EGYM founder Philipp Roesch-Schlanderer raised nearly $400 million by framing his smart gym equipment company as a preventative healthcare solution targeting the trillions spent on chronic disease. This case study breaks down how he overcame investor skepticism towards a complex hardware/software/subscription model by proving it created a defensible moat and addressed a much larger market.
Key takeaways
- Reframe your pitch from your product category to the massive market your vision addresses.
- Justify a complex business model by showing how it creates an unbeatable moat.
- Use a B2B entry point to de-risk capital-intensive hardware and build a footprint.
- Layer a recurring revenue model (like subscriptions) on top of initial hardware sales to show scalability.
- When a crisis hits, cut costs to survive, but preserve your core team to rebound faster.
- Your fundraising story isn't just a pitch; it's a narrative that redefines your entire market.
Your Pitch Is Not Your Product
EGYM has raised nearly $400 million. Let that sink in. They did it in a category—connected fitness hardware—that most VCs avoid, with a complex business model combining hardware manufacturing, enterprise software, and B2B2C subscriptions. It’s the kind of business that gets a “no” from 99% of investors before you finish your first sentence.
So how did they do it? The original story of founder Philipp Roesch-Schlanderer credits “storytelling.” That’s true, but dangerously vague. It wasn’t just a good story; it was a masterclass in market re-framing. Philipp didn’t sell investors on a better gym machine. He sold them on a new system for preventative healthcare, designed to capture a slice of the 18% of US GDP spent on healthcare.
This is the most critical lesson for any founder building something complex, capital-intensive, or outside the simple SaaS box: You are not pitching your product. You are pitching a new way to see the world, one where the market you’re attacking is 100x bigger than the one investors think you’re in.
Find a Broken System, Not Just a Missing Feature
Philipp’s first insight in New York wasn’t a product idea. It was noticing a broken system. Gyms had high churn, and members saw poor results. Why? The experience was “disjointed.”
No Onboarding: A member signs up and is left to wander, intimidated by machines they don’t know how to use. · No Progression: There’s no guided path. How much weight should you lift? How many reps? When should you increase the difficulty? Most people are just guessing. · No Data: You can’t manage what you can’t measure. Without data, members can’t see progress, and gyms can’t prove value. · High Churn: The result is boredom, frustration, and injury, leading to members quitting after a few months.
A typical founder might try to solve this with an app. Philipp saw a bigger opportunity. He realized this wasn’t a fitness problem; it was a healthcare problem in disguise. The US spends over half its healthcare budget on chronic, preventable diseases. The gym, if properly equipped, could be the most powerful tool for prevention. He didn’t see a market of gym-goers; he saw a market of future patients.
The Common Mistake to Avoid
Don’t just identify a pain point. Identify the multi-billion dollar system that is failing to solve it. EGYM isn't competing with other fitness apps; it's competing with painkillers, unnecessary surgeries, and chronic disease management—a far, far larger prize.
De-Risking a Complex Model with a Two-Pronged Attack
An investor's biggest fear with a model like EGYM's is complexity. Hardware is cash-intensive, software is a different discipline, and a subscription on top adds another layer. It seems like three different companies.
Philipp’s genius was to structure this complexity as a strategic advantage that de-risks the business over time. The two business units, Gymtech and WellPass, are not separate ideas; they are a deliberate one-two punch.
1. EGYM Gymtech: The Infrastructure Play (B2B)
This is the starting point. EGYM sells its connected hardware and software directly to gyms. This isn't just a one-time hardware sale; it's an operating system for the entire gym floor.
The Hook: It solves the gym owner’s biggest problem: member retention. The personalized, game-like experience keeps members engaged and demonstrates clear ROI. · The Moat: Once a gym is running on EGYM’s OS, it’s incredibly sticky. The hardware, software, and member data are all integrated. Ripping it out is not an option. · De-Risking for Investors: This B2B model provides predictable, albeit lumpy, revenue. It gets the hardware into the world and builds the foundational network, one gym at a time. It's the necessary, capital-intensive first step.
2. EGYM WellPass: The Scaling Play (B2B2C)
This is where the story shifts from capital-intensive to scalable. EGYM sells WellPass subscriptions to companies as an employee wellness benefit. Employees get access to any EGYM-equipped gym or other fitness facilities in the network.
