Contxto – There’s a fine balance to being a successful, burgeoning startup. You’ve got to keep costs down and yet appear to effortlessly belong to the winners’ club. And it’s not only the breakneck expansion that some of these competitive scaleups pursue which can break them on the way to success.
Appearing to be successful is also seen to be a key, and sometimes damaging, part of the game. A game which often implies, at least in the minds of many, having a foothold in some of the world’s most expensive postcodes.
I’ve known many a startup to have become too big for its boots, splashing out on an NYC office only to be forced to retreat back to the proverbial garage with its tail between its legs. Or close up shop altogether…
These thoughts raced through my mind as I scaled my third elevator to one of the highest points in Mexico City, on one of its fanciest avenues—Paseo de la Reforma—, to the new digs of the seemingly unstoppable Brazilian unicorn, Gympass.
The social network economy
But, it’s important not to be fooled by first impressions. Like a smiling ballerina twirling at 90 RPM on a single toe, Gympass’ corporate balance seems to be on point.
I found the right floor in the skyscraper and sought the press junket organized by this business-to-business (B2B) exercise marketplace platform.
On arrival, I saw the distinctive logo of that (in)famous, US-based co-working giant, WeWork. But, look beyond the company’s recent scandals and Gympass’ strategy does smack of brilliance; a brilliant balance, that is.
The equilibrium struck by the Brazilian scaleup combines the lavishness of a top-tier address without the hassle of going broke to pay the rent. It has all the perks of those hipster, Silicon Valley offices—beer on tap, ping pong tables, swings instead of chairs—at a fraction of the cost.
Related article: SoftBank-backed Gympass signs office space deal with WeWork
Indeed, the company seems to pride itself in its evolving business model. And after all its recent success, it certainly has an eye to having its cake and eating it too. They have the track record to prove it.
Just recall their initial evolution which saw the startup switch from a business-to-consumer (B2C) to a B2B model. The step turbo-charged the startup from the get-go, since instead of laboriously looking to connect with individuals, the company could tap into pre-existing communities. In two months, they grew what they had grown in two years prior.
A crucial step, according to Gympass, was the transparent horizontality of the startup. The company holds monthly feedback sessions with hundreds of people in one room. It also sends out its employees to live the Gympass experience themselves. And finally, they resort to “ambassadors” in each of their allied exercise facilities in order to keep an ongoing feedback loop going.
Most recently, the startup acqui-hired Portuguese artificial intelligence company, Flaner, to optimize their platform. The dream is to tailor each user’s experience depending on their behavior to suggest and encourage them to go to the right gym or attend the best class for them.
AI, thus has become an elegant solution to the growing pains that scaleups tend to suffer. Automate the bespoke curation of the nitty-gritty data while you grow your platform. The micro solution to their macro expansion. The ying to its yang.
Overall, what Gympass has been doing over the past seven years is trying to carry out a new business model altogether. One based on a nascent networked digital economy.
Each client, each gym, each new country Gympass expands to is another node which feeds—yes, income, but perhaps more importantly—data into the company in an ever more efficient way. This is what links their transitions to B2B and then to AI over the past few years.
“Facilitate autonomy and eliminate processes”, Lucas Melman—CEO of Gympass Mexico—would say to me later on that day. That, apparently, is the shorthand solution to the conundrums to the digital global economy.
This is the brave new world that startups promise us, and yet, our experiences with the crises and criticisms these same startups have encountered as they have grown to be titanic, should fill us all with doubt.
Remember the innocence with which we signed up to the original social network, Facebook, compared to how we perceive it nowadays?
The Mexico CEO of Gympass, Lucas Melman, greeted us personally on entering the WeWork conference room. He is almost as new to Gympass as the unicorn is to its new co-working digs. All quite normal in the fast-paced world of startups, as you well know.
Melman is the embodiment of what a successful Latin American startup should be. In other words, he is a walking contradiction:
He is young and yet experienced; this man seems to have lived a few lifetimes in his just over three-decade life. His CV resembles a who’s who list of the Latam startup ecosystem, ranging from Endeavor, iFood, SinDelantal, and Mensajeros Urbanos.
He is local and yet global; Melman is from Rio but has spent over five years in Mexico. He and his team are a tribute to transregional and global integration. It looks like he and his wife will be having a baby here soon. (Congrats, Lucas!)
He gave an air of causal spontaneity as he gave what was clearly a slickly rehearsed presentation.
The atmosphere was overall desperately chillax; the Gympass staff aggressively charming; their proclaimed passions perfectly presented to seduce their journalistic audience.
There is something eerie about the enforced happiness culture of the modern-day startup. Yet, the fact that it arose at all is laudable.
This corporate culture originated as a reaction against the strenuous, highflying world of high-level executives. The cutthroat nature of these prior corporate cultures led to depression, anxiety, and all the other ailments illustrated by The Wolf of Wall Street. Too many quaaludes not enough hot yoga.
