Sworkit Fitness App
DEAL
EPISODE SUMMARY
🕓 Air Date: February 19, 2016
Asking For:
$1,500,000 for 8%
Investor:
Mark Cuban
Deal:
$1,500,000 for 10%
PRODUCT SUMMARY
Sworkit is a personalized exercise app that provides a convenient and flexible workout experience, allowing users to exercise anytime, anywhere without the need for equipment.
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Background Story
Sworkit founders Ben Young and Greg Coleman, based in the Washington, D.C., Metro Area, launched the company out of frustration with common excuses people use to avoid working out. They wanted to eliminate barriers such as lack of time, uncertainty about exercises, and financial constraints. Both entrepreneurs, with a background in health and fitness, met at Wharton Business School.
Sworkit is their third product, following the success of their fitness tracker called Nexercise. Over the last five years, they have demonstrated success in the health and fitness space, reaching 2 million downloads with Nexercise. Their commitment to understanding the industry’s dynamics led them to develop Sworkit, aiming to offer a solution that simplifies and personalizes exercise routines.
The Product
Sworkit is designed to make exercise accessible and tailored to individual needs. Users can choose a focus area, such as strength or cardio, and select a workout duration that fits their schedule. The app then compiles a personalized exercise playlist from a library of individual exercise videos.
This approach allows users to follow along with the video instructions, making it easy for them to exercise without the need for specialized equipment. The founders emphasize the flexibility of the app, allowing users to skip exercises they can’t perform or pause when needed. Sworkit also integrates with Spotify, adding a music element to the workout experience.
The app’s business model involves offering a free version with advertisements and a paid Pro version priced at $3.99, providing an ad-free experience and additional customization options. In November, they plan to introduce a subscription-based model at $9.99 per month, offering premium content and access to equipment-based exercises like kettlebell and exercise ball routines.
How It Went
The company’s position before Shark Tank
Sworkit has seen impressive growth, with $770,000 in revenue over the last 12 months and $460,000 attributed to the Sworkit app. The founders reported a total of nearly $2 million in revenue over the lifetime of the company, demonstrating financial success. The company has achieved a strong position in the instructional exercise fitness category, consistently ranking in the top 10 on the Apple App Store. They boast over 1.5 million monthly active users, positioning Sworkit as a category leader.
Sworkit’s revenue growth is notable, increasing from $44,500 per month to approximately $94,000 per month in the last 12 months. The app monetizes through a combination of user upgrades (2/3 of revenue) and advertising (1/3 of revenue). With 72% of their ad inventory sold, Sworkit demonstrates a viable market for advertising within the fitness space.
The company has raised $2.1 million in financing to date at a $11 million valuation cap. Sworkit’s strategic vision includes expanding its engineering team to enhance app speed and introducing Sworkit Kids, an upcoming version targeting younger users.
The Negotiations:
The negotiation process involved a $1.5 million investment for 8% equity, but Mark Cuban proposed an alternative deal. He offered $1.5 million for 10% equity and an additional $1.5 million worth of unsold ad inventory. Lori Greiner and Kevin O’Leary bowed out, expressing concerns about valuation and their inability to see the potential return. Barbara Corcoran considered an offer of $1.5 million for 16% but ultimately decided not to invest.
Mark Cuban’s offer was accepted, with the founders appreciating the strategic value he brings, particularly in the sports industry. They saw the deal as an opportunity to leverage Mark’s connections for expansion into physical therapy and sports-related applications. The negotiation showcased the founders’ business acumen and their willingness to adapt the deal to incorporate Mark Cuban’s expertise and maximize the benefits for both parties.