The Hook: For employers, it’s a powerful wellness perk to lower healthcare costs. For employees, it’s a subsidized passport to premium fitness. · The Network Effect: The more companies that sign up, the more valuable the network is for gyms. The more gyms that join, the more valuable the pass is for corporate clients. This is a classic, powerful flywheel. · The Investor Payoff: This is the recurring revenue engine that venture capitalists love. It transforms the business from a seller of machines into a scalable, high-margin subscription network built on top of the initial hardware footprint.
How to Pitch a "Too Complicated" Business
When investors told Philipp his model was too complex, he didn't simplify it. He explained why the complexity was the very thing that made it defensible. No software-only company could compete because they lacked the integrated hardware. No hardware-only company could compete because they lacked the subscription network and data.
The lesson: If your model is complex, don't apologize for it. Frame the integration of its parts as your deepest moat. The complexity isn’t a bug; it’s a feature.
Navigating Crisis: The COVID-19 Test
When COVID-19 shut down gyms, EGYM’s revenue evaporated. This is the nightmare scenario for any capital-intensive business. The company was forced to make deep cuts. But the key decision was what to cut. They preserved the core team. This is a critical distinction. Many companies panic and cut indiscriminately. By protecting their talent, EGYM was able to hit the accelerator the moment lockdowns lifted, leading to accelerated growth on the other side. For founders, it’s a lesson in navigating a downturn: cut fat, but protect the muscle and bone of your organization at all costs.
The $400 Million Narrative Arc
Your pitch deck is not a list of features. It is an argument. For EGYM, that argument wasn't about circuits and weight stacks; it was about GDP percentages and preventative care. You can imagine the narrative arc:
The Broken Market: Start with the shocking numbers. The US spends $4 trillion on healthcare, and over half of that is on chronic diseases that are largely preventable. Meanwhile, the one place designed for prevention—the gym—is failing with high churn and poor outcomes. · The Big Reframe: What if we could turn every gym in the world into a data-driven, preventative healthcare center? What if exercise could be prescribed like medicine and the results tracked? · The Integrated Solution: Introduce EGYM's ecosystem. The connected machines provide guided, personalized workouts. The software tracks every rep, creating a unique health record. The network connects gyms, users, and employers. · The Flywheel Model: Show how the B2B Gymtech sales create the footprint, and the B2B2C WellPass subscription builds a scalable, high-margin network effect on top. Show the unit economics of both. · The Vision: End by restating the grand vision. EGYM isn’t just making gyms better; it’s building the rails for a future where healthcare starts with fitness, not sickness. The goal is to bend the curve of healthcare spending for society.
How to Apply This This Week
Define Your "Real" Market: Are you selling accounting software, or are you the financial OS for small businesses? Are you a marketing automation tool, or are you the engine for customer data platforms? Write down the product category and then the 100x larger market you are reshaping. · Map Your Moat: If your model is complex, draw a diagram showing how the different parts (hardware, software, services, marketplace) connect and reinforce each other. Articulate in one sentence why a competitor can’t just copy one piece. · Script Your "Complexity" Objection: Write down the investor question: "This seems too complicated. Why not just do one thing?" Now, write a 30-second response that explains why the integration is your single biggest advantage. · Outline Your Narrative Arc: Using the 5-step structure above, outline your own fundraising story. What is the broken system? What is your reframe? What is your unique, integrated solution? How will you scale? What is the massive vision?
Frequently asked questions
- Should my startup combine hardware and software?
- Only if the integration is essential to create a 10x better user experience and a strong competitive moat. Be prepared to justify the high capital costs and operational complexity to investors.
- How do you find investors for a capital-intensive business?
- Target investors with a track record in your specific industry (e.g., connected hardware, healthtech) and those with larger fund sizes who can write significant checks and follow on. Your narrative must focus on the massive market size and defensibility to justify the capital requirements.
- What does it mean to reframe your market?
- It means shifting the investor's perspective from what your product is (e.g., smart gym equipment) to the massive, valuable problem it solves (e.g., reducing the multi-trillion dollar cost of chronic disease). This allows you to anchor your valuation to a much larger opportunity.
- How much dilution does raising $400 million cause?
- While every round is different, raising $400M over multiple stages (Seed, A, B, C, etc.) often results in the founder team owning between 10-20% of the company by this stage. Early rounds might dilute 20-25% each, with later-stage rounds typically being less dilutive (10-15%).
