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However, not every sign pointed to success. From the beginning, Classtivity had set a goal to get 75% of users who rated a class with four or five stars to go back to the same studio. Classtivity retargeted these clients by sending them personalized marketing emails that contained a promotional offer. For example, one user who had given Kettlebell Kickboxing a five-star review received a promotion for 10% off a 10-class bundle at Kettlebell Kickboxing (see Exhibit 4.) In fact, only 10% to 15% of users returned. Kadakia was concerned that her customers viewed the Passport like a deal on Groupon. “Our vision was to get you habituated to going to the same studio over and over again, but our customers were treating it like a one-month experience,” she said. “They were saying things like, ‘I can’t wait to do this for this month.’ But my vision was to keep people connected to their passions, stay active, and continue living that lifestyle.” However, Classtivity clients seemed to balk at the higher cost of studio membership, Kadakia said. “You were going from paying $49 for a month to paying $200 or $250,” she said. “The price jump was very high.” In addition, customer feedback revealed that the appeal of variety was getting in the way of studio loyalty. “Some users did not look forward to getting on the same exercise bike week after week,” she said. “They wanted to switch it up more.” She worried that Classtivity was not creating enough value for the studios, as studios provided the inventory, class seats, free of charge. “Something felt off to me about that partnership,” she said. Some studios even wrote to the company to voice their concerns. “I am not getting enough repeat business to justify continuing to give away hundreds of free classes,” one studio owner wrote. “Strategically, it simply doesn’t work for me.” (See Exhibit 5 for a complaint letter.) The team also noticed that many customers were attempting to buy the Passport for successive months by registering under multiple email addresses. “We realized that users were trying to game the system to satisfy their appetite for variety,” Kadakia observed. “We uncovered a market for what I call the dabblers of the world.” Taking Stock In March 2013, Classtivity moved to a cheaper office in Chelsea. To cut expenses even further, Kadakia asked her engineer to find other full-time work and instead provide consulting services to the company. In April, even with increased marketing expenditures, Classtivity’s burn rate was only $30,000 a month. That spring, Classtivity prepared to raise another round of funding. Gupta, of Romulus Capital, visited the office to evaluate the investment opportunity, but he left underwhelmed and decided not to invest further in the company. “They had the venue side of the equation figured out, but they just weren’t getting the customer traction,” he said. “And the Passport product didn’t make sense to me.” His enthusiasm for the target market had also waned. “They were pursuing that highly-sought after community of young, active women. The idea that people would take 10 classes a week at different studios seemed kind of absurd to me.” He also questioned whether the product had promise outside of fitness-crazed New York City. “I wondered, ‘Is this really going to translate to Atlanta or Austin?’” Kadakia also approached Spencer Lazar, a former Techstars NYC mentor and then a newly-hired principal at venture capital firm General Catalyst Partners. He recognized what he called “founder authenticity” in Kadakia. “The thing that she does so well is speak through the voice of the user,” he said. “She really wants to create the lifestyle that she wanted to lead as a consumer.” However, when Kadakia pitched the Passport to him, Lazar also declined to invest. “We loved her thinking about product, but the business model didn’t seem right,” he said. “We decided to wait until the metrics indicated true product-market fit.” (See Exhibit 6 for the pitch deck she prepared for these conversations.)