🏃♂️Cadoo
+the burgeoning financial incentivization ecosystem
Hey hey 👋,
Welcome back :) Today’s story is a guest post from my good friend, Kelvin Boateng. He is currently an Associate Product Marketing Manager at Google and has been helping me a ton with this newsletter. Let’s hear from Kelvin:
I’m a sucker for startups looking to change the way we live and think at scale, especially when it comes to our health, so that’s where we’re going to start this week - with a startup looking to harness the power of loss aversion and self-competition to help you follow through on your life goals. - Kelvin
Here’s a bit of old news: According to the CDC, obesity prevalence was 42.4% in the U.S. in 2018, and it hasn’t really improved since. (I recognize that this is based on BMI, which can be a misleading measure of obesity.)
Here’s what is not misleading, the same report estimates that the annual medical cost of obesity in the U.S. is $147 billion dollars, with the average obese person paying $1,429 more in health costs than those with healthy weight annually. And that’s just the economic side of things. There are entire journals on the health risks associated with obesity, (i.e. heart disease, stroke, and type 2 diabetes) and what we should do about it.
The point is, no matter how you measure it, obesity has real consequences. Here is why that is relevant. Outside of Lizzo (We stan a confident Queen) and athletes who need the size, I’ve never met someone who doesn’t want to be in a healthy weight range, which explains why the weight loss and weight management diet market size was valued at $192.2 billion in 2019, and is expected to be almost $300 billion in 2027. Add in another $32 billion for the fitness industry and it’s crystal clear that we’re not only concerned about our physical health, but that we’re also willing to put our money where our mouths are. What’s missing then? I think it’s an inability to follow through and so does Cadoo co-founder, Colm Hayden.
Cadoo is a startup helping you follow through on your fitness goals. Here’s how it works: You pay to join a group challenge, and depending on whether or not you complete the challenge, you either get your money back or lose the money you paid to complete the challenge. Those who complete the challenge are winners, and those who lose are losers. That part is simple. Where it gets a bit more fun is that the losers’ money gets paid out to all the winners.
* Note: In an ideal world, everyone completes the challenge and no one wins any extra money - at least that’s what Cadoo is trying to build.
If you follow tech closely, you know that Cadoo is not the first company to use financial incentives as a mechanism for helping users complete goals. The startup is entering a space where apps like WayBetter have already pioneered this exact idea. (I also have a co-worker who just completed a similar project for the Solana Hackathon.)
If the idea itself isn’t exactly novel and there are established players already in the space, what could Cadoo possibly expect to bring to the table that no one else has thought of? To get to that answer, we’ve got to get into the company’s background and into co-founder, Colm Hayden’s mind a bit. If you’d like an extended version of Cadoo’s founding story, you can read Colm’s direct account here.
Otherwise, keep reading for a shorter version.
Genesis
During his internship at Diginex, Colm met Tim Parsa, who was working on AirTM at the time. While discussing projects they were working on outside of work, Cadoo came up as an idea of Tim’s. Colm took initiative and reworked the idea to match a system he and his high school friends had set up around a Snapchat group called “🏃♂️💸Running💸🏃♂️”.
The idea was that each member of the group would promise to run a certain number of miles by the end of each week. For the sake of simplicity, let’s go with 5 miles - that’s 1 mile per day. At the end of the week, everyone would send in proof that they had completed the run either through Strava data, Apple Health, or Fitbit data. The key was that the group had a data-driven way to track their accomplishment, and it worked! It was 5 weeks before anyone actually missed a week of running.
The group worked so well that when Colm pitched Tim the idea to modify the original idea for Cadoo, Tim agreed and decided to let Colm be CEO of the company.
Unique Insight
Colm’s analysis of the market and experience with his Snapchat running group led him to believe two things:
Other solutions in the market were not data-driven and could not scale (many had you submit data that had to be reviewed by a human referee).
Trust is at the center of the financial incentive model
Product Journey
With core insights in their back pocket, Colm and Tim set out to hire engineers in the Bay Area to build out the first version of Cadoo. The platform was based on a network model, encouraging users to bring a friend to the platform with them and bet on their friend’s success. Unfortunately, after 6 months, Cadoo still had no users.
It turned out that users weren’t as willing to pay a friend for a job well done. There was no sense of loss - perhaps a lack of urgency for winners if all they had was an upside. In what we’ll call the “partner model”, Cadoo users had nothing to lose.
The team needed to pivot, and that’s when Colm came up with the idea for the Group Challenge model, which has helped Cadoo take off. The difference now is that rather than betting on someone else, users only have to bet on themselves, which dramatically increases user trust.
Customer Acquisition
For the first 6 months of its existence, Cadoo had 0 users. That has since changed, and now over 2,000 users are competing in and winning Group challenges at a rate of 93%.
The team has invested in a social media-driven customer acquisition strategy with two main goals:
Make Cadoo viable for influencers
Build brand equity and trust
Let’s dive further into these two ideas, and actually start with the second one.
“We've realized Cadoo's growth is tied to the amount of trust on the app, and the amount of challenges hosted. Our team can only host so many challenges, so creating a scalable way to host 1,000+ challenges a month would significantly impact our growth.” - Colm
Part of what Cadoo has done exceptionally well to this point has been building trust with its user base to the point where they want to invite others to join them on the app. Every challenge is another opportunity to build on the trust the team has built up so far and supercharge growth. More challenges = more users!
The team could host more challenges with the current team (probably not a great idea), expand the team (maybe a little too early), or partner with trusted athletic influencers and brands, and essentially outsource challenge hosting duties (surprise, this is what they’re doing).
“We need to make this economical and provide a good incentive for athletes to host challenges. Its not something they will do for free. What we'd like to do is give a challenge host 20% of the losers money, along with the option for challenge winners to tip the host. At scale with 5,000 - 10,000 challenge participants, we hope athletes could make up to $5K per challenge hosted.” - Colm
An idea just came to mind: Imagine your local non-profit hosting a virtual running/walking fundraiser event on Cadoo. The platform is already set up to handle financial data (trust and tactical infrastructure) and the event would have a reach far beyond those in the local area. You could host a global 5k run!
Random idea aside, there are plans to further integrate potentially relevant social platforms, like Reddit and Facebook directly into the user experience going forward to increase shareability, but for now, you can watch the team’s TikTok account start to take off.
Vision
A few interesting things have taken place since the team moved over to the group challenge model, one of which being that the financial incentive has almost taken a back seat to the community that’s formed on the platform.
“We group people together who all seriously care about reaching their fitness goal. Since users are all motivated, and all are paying to see the same goal through, a great community is formed on our app from people with aligned incentives.” - Colm
Rather than being concerned about losing their money, people are buying into a community of like-minded people encouraging and motivating them to achieve their fitness goals, which I think is awesome.
But let’s think beyond fitness because that’s where Cadoo would like to head as well.
“In ten years, I’d like Cadoo to be a mainstream platform for people to reach any kind of goal they have set for themselves.” - Colm
In the near future, this may include calisthenics and screen time, but there’s no shortage of areas where Cadoo could help both you and I follow through on our goals. As long as there is a way to track it, the team at Cadoo will find a way to help you put your money where your mouth is. According to the tweet above, it works!
Thanks, Kelvin, for the story! See you all next week 👋
Leo