goals of the founding team — especially at the early stages since the decisions made at the outset around whether to jump on the venture track or not have an outsize impact on the long term arc of a business.

The ecosystem’s need for more aligned capital options is starting to be met by a new wave of firms, investing what I will call Precision Capital.

Before jumping into Precision Capital, I’ll quickly comment on the notion of 3rd Wave referenced in the title. Essentially, I see Precision Capital as an evolution of the early stage venture model building off of the Partner-Driven model pioneered by firms like SV Angel and Floodgate and then off of the Platform model brought to life by First Round and others. I defined those two categories in a Twitter thread on the topic and believe there is a ton of innovation happening within those two segments of the market as well.


Precision Capital

The idea that early stage ventures can and should pursue other forms of financing beyond typical VC is not new.

As CoVenture’s Ali Hamed noted in his recent post about Equity Efficient companies, SaaS loans and venture debt have long been a piece of the capital stack and are becoming more and more prevalent with the growth of SaaS Capital, Lighter Capital, and Clearbanc among others.

These firms are early players in the Precision Capital segment of the market, where firms bring to bear a holistic capital stack tailored to the specific needs of companies in a certain industry or with a certain business model and intend to become a one-stop shop for most or all of a given venture’s capital needs — if not forever, then at least until the company reaches a scale where traditional late stage or public market financing options are available and applicable.

The idea is to give companies the option to get off the VC track or avoid it in the first place while still seeking high growth and global scale (have your cake and eat it too, I guess).

The long term commitment to a specific vertical or type of company in need of new capital solutions allows these firms to establish a unique data set and deep operational capabilities with companies in the space and, over time, pull more and more promising ventures away from the pure-play VC track and into their sphere.

By offering alternative financial products (non dilutive capital, revenue agreements, etc.), the model also has the potential to shift the risk/return curve for LPs looking to access growth in industries where technology is playing a bigger role but who are not interested in the power law dice roll of traditional venture capital or unable to get into top tier firms in the previous categories.

The combination of these elements is what distinguishes Precision Capital from vertical focused venture funds or “quant” oriented VC-track efforts that are actually (very interesting and needed) evolutions of Partner-Driven or Platform Capital models.

To be clear, a lot of this will still look like venture capital in the near term and not all the firms will run the exact same playbook (just like in more traditional VC).

This is because proving out a successful Precision Capital strategy will require firms to first show they possess a traditional VC skillset — sourcing, selecting and supporting great companies — that is supported by a unique structural edge. They will also need to exhibit patience and a repeatable framework to build a long-term data asset that can be used to underpin new financial products.

One exciting example of the Precision Capital model comes from Urban.us, a great firm focused on backing early stage urban technology companies. True to Precision Capital form, Urban.us started off with a small seed stage venture fund before expanding to run an accelerator with Mini, the automaker. The success of these two efforts have given Urban.us the credibility within the markets that matter to them to start branching out and playing a larger role in the non-equity pieces of the capital stack for the companies they work with.

This is done through the recently announced Perl Street, which founder Shaun Abrahamson described in a recent post as:

Exploring the growing universe of non-equity options for startups ways by providing non-dilutive funding to operate fleets of EVs and residential batteries or to find funding for co-living projects. We see a growing list of emerging city assets that could be financed without requiring founders to sell more of their companies.

Other examples include Circle Up (Ryan Caldbeck), a firm whose quantitative approach to CPG investing has already helped a large number of companies take a different approach to growth, and Indie.vc, whose equity model is less dependent on chasing large follow on rounds and generating billion dollar exits.

In addition to these firms and others like them, I believe there are interesting ways for family offices and corporations to run the Precision Capital playbook and will write more about that down the road.


Challenges of Precision Capital

As with any new innovation, Precision Capital has a ton of drawbacks and is worse in a lot of ways relative to more traditional VC funding models.

Even an investor like Bryce Roberts of the aforementioned Indie.vc, a pioneer with an outstanding track record in seed stage investing, lost 80% of his LP base when when he “stuck his neck out” to focus his investing on Indie.vc.

