Month: March 2021

Back in the halcyon days of 2019, we piloted a new format for Extra Crunch we dubbed the EC-1. Modeled after the Form S-1 filing that late-stage startups submit to the SEC as part of the IPO process, EC-1s are authoritative, deep analyses into growth-stage startups. We profiled and analyzed a number of companies like Patreon, Niantic, Roblox, Kobalt and Unity, looking at everything from their product design, to their customer relations, to their events strategy and to the changing economics of music licensing.

They were very popular and we had huge ambitions for the series, but then 2020 hit, COVID-19 swept in, and suddenly our ability to travel and meet with a dozen executives in-person at a company was curtailed (there was also just a wee bit of breaking news to cover as well!) We didn’t want to cut back on quality, so we bided our time.

Well, with some level of normality finally kicking in, we’re excited to restart this series in 2021. We have nearly ten EC-1s in the works right now, and I am excited to introduce our first EC-1 profile of this new batch — a company that has truly skyrocketed amidst that dark pandemic year.

Tonal is a unique entrant in the upscale fitness market, using a proprietary blend of hardware, software, and content to bring comprehensive strength training to the home in as small and efficient of a package as possible. Sales have zoomed the past year as gyms shut down worldwide, and the company has been pelted by interest from both customers and investors.

That success today, though, occludes a lengthy process of iteration over years against the droning negativity of most VCs who never expected a corporate enterprise infrastructure founder to be capable of building a popular consumer hardware device. Tonal is not just a story of willpower, but also an example of how much effort it takes to build a major startup, from product design and launch strategy to careful marketing and building the moats to protect itself from competition in a ferocious market.

TechCrunch’s writer and analyst for this EC-1 is JP Mangalindan. Mangalindan has been covering technology for years now, previously serving as chief tech correspondent for our corporate sister site Yahoo Finance and also publishing across a plethora of other tech publications. He brings a wealth of insight not just into startups and Tonal, but the wider fitness market as well. The lead editor for this package was Danny Crichton, the copyeditor was Richard Dal Porto, and illustrations were created by Nigel Sussman.

Tonal had no say in the content of this analysis and did not get advanced access to it. Mangalindan has no financial ties to Tonal or other conflicts of interest to disclose.

The Tonal EC-1 is comprised of four main articles representing about 10,600 words and a reading time of about 43 minutes. Let’s get started:

• Part 1: Origin Story “How a homegrown experiment became one of the fastest-growing companies in fitness tech” (3,200 words / 13 minutes) — we start with the history of Tonal, the multi-year effort to raise VC funds and iterate on a product while reinventing the definition of strength-training equipment
• Part 2: Product launch “Millions of dollars and 3.5 years, and it all came down to this” (2,800 words / 11 minutes) — explores the tradeoffs and tactics Tonal used to launch its product, a launch that as a hardware company, it couldn’t afford to mess up
• Part 3: Community building “Building online communities for fun, profit and product” (2,200 words / 9 minutes) — analyzes Tonal’s early forays into community building and how it uses community to improve its products while also retaining customers for its critical subscription business
• Part 4: Competitive landscape and future “ Can Tonal become the luxury fitness market champion?” (2,400 words / 10 minutes) — evaluates the keen competition confronting Tonal in this market, and analyzes the company’s next steps to continue its successful growth

We’re always iterating on the EC-1 format. If you have questions, comments, or ideas, please send an email to TechCrunch managing editor Danny Crichton at danny@techcrunch.com.

Fitness is about resistance — running against the wind, firing up muscles against the dead gravity of weights, fortifying the mind against that nagging feeling that a park bench and a scoop of ice cream would probably be just a bit more enjoyable.

For Tonal, resistance isn’t just a value proposition, it’s the very ingredient that conditioned this startup to become one of the darlings of the fitness tech world.