Indeed, Cesar Carvalho—Co-Founder and Global CEO of Gympass—was a product of this world. He bemoaned the lack of access he had to a gym during his previous life as a globe-trotting McKinsey analyst. “Imagine if you had access to a network of different gyms across a number of different countries… A sort of all-access gym pass…”, he must have thought. The rest is history.
Wellbeing culture very slowly trickled down to blue-collar workers. Indeed, Gympass is an important actor within this trend, teaming up with large companies to give all their workers accessible prices to a decent workout.
However, it is crucial to recognize that this new model was viable in the first place because it was profitable. Had the previous status quo been efficient or wellness and happiness too costly, it is doubtful anything would have changed.
Turns out though, wellbeing is profitable. In fact, a centerpiece of Gympass’ sales pitch to companies is the increase in productivity, retention, and attractiveness in the labor market that being a Gympass customer-company entails. The slides showcase happy workers working away more efficiently than ever. Obesity is explained in terms of cost to GDP as well as deaths.
The commoditization of wellbeing and happiness is problematic and is probably the chief cause of the weirdness one feels when companies embrace them.
But even if you are keen on the idea regardless—it does seem to be the lesser of two evils compared the previous exploitative corporate culture—the main problem seems to be that even in their commoditized form, corporate wellbeing, horizontality, and congeniality do not seem to be compatible with the rigors of expansive venture capitalism.
Melman claimed that moving to Gympass was the easiest decision of his life. To his knowledge, there has been no other Latin American startup which has grown and expanded internationally at such a rate as this Brazilian company. The growth indeed has been exponential, and it conservatively estimates a fourfold expansion in 2020.
Later on, Melman told me about how happy he was about the fact that the scaleup has kept true to its startup corporate values: the horizontality, the openness, the fact that they practiced what they preached, etc.
And yet, when I asked if that model was compatible with the company’s accelerated international growth, he paused, and said:
“It will be difficult.”
“Proud and humble”, the ethos of the oxymoron economy
It should be evident by now that the idealism with which modern, tech-oriented, startups present themselves is fraught with contradiction.
The networked approaches that scaleups like Gympass take—B2B, AI, ambassadors—can iron out some of the kinks. But not all of them.
Lucas Melman changed to the next slide which depicted a graph outlining a word cloud of the company’s ethos.
Melman immediately apologized. The slide was entirely in English. He did note that the messaging had to be standardized for the entirety of the global team. (Boy do we at Contxto feel you, Lucas.)
Everyone nodded and the talk went on. From my vantage point, I could just make out the words “diversity” and “ecosystem mindset” written in a language not native to most of Gympass’ staff behind him.
I also thought that it was funny that a key point was a pair of antonyms, hand in hand: “Proud and humble”; “standardized diversity.” “Funny,” I thought.
The awkwardness of the messaging highlights the contradictions of this brave new world of corporate culture.
As companies become successful, their expansion starts to require the addition of processes to administer the ever-growing amount of staff, customers, and, well, processes. As Oscar Wilde once said (on Civilization V): “The bureaucracy is expanding to meet the needs of the expanding bureaucracy.”
Similarly, when Gympass expanded to Europe, most of the new teams were relatively autonomous, as per Melman’s vision of more freedom and fewer processes.
The acquisition of Flaner integrated some top AI into the company mix, and yet it suddenly created a problem: Everybody needed to benefit from the new team’s expertise, regardless of their time zone. So the Brazilian scaleup will be wrestling throughout 2020’s first quarter with the difficult reality that at least a portion of the Portuguese team will be forced to relocate.
Suddenly, corporate necessity trumps cushy flexibility.
Success is a tricky thing to manage. It can go on to kill a company, ruin a product, or turn a smile upside down. The economic juncture we find ourselves at worldwide—where startups and their corporate culture start to become the norm—the mismanagement of success could tarnish the ecosystem’s development forever.
Gympass is the perfect image of this corporate crossroads.
If all goes well, the Brazilian startup will go down in history as a trailblazer to a fairer, happier economy. One in which standardization and personalization come to a fruitful synthesis through the good use of AI and networked systems. A future in which the profitability of the wellness industry continues to be aligned with actual wellness.
Conversely, as the contradictions exacerbate, there is a dystopian world in which the narrative of a wellness/happiness ethos is kept while, in practice, it is abandoned. A dystopian corporate culture where outwardly, everyone has pep in their step and a smile on their face, but on the inside, the company is moving them around, exhausting them, and making them miserable.
Will Gympass, Latin America, and the world be up to the challenge?
Will this new and evolving corporate culture truly keep employee and customer happiness at its core?
I stepped outside of the WeWork skyscraper and called Víctor—Contxto’s CEO based in Guadalajara. I told him the event had been interesting and if he’d be happy for me to write something a bit different based on what I’d seen and heard. He said he was perfectly happy as long as I was happy. We both agreed we were happy.
Do you ever get that feeling when you’ve said a word too many times and it starts looking weird or stops meaning anything at all? “H-a-p-p-y.”