Dear TrainMe employees:
It is with a heavy heart that I write this missive. Effective tomorrow, TrainMe will shut down permanently. Because none of you were technically employees (check your employment agreement, you were all classified as “independent fitness consultants”), we don’t have to comply with the WARN Act and give you 60-day notice of the dissolution of the company. Also, we don’t have to pay you any severance. Finally, we were able to recoup some money by selling our trainer list to all of the big gym chains in the city, so you’re probably all blacklisted and will never work in this town again.
That being said, as founder and CEO, I feel I owe it to you to explain why TrainMe is shutting down in the hopes that 1) this will make the pain of being out of a job and losing all your stock options and benefits seem less painful because of the transparency, and 2) this letter will get picked up by a bunch of tech sites and will help me get a better gig in a few months at another start-up, an accelerator, or a VC fund.
We didn’t understand quickly enough that our business model didn’t work
TrainMe connected personal trainers with clients, but instead of paying per session, TrainMe users paid an all-in monthly fee of $75 for unlimited training sessions. TrainMe also guaranteed its trainers a monthly income of $10,000. Because the going rate for a one-hour private training session in New York is $100, we ran into serious cash flow issues as we didn’t anticipate that people would, you know, actually book training sessions. That meant for every session, we would have to pay a trainer $65, but once each client booked a second appointment for a particular month, we were already in the red.
We thought we had solved this problem by trying to scale quickly, which would have allowed our algorithm to identify scheduling efficiencies, and by acquiring a large amount of out-of-shape customers, who would be so turned off by the intense workouts that they would stop booking sessions, but would forget to cancel their monthly subscription because iTunes makes it nearly impossible to do so.
However, two things happened. First, surprisingly little efficiency was gained by all the data our algorithm was crunching. At best, we could schedule in extra sessions for trainers by assigning them clients all in the same apartment building, thus cutting down on travel time. This would allow the trainers to generate more revenue, but in the end, that didn’t matter because our users paid via subscription and not per session. Oops. When we realized this fundamental flaw in our business model, it was too late to pivot because our cash had run out, and we didn’t have time to upgrade our outsourced engineering team. Speaking of cash…
We ran out of money
Yes, that’s a common refrain among reasons for why a startup goes under, but in our case, we had a spectacular burn rate of $3 m per day due to our business model.
We also used up too much money to support our expansion. We had raised an immense Series A round of $35 m, followed by enthusiastic B, C, D, E, and F rounds over the last six months, but the next round of funding hit a snag when our lawyers couldn’t find the template for a Series G agreement. The massive find-replace based off of the Series F agreement would have worked, but our investors got impatient and walked. That money would have probably saved the company and acted as a bridge to a Series K (we would have skipped Series H through J), but I also have to admit that our spending, which some would call “outlandish” probably did us in months ago.
Yes, it was a mistake to take a 40-year sublease of an old factory from WeWork, especially because we didn’t even get the free beer that the other WeWork tenants get, and yes, it was a mistake to cover all health care costs of our independent fitness consultants, especially after my last Medium post lauding our new benefits had the unexpected effect of increasing applications 1000-fold, which inundated our outsourced recruiting department and prevented us from hiring anyone for the past nine months.
would I do anything differently next time? Yes, I would pay myself more money instead of doting out crazy perks. Do you know how much take-home pay I’ve had over the past few years? I was basically making minimum wage, hoping that the 16% of the company I managed to hold on to after taking on investors would eventually turn into WhatsApp-level money. Did you really need free healthcare or seasonal microbrews in the break room? No. But I needed a place to live that was not half of a closet containing only an air mattress 10 minutes from the nearest bus stop.
The last 31 months have certainly been a roller coaster ride, but I am so proud of all of the work you put in. We helped so many people get in shape cheaply while at the same time helping trainers leverage their personal brands through our platform. When I finally hit it big and sell something for tres commas, I won’t forget about all of you who helped get me there. First round of drinks is on me.