The numbers speak for themselves. The company has raised about $200 million to date from venture capitalists and is becoming a household name with a $2,995 wall-mounted device that employs a digital weight system that can emulate various traditional gym stations. Since Tonal launched in August 2018, the company has carved out a reputation among fitness enthusiasts seeking a strength-training solution at home that saves on space without compromising serious weight-lifting capabilities.

As at-home fitness sales have boomed during the pandemic, Tonal equipment has been one of the beneficiaries, seeing its sales surge 800% from December 2019 to December 2020. The company also announced a partnership with Nordstrom this month which will place 50-square-foot sales stations in the women’s activewear department of at least 40 Nordstrom stores across America, bringing the total number of Tonal physical locations to 60 by the end of 2021.

Like all great athletes though, Tonal’s visible victories belie its massive exertion against the resistance of the world to innovation. Aly Orady, the company’s founder and CEO, had to overcome his own burnout and weight gain while kindling the energy to strike his own path. The company that would become Tonal had to fight through multiple VC rounds of skeptical investors ready to say that two-letter word that stops all progress.

It’s that resistance and its ability to overcome barriers that makes understanding Tonal’s story so compelling.

A founder lifting the weight of the past

The morning after Christmas in 2013, Orady woke up feeling downright abysmal. Over the past 17 years or so, he had toiled as an engineer at companies like Samsung, Sun Microsystems, HP and three enterprise startups, work that had taken a heavy toll on him. His corporate exertions had left behind a slew of health problems; he had become grossly overweight and had developed Type II diabetes and sleep apnea.

“It felt like I was heading toward this point of no return, and I just wasn’t going to be able to reclaim my health if I didn’t do something about it,” he recalls.

The only viable path Orady saw to fixing the situation was a major lifestyle change. A few days later after the holidays, he dialed back his hours as a full-time consultant for Samsung’s TV and display division — a role that meant frequent trips to Korea — and embarked on an ambitious workout plan involving four hours of exercise a day six days a week, usually split between mornings and evening, plus intermittent fasting two days a week.

Many mornings, Orady woke up at 6 a.m. and drove to a Gold’s Gym in San Francisco, where he initially hit the elliptical and also went for outdoor bike rides. He scoured the internet and read books about strength training, and the more he worked out, the more he integrated strength training into his six-days-a-week workout schedule until strength training became the core of his routine. Over the course of nine months in 2014, Orady lost a whopping 70 pounds, all while winding down his consulting work with Samsung.

Yet, although he’d already made significant progress getting in shape — and the results truly spoke for themselves — Orady loathed trekking to the gym each day and wished he could do the same workout at home. Perched on a gym bench one day in March 2015, Orady found himself staring at a cable crossover machine, a 5 foot by 3 foot by 7 foot gym mainstay that lets users perform various exercises with removable weight plates.

“I was looking at this thing, and I realized the reason this thing was so big was because it relied on big metal plates and gravity to work,” he explains. “I thought to myself, if I could replace those big metal plates and gravity with electricity, I could shrink it down and create something really small.”

That was his cue. That same month, Orady founded Ripped Labs, a name he would later change to the simpler and catchier moniker, Tonal.

The many reps of product iteration

The same day Orady observed that cable crossover machine, he began brainstorming ways he could bring weight stations into the home while cutting out most of the bulk. Traditional gym stations often use large, unwieldy weight plates to offer enough resistance for strength training. But what if, Orady thought, he could devise a product that swapped out those big metal plates for something smaller and more compact and bundled that technology with intelligent software that tracked a user’s workout?

“I bet if we could make electromagnetics work, it would be completely revolutionary,” says Orady. “It already is the technology that spins the motors in electric cars, propels high-speed trains … but no one had ever used it for this, and the questions started swirling in my head of whether we could use electromagnetics to make a device feel like a real weight machine.” Having received a bachelor’s degree in computer engineering from McMaster University, Orady had studied the theory of electromagnetics, but he had never actually developed electromagnetic devices in his prior work.