A few major challenges I see:

Infrastructural Inertia — Every few months, I come across a Twitter thread or article lamenting the 2 and 20 VC model…how it can create counterproductive behavior from VCs (grow AUM, collect fees), is a function of lazy thinking from LPs, etc.

What is more likely happening is a process that starts with career risk aversion and lack of incentives to change at the LP level — don’t want to rock the boat too much for one of the smaller asset classes by allocation percentage — and filters down to VCs dependent on that institutional capital deciding to focus their “differentiation” story on how they will deploy the capital instead of fighting battles to change the culture and incentive structure at the LP level.

This creates challenges up and down the capital stack for firms wanting to employ a different model and requires them to do more work both in finding the right LPs and in telling their story once they gain an audience.

Opportunity Size — I recently read two very insightful pieces of writing — one from Ezra Galston of Starting Line VC in his quarterly LP letter (h/t Dave Ambrose) and one from Fred Wilson — that use the frameworks of other top investors to make points about the importance of being able to gain conviction around market opportunities that don’t yet exist — but could and should.

Fred Wilson’s partner, Brad Burnham, calls this “finding the narrow point of the wedge”.

The analogy is trying to hammer a piece of metal into a block of wood. If the metal is large and flat, you can’t do it. But if it is narrow and thin, you can. And, of course, once you get the narrow point of the wedge into the block of wood, you can hammer it all the way in.

Some of the best companies have been built in markets that looked small initially to investors and employees that may have passed on getting involved — there were no predecessors from whom to accurately gauge the size of the opportunity and many missed these opportunities as a result.

Similar blind spots — from both LPs and potential employees needed to build out the Precision Capital — will prove challenging for some early firms to overcome, especially if they are trying to come to market before they have fully proved out their ability to execute on a less complex VC strategy.

Today, it is unclear how many verticals, business models, or industries there are that are:

  1. Meaningfully underserved by the VC model and
  2. Present a large enough financial opportunity for this model to grow beyond just a handful of niche-focused boutique firms and attract real institutional capital.

Operational Complexity — This goes for how the firm is run and for what impact the capital will have on the ventures receiving it.

In addition to building out a team that can operate many elements of the traditional venture model at a high level — again, the idea with Precision Capital is generally that firms are still aiming to back high growth, global scale companies — these firms must attract and retain individuals capable of evaluating new types of risk and deploying capital into that. The uncertainty around what type of profile will best fit in with these firms may may make recruitment a taller task.

Firms must also consider the long term implications of the capital they are providing to ventures and ensure that they are not layering on too much complexity to companies at too early of a stage.

Data will also be crucial in capitalizing on the opportunity, creating another element of complexity that firms need to solve for over time to execute effectively.

Time — I’ve pointed this out a number of times already, but in order to execute this model effectively, firms must “ladder up” over many years, building a reputation with others in the ecosystem and gain trust that they can execute effectively with an new, unproven model.

Urban.us has had to prove their seed stage investment chops in urban tech for the last half decade, Bryce Roberts of Indie.vc has almost a 20 year track record of early stage success, and CircleUp is sitting on heaps of data that had to be meticulously gathered and analyzed over the years to make their algorithmic models what they are today.

So another characteristic of successful managers under this model will likely be patience around firm growth, as many strategies will be quite capital constrained thanks to vertical focus areas & time needed to fully capture datasets to allow for useful new capital solutions.

As Chris Douvos put it in a recent Twitter conversation:

The last true risk premium is time. All else has been arb’d away.

To twist the famous words of Andy Grove, “only the patient survive” in the early stage investing market and those providing Precision Capital are in the exact same boat.


Get in Touch!

I am an early stage venture investor based in Paris with a passion for working with companies that elevate human well-being, performance, experience, and opportunity. For the last 3 years, I have been on the team at TechNexus, a Chicago-based firm that invests at the intersection of the venture and enterprise ecosystems.

You can email me at brett [at] technexus.com or find me on Twitter.

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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.