Australia’s Richest 250 #206, #207: Kayla Itsines & Tobi Pearce

Worth $487m, Kayla Itsines and Tobi Pearce are just warming up.

Kayla Itsines and Tobi Pearce. Picture: Nic Walker.

Call it the business equivalent of still being in the warm- up phase before you get into your intense workout.They’re already a global phenomenon worth $487 million after only five years in business, are both a few years short of turning 30 and are the youngest on The List – Australia’s Richest 250.

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Yet as 27-year-old Kayla Itsines explains when discussing the growth potential of the digital fitness platform Sweat, which she built with her business and life partner Tobi Pearce, 26, the pair still have a long road ahead of them.

“Oh, we are just getting started,” Itsines says.

Their plan is for Sweat to be the fitness equivalent of what Netflix is for entertainment or Spotify for music: the go-to app or brand in their industry that builds market domination after seeing off or merging with competitors.

How they intend to get there is by mixing some old-fashioned business practices with new-world millennial nous. And in a fragmented market that has about 174 million women in 10 countries as potential customers, Pearce says he is determined to be at the forefront of an inevitable wave of merger and acquisition activity and make the business a global giant.

“Most large significant opportunity industries go through an aggregation phase at some point as that industry matures,” he says. “What that means is the frontrunners either aggregate or stand tall, and eventually there is a monopoly or duopoly.

“At this point in time the digital fitness industry is highly fragmented. So from our perspective, how we qualify our success is that at some point there is going to be an aggregation event or a monopolisation event, and ideally we would want to be in that group so when people think about fitness, working out or going to the gym, people think of us first.”

Already Istines and Pearce are stars to millions of women around the world. They are held up as examples who encapsulate the modern world in which social media and the internet has allowed nascent brands to turbocharge their growth by taking their wares to the world – quickly and seemingly almost effortlessly.

In February, Itsines and Pearce spent a week in the US. While she did the rounds of breakfast television, discussing her pregnancy on Good Morning America and The Today Show – they have a baby girl due in May, and yes, she still works out daily – he spoke at a Harvard Business Review function on the social media influencer economy, and met with EY and KPMG to discuss growth opportunities in their biggest market.

For now, though, the pair are resisting overtures from the US and want to keep building Sweat from their home town of Adelaide.

“We get asked every day when we are moving to America,” says Itsines. “They say there’s so much more opportunity there and they promise you the world, but we have done this all from Adelaide. And we’re not tempted, not even one per cent. I think people are proud that we are from Australia.”

‘There are at least 1 million active users of the app per month. Sweat has become Apple’s highest-grossing health app, and is now available in seven languages and 155 countries.’

Yet a whopping 40 per cent of Sweat app users are in America, and only 5 per cent in Australia. The rest are scattered around the world, from Canada to the UK and Europe. They pay $19.99 per month or $119.94 annually to get a mix of fixture workouts, such as the 28-minute high-intensity routine Itsines has made her specialty, as well as diet tips, nutrition plans, recipes and books. There are at least 1 million active users of the app per month.

Sweat has become Apple’s highest-grossing health app, and is now available in seven languages and 155 countries. And while Itsines is the undoubted star on the platform, she and its other five trainers – who offer programs that include yoga and post-pregnancy workouts – have a combined social media following of almost 45 million people.

It is a long way from where they were a little more than five years ago. In January 2014, fitness instructor Itsines compiled all her workout tips after her “before” and “after” Instagram shots of her client’s transformations started going viral, and created an e-book called the Bikini Body Guide.

Kayla Itsines and Tobi Pearce. Styling: Viva Vayspap, Picture: Nic Walker

It was a sensation, downloaded millions of times around the world as women aged from 16 to 44 went wild for the workouts they undertook in the park, the backyard or the gym.

Suddenly, Itsines and Pearce – who met while working out in a gym – had a global brand, and before long Pearce had ditched his commerce and law double degree to focus on building a business. They rode out problems with their initial app launch in 2015 and have since built scale in the business.

Sweat is now extremely profitable, with revenue of about $100 million in 2018. Pearce says January’s income was 30 per cent up on the same period a year earlier and already the business has an estimated value of $487 million.

If you ask Pearce, though, there is every chance Sweat is closer than people realise to the “unicorn” status bestowed on technology firms worth $US1 billion, though it comes at a time when the business now needs proper structures in place to achieve its next stage of growth.

He brings up the example of his friend, British entrepreneur Michael Acton Smith, the founder of meditation space company Calm. “[Last year] they raised $US88 million from investors for a value of $US1 billion. We are a very similar size; we are a very similar business, except they are selling audio meditation content and we are selling workouts. So if you go by that we may not be very far off.”

But in a concession to the challenges that can beset even the best startups, Pearce says Sweat is now focusing on corporatising the business. The group is on a hiring spree to fill 30 to 35 roles that will take the head count past 100 and has Sweat looking for new office space in Adelaide.

It means hiring marketing and business development staff, and more software engineers and digital analysts, and suddenly having people with titles such as chief information officer, chief marketing officer, and vice president of product and growth. It means the business is maturing before its founders’ very eyes.

“We are proud to have done what we have done without having people in those roles,” says Itsines. “Imagine what we can do now with them there.”

It will bring a focus on growing subscriber numbers through targeted acquisition campaigns and cutting down on churn, or the number of users that may stop subscribing. It could mean expanding into new markets and languages, and even targeting males. And it all needs to happen while they maintain a cutting-edge social media presence and wider profile that keeps the Istines brand at the forefront, both before and after their baby is born.

“We have a long list of hundreds of things we want to do, but right now this is almost the boring phase,” Pearce says, adding that there should be a better word than “boring”.

“We need to get the company hygienic, cleansed and structured to allow us to faciliate growth. There’s a point in every organisation’s lifecycle where it goes through this phase, where you go from a small to medium-sized business to corporatising the organisation to facilitate high-velocity growth and a large team size.”

That growth could be boosted by outside investment but Pearce says he and Itsines want to forge their own path, at least for now. He says they would average about two approaches per week from private equity or venture capital, and while he enjoys the process of engaging with potential investors, it is as much about networking and learning from others in business than anything else.

But he says ultimately he and Itsines just want to keep building Sweat and aspire to be considered a truly global player in a business that has been built from home.

“Wouldn’t it just be amazing if Australia was to add another business to its huge international successes?” he says. “Atlassian is one of maybe only a few others. So I just think it would great if there was an organisation like us that could do it too one day.

“I think we truly can, and I think we are in the right position to do so. We are the right business, in the right time and the right industry. The last bit is ‘can we do it?’. But is an exciting time.”

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