Orady ordered a number of parts online to build his first prototype, a rudimentary device strapped to a wooden workbench in his home that had a cable you pulled back and forth. But those first two versions of “digital weights” didn’t work very well — there was too much friction when pulling the cables and not enough magnets to replicate a wide range of weight like traditional gym equipment. The first version contained one magnet and a usable range of 25-40 pounds, while the second prototype used dozens of magnets, which allowed the resistance to be generated by the magnets themselves and not as much from the cables.

After two more iterations, he had managed to create his own kind of electromagnetic technology that created resistance comparable to weights. By then, the prototype had reached a point where he felt the device replicated the feeling of doing some weight station movements like single-arm cable rows and bicep curls.

A marathon of investor meetings

Parallel to working on the prototype that would one day become Tonal, the Ripped Labs founder started an arduous nine-month process of pitching investors. Orady was an enterprise guy with an enterprise rolodex, having worked at three enterprise infrastructure startups and also serving as an advisor at Mayfield Fund for six months in 2013. He pitched his vision of a compact at-home strength-training product, but investors simply scoffed at the idea.

Launching a product is a nonevent for many startups. In software, it’s not uncommon to put together a flimsy working prototype over a couple of hours and publish it immediately to start generating feedback from early users and get that iterative flywheel spinning.

Launching has a very different meaning, though, for hardware. Once that physical product leaves the warehouse, the design team can’t patch the hardware itself. It’s got to work reliably, be easy to use and most importantly, be safe for users straight out of the box. Even more important than readying the product itself is the sales and marketing engine that accompanies a launch. For hardware startups, a mislaunch may well lead straight to bankruptcy as hardware inventory piles up and cash flow becomes constrained. You just can’t get a launch wrong.

In part one of this EC-1, we looked at the three-and-a-half years of Tonal’s origins and how a scrappy entrepreneur in the form of founder and CEO Aly Orady continued to iterate upon prototypes of an all-in-one strength-training device powered by electromagnetics — a technology he had never worked on before. We also saw how he eventually won over several investors including Bolt, Mayfield, Shasta and Sapphire Ventures, who saw the potential in his device once they experienced it for themselves.

Tonal’s individual components were all ready, but how should it bring them together and create a successful launch?

Company building, brand building, launch strategy and marketing tactics are key to the success of most startups — and that’s what this second part of the Tonal EC-1 is all about. We will look at how Tonal’s designers changed the product based on feedback during its beta period. We’ll look at how Tonal’s product focus on strength training forced it to adapt a typical hardware launch strategy to optimize for the consumers it was hoping to target. Finally, we will explore the company’s marketing and launch strategy — and one key and seemingly smart decision at the time that proved to be an early blunder and humbling lesson in hindsight.

Iterating when a build isn’t one click

Unlike, say, productivity software where a user might be logged in for much of a work day spewing out usage data, Tonal is a strength training device, which means that users only use it for a limited period of time a couple of days per week. That made receiving sufficient authentic feedback on early units challenging.

Getting to a point where the prototype was usable and somewhat reflected the final product in its feature set was therefore a lengthy process. Following the small alpha trial in 2016 that Ripped Labs (later renamed Tonal) performed in a San Francisco apartment, the startup began an extensive year-long beta trial in early 2017 that placed prototype devices into 25 homes with at least two people in each home, and the company tracked those users for a year.

Once a fitness tech company like Tonal launches its product, it immediately faces another challenge: how to keep those users engaged. It’s not enough that a customer purchased the device; it’s equally as important to keep them using it over the long term so they continue to pay the monthly subscription fees required for access to classes. In Tonal’s case, recurring revenues generated from those monthly subscription fees are significant, as the startup charges each user $49 per month with a minimum 12-month commitment to start.

To keep their users engaged, at-home fitness companies energize online communities by building Facebook Groups and significant Instagram and Twitter accounts. Since it launched its first bike in 2014, Peloton has catered to its large audience with a robust Facebook group that numbers nearly the population of San Francisco. Likewise, newer entrants such as Mirror and Tempo also developed their Facebook presence with nearly 86,900 and 11,200 followers, respectively.

Tonal is no different. Across social media channels, Tonal currently has over 155,000 followers, with its own private Facebook Group, “Official Tonal Community,” having roughly 12,900 members. At this point in Tonal’s lifespan, the community experience is decent, but more along the lines of Peloton’s engagement three to four years ago.

Yet, while it has pursued a tried-and-true community engagement strategy, Tonal has also had to evolve its tactics as it learns the unique tastes of its strength-training demographic and how they differ from other fitness users. In this third part of the Tonal EC-1, we will look at how the company grew its nascent community, how it shifted its strategy of engaging users, how the team uses community to hone its product, and how the future of Tonal’s community will look like as the company continues its rapid ascent.

A planned community, but what to build?

With its online community, Tonal’s strategy was deliberate and staggered, mirroring the approach it took with its August 2018 launch, in which the startup first launched in the San Francisco Bay Area and expanded to all of California before going nationwide in March 2019.

The startup hired its first community manager, Sarah Johnson, in October 2017 — nearly a year before that public launch. Her initial focus was monitoring users during Tonal’s alpha and beta trials, and she regularly called users to solicit feedback about their experiences working out with the device. Among Johnson’s early observations: Unlike the gym, which inherently has a more physical social element, Tonal users, who may have partners or families, wanted their at-home classes to be the most efficient workout possible in the shortest amount of time.

Over the last three sections of this EC-1, we’ve seen the genesis of Tonal, transforming from a series of prototypes in the mind of CEO and founder Aly Orady into a unique strength-training entrant in the luxury at-home fitness market. We’ve also seen how the company extensively alpha and beta tested its device, designed a launch and marketing strategy, and also cultivated a nascent community to hone the company’s products while engaging customers.

Yet, with Peloton such a dominant force in this market and multiple other fitness upstarts targeting the same affluent customer, there’s a natural question to be asked: Why should any customer ultimately spend upward of $3,000 on a base Tonal device? The answer to that question will determine Tonal’s eventual success, and that’s the theme we will explore in this fourth and final part of the EC-1 as we consider the competitive landscape of this white-hot market.

So what’s the product really like?

While the market is huge and the competitors are hungry, Tonal’s success pivots exclusively on whether the device itself is worth its quite prohibitive price. For me, using Tonal has been largely a positive experience, although it’s worth noting I received my Tonal loaner device within 14 days, far faster than the 10-12 week timeline that many customers have experienced in the pandemic-induced surge. The startup works with a third-party delivery service, which reminds the user the day before via email and also calls 30 minutes ahead of arrival.

Compact as the Tonal device is compared to gym weight stations, it was still a squeeze finding a spot in my crowded 900-square-foot apartment, and using it still requires me to move some dining chairs around to make space for my workout. While this probably won’t be an issue for many Tonal owners who live in larger homes (particularly in the suburbs), I suspect city dwellers may encounter similar challenges as I did.

Cameo, the celebrity video site you’re probably familiar with if you’ve celebrated a birthday in the last three years, announced this morning that it’s raised a $100M Series C. The round, which was led by Jonathan Turner with e.ventures, puts the site’s value at just north of $1 billion.

Cameo has been building a good deal of steam in recent years, but the service is among those that managed to get a major boost amid the pandemic, as celebrities and normals alike suddenly found themselves with a lot more time on their hands.

“The pandemic put extra stress on the already unstable business models supporting talent across sports and entertainment ecosystems,” CEO Steven Galanis said in a Medium post tied to the news. “It catalyzed a massive shift in awareness and widespread adoption of direct-to-fan models, which has, in turn, created a new foundation for fan engagement. We exist in an entirely different world today — one in which talent actually want to connect more deeply with their fans, and fans expect unprecedented access to the talent they admire most. This funding will help us create the access and connections that will define the future of the ‘connection economy’ on a global scale.”

This latest round more than doubles the service’s total funding, bringing it up to $165 million. Google Ventures, Amazon Alexa Fund, UTA, SoftBank Vision Fund 2, Valor Equity Partners and Counterpoint Global (Morgan Stanley) join existing investors, Lightspeed Venture Partners, Kleiner Perkins, The Chernin Group, Origin Venture and Spark Capital. There are also some “talent investors” on board, as well, including skateboarding legend, Tony Hawk. Because, you know, Cameo.

Cameo says some 80% of its standard video requests are booked as gifts, to celebrate things like birthdays. In total, around two million videos have been created through the offering. But the site is looking to grow into additional categories. Last year it added the ability to book celebrities as guests for Zoom video chats (a very pandemic-focused offering).

Some of the funding will go toward ramping up Cameo for Business (C4B), which brings celebrity videos to events and conferences, as well as ads and sales. Effectively, the service works as a pipeline between businesses and famous people. The company will also be expending its international offering, growing beyond the approximately 20% of videos currently purchased outside the U.S.

SpaceX is set to make a change to its Crew Dragon spacecraft for its forthcoming history-making all-civilian launch, currently set for September 15. That Dragon will replace its International Space Station docking mechanism with a transparent dome, through which passengers will be able to take in an awe-inspiring surround panorama of space and the Earth from an orbital perspective.

The glass dome will be at the ‘nose’ of the Dragon capsule, or its topmost point when it’s loaded upright on top of a Falcon 9 rocket readying for launch. There should be space for one passenger to use it at a time, and it’ll be opened up once the spacecraft is safely out of Earth’s atmosphere, exposed by a protective cover that can be flipped back down to protect the observation deck when the spacecraft re-enters on its return trip.

SpaceX CEO Elon Musk called it “the most ‘in space’ you could possibly feel” in a tweet sharing a concept render of the new modification in use. During a press briefing for the upcoming tourist flight, which is called ‘Inspiration4’ and led by billionaire Jared Isaacman, it was described as being similar to the exiting cupola on the International Space Station in terms of the views it affords.

The ISS cupola is an observatory module built by the European Space Agency (ESA) and installed in 2010. Based on these renders from SpaceX, the Dragon version will be a continuous unbroken transparent surface, whereas the ISS cupola is made up of segmented panes separated by support structure, so that could mean Dragon provides a better view.

This modification could pave the way for a more permanent alternate configuration of Dragon, one best-suited for SpaceX’s planned commercial passenger missions, most of which will likely aim to do orbital tours without any actual docking at the ISS. It’s possible the company will make further cabin modifications when the vehicle isn’t configured for crew delivery to the orbital science station.

SpaceX also revealed new details about the Inspiration4 mission today, including its planned launch date of September 15, and a three-day mission flight duration. The remaining two passengers on board the four-person crew were also revealed this morning.

Meet Stockly, a French startup that keeps the inventory of various e-commerce websites in sync. When you see an out-of-stock item on an e-commerce website, chances are you leave that website and try to find the same item on another site.

If you operate an e-commerce website, Stockly lets you sell items even when they’re currently out of stock. The startup automatically finds a third-party Stockly supplier with that specific item.

The order will go through and be sent by that supplier directly. Stockly tells its partners to use neutral packaging so that the end consumer isn’t confused.

This could be particularly useful for small scale e-commerce companies that don’t have a healthy marketplace of third-party retailers. For instance, Amazon can already sell you an out-of-stock item if a supplier has listed that specific item on Amazon’s own marketplace. But that’s not the case for most e-commerce websites.

The main challenge for Stockly is that it has to sort through various catalog formats and match the different inventories of different retailers. It is focusing on clothing items at first. When an order is routed through Stockly, it selects a specific supplier based on different criteria, such as logistics, delivery time and historical data.

So far, Stockly has been working with Galeries Lafayette, Go Sport, Foot Shop and others. The startup has recently raised a $6 million (€5.1 million) funding round from Idinvest Partners, Daphni, Techstars, Checkout.com CEO Guillaume Pousaz and various business angels.

With this funding round, the company plans to expand its team to 20 people, add new clients and iterate on its product.

The autonomous vehicle startup Aurora Innovation said Tuesday it has reached an agreement with Volvo to jointly develop autonomous semi trucks for North America.

The partnership, which the two companies say will span several years and is through Volvo’s Autonomous Solutions unit, will focus on trucks built to operate autonomously on highways between hubs for Volvo customers. The Aurora Driver technology stack – Aurora’s self-driving software, computer and sensor suite – will be integrated into Volvo trucks.

The announcement comes fresh on the heels of the startup’s recent acquisition of Uber’s self-driving subsidiary and a separate deal with Toyota to develop self-driving minivans. Aurora now has partnerships with two of the three largest trucking manufacturers – Paccar and Volvo – that produce and sell nearly 50% of all Class 8 trucks in the country.

“Our previously announced collaborations with partners such as PACCAR will continue in parallel to the collaboration with Volvo,” an Aurora spokesperson told TechCrunch. “As Paccar’s first self-driving technology partner, the unique nature of our partnership enables us to build Paccar’s first redundant truck that will be able to operate without a safety driver, bring it to market first, and deploy it broadly.”

Aurora said its Frequency Modulated Continuous Wave lidar  — through its acquisitions of companies Blackmore and OURS Technology — will be key to solving autonomous long-range trucking. Lidar, or light detection and ranging radar, is considered to be a necessary component of self-driving systems. Aurora’s pitch’s is that unlike traditional time-of-flight lidar, its technology provides the long-range visibility needed to be able to spot hazards with enough time to stop or slow down.

The announcement also marks a major acceleration for Volvo’s autonomous vehicle arm, Volvo Autonomous Solutions. It’s the business unit’s first deal to bring autonomous trucking to the road.

Since its founding in 2017, Aurora has rapidly become one of the leaders in self-driving tech, attracting backing from Amazon, Sequoia Capital and Greylock Partners. The company was founded by former executives of Uber, Tesla and Google.

MobiKwik said on Tuesday it was investigating claims of data breach after a website claimed to have exposed private information of nearly 100 million users of the Indian mobile payments startup.

Over the weekend, a site on the dark web claimed it had 8.2 terabytes of MobiKwik user data. The data included phone numbers, email addresses, scrambled passwords, transactions logs, and partial payment card numbers.

The website also claimed that it had “know your customer” (KYA) documents of 3.5 million users, and each visit to the website displayed four random images from the data dump. KYC documents are required in India for users who want to access certain services without any limitations. Local law requires a mobile wallet firm in India, for instance, to support monthly transactions exceeding a certain limit.

The dark web site features a searchable database that allows users to look up their phone number or email to verify the authenticity of the data breach claim. TechCrunch was able to verify the accuracy of the data in several cases.

A seller on a well-known cybercrime forum claims to be selling access to the database for 1.2 bitcoin — about $70,000.

The Sequoia Capital India-backed startup says it can’t yet prove if the data actually belongs to MobiKwik users. “It is incorrect to suggest that the data available on the darkweb has been accessed from MobiKwik or any identified source,” the startup wrote in a blog post.

Rajshekhar Rajaharia, a security researcher, told TechCrunch that he alerted MobiKwik about this alleged security breach last month. In a statement, MobiKwik said the company had conducted a thorough investigation and did not find any evidence of a breach.

However, a screenshot leaked to TechCrunch shows a MobiKwik official asking an Amazon representative last month for logs relating to its cloud service after the startup “came to know that our S3 [cloud storage] data is downloaded by some other person outside the organization.”

The startup said its legal team will take “strict action against the so-called security researcher.” Rajaharia told TechCrunch that it’s his right as a user to know if his financial data is safe and that he doesn’t have the resources to fight legal battles.

MobiKwik said it was closely working with authorities and was confident that security protocols to store sensitive data are “robust and have not been breached.” It added that it was getting a third-party to conduct a forensic data security audit. “We are committed to a safe and secure Digital India.”