20VC: Turning Down Apple & Getting Funded By Chamath @ Social Capital with Dhananja Jayalath, Co-Founder & CEO @ Athos

Dhananja Jayalath is the Co-Founder & CEO @ Athos, creating the new standard for fitness by changing the way we train the human body. Athos have funding from our friends at Social Capital, Felix Capital and DCM Ventures just to name a few of their investors. Prior to Athos, DJ turned down a job with Apple straight from University to pursue his vision of creating the next generation of consumer fitness wearables with Athos. In Today’s Episode with DJ You Will Learn: How DJ went from University to turning down Apple to founding Athos? How did DJ come to meet Chamath @ Social? How was the fundraising experience? What did Athos do well and what would DJ like to improve for the next round? How does DJ approach iteration and testing within product testing at Athos? What are the lessons DJ has learned in the manufacturing and iteration process with Athos? How does DJ approach business models for Athos today? Does DJ agree that the winners of hardware will be determined by software? Items Mentioned In Today’s Show: DJ’s Fave Book: Velocity: The 7 New Laws For A World Gone Digital As always you can follow Harry, The Twenty Minute VC and DJ on Twitter here! Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  This is the 20 Minute VC with your host Harry Stebbings, who you can find on Snapchat at H Stebbings, for behind the scenes of all things 20 Minute VC. But today's show, and joining me today for this Founder's Friday, is a founder whose product I simply love so much that I reached out to his investors and asked for an intro. So a huge thank you to David Cheng at DCM for that. So joining me today, we have Dananjir Jayalath, aka DJ, founder at Athos. To me, one of the most exciting companies in the consumer hardware space. And Athos is creating next generation wearable technology that really gives you detailed insight into how your body works as you move. That insight is then distilled into a beautiful user experience that will enhance your existing routine. Certainly helps me keep in shape with all the mojitos.

• 0:42Harry Stebbings?

  And Athos have raised funding from some of the greats, including Chamath at Social Capital, our very good friends at Felix Capital, and DCM Ventures. As for DJ, he really is a born entrepreneur, having turned down a role at Apple on leaving university to build Athos into the fantastic company it is today. But before we meet DJ, whether you are a startup, one man company, or a global bank like Deloitte, design should always be central to your thinking. And with that in mind, there's no better place than DesignCrowd, the online marketplace for custom graphic, logo, and web design that will allow you to outsource design projects to over 500,000 registered designers around the world. And what makes it so accessible for me is the ease. Three simple steps: launch your project with your requirements. Two, sit back and wait as all the designs come pouring in from around the world,

• 1:26Harry Stebbings?

  traditionally 60 to 100 per project, which you can then select and choose your favourites. And then finally, once you've selected your favourites, the winning designers will send you the designs. Job done, and all in three days. So check them out at designcrowd.com/vc and enter the promo code VC100 for a fantastic $100 off your project. But enough from me, so it's now time to hand over to the main man, DJ, founder at Athos.

• 1:56Speaker 01

  You have now arrived at your destination.

• 2:00Harry Stebbings?

  DJ, it's such a pleasure to have you with me on this very special episode of Founders Friday on the 20 Minute VC. I'm an immense fan of Athos, as I just was telling you, so thank you so much for joining me today.

• 2:11Speaker 02

  I appreciate that. I appreciate being on the show. There's been some great company on the on the show as well. Congrats on your end.

• 2:18Harry Stebbings?

  Now, I'd like to get started by by hearing about you and the founding story of how you started Athos from university and and turning down a job at Apple. And so what's the founding story for you and the aha moment with Athos?

• 2:31Speaker 02

  Yeah, so it's been an incredible journey, just thinking about it from the history of things. The reason we started was because Chris, my co-founder, and I went to the gym a lot and we wanted to find a way to get more of the time we spent at the gym. How to get better? Are we doing things right? Are we doing the right things for ourselves? There was really no way of doing that. The technology out there wasn't really helping us be able to get better and we couldn't afford a personal trainer. So we wanted to make something that could give us that experience where some like something could tell us how to do things right, how to get get better, how to get more of that time we spend at the gym. We started looking around to figure out a way to capture information that could tell us all these things. To make that possible, we kind of started looking at like, what are the existing ways people will do this?

• 3:15Speaker 02

  Xerometers, gyroscopes, they weren't really very good at understanding exactly what's going on. And for us, it was really important to be able to give feedback that actually we could take away and do something immediately and be meaningful and actually affect how we worked out. There was nothing that was accurate enough or gave us valid enough data that we could come to valid conclusions that would result in us being able to provide this information. So we started looking at what is the medical space used? And that's where we came across the science of electromyography. It's been studied for about 60 years, been used in medicine and in research. So it was the most validated way of understanding what's going on with your body. So we decided that, you know what, we're gonna use this science to give feedback and capture this information.

• 4:00Speaker 02

  The problem was that these machines cost sixteen thousand dollars, you gotta roll them around, there's wires everywhere, sticky electrodes, it's a big mess. So we kind of had to, I I would say, there was a bunch of naive confidence that said, um, we can capture, take the same system and get the same signal. And we can build a product that everybody else could afford, because you know, if you can't afford fifty dollars for a personal trainer, you definitely can't afford sixteen thousand dollars for a E M G machine. So we kind of put our heads down and kind of went at it, trying to figure out how do we capture the signal. And one of the things that was really important and we recognized was that it's very hard to get people to adopt new technology if they had to build a new habit around it. But if you integrate the existing routine, they're much more likely to use it.

• 4:43Speaker 02

  We were like, okay, when you go to the gym, you always changing your gym clothes, that's part of your routine. We should build the technology into the gym clothes so that you don't have to change your routine, you just, this is just your new gym clothes. And what that meant was we need to build something that looked good, felt good, and could go through a washing machine and a dryer. So you didn't have to do any behavior change. Those kind of gave us a boundary conditions and we iterated towards it. We we put our heads down and just created how to capture the signal in a in a very different way. And then create the materials that can capture the signal without having to use sticky electrodes. We were doing this as our final design project um at the University of Waterloo, which is where we went to school. And one of the requirements in four years is that you have to create something, it it's a very unbounded problem.

• 5:27Speaker 02

  And we thought that was the best opportunity for us to like work on this stuff and still get credit for schoolwork. We were presenting it at a symposium and this this guy came by, he was better dressed than everybody else, wasn't he? We didn't know who he was, we kind of talked at him for ten minutes. And he said, really cool guys, and he he left. And then a week before final exams, he sent us an email saying, hey, uh, my name is Chima, um, I went to the University of Waterloo, I'm a V C. Uh, I'm I was also a executive at Facebook, I would love to talk to you about uh funding you to keep working on this. We're like, holy cow, this is amazing, I would love to talk to you. But we haven't gone to school in the last three months, so we kind of need to cram for exams this week. How about we talk to you right after exams? And then we had a call with him two days after we finished our final exams.

• 6:12Speaker 02

  We kind of went on a Skype call and he's like, just come down here and talk with me. And so the next day somehow we were on a flight at six in the morning. We got here, I think we we had a C deal about three hours afterwards. It was a an incredible, incredible day. And then we, at this point in time, Chris and I had already signed job offers to join. I was going to join Apple because I was going to be joining um analog devices. Idea was like, let's just like make some money and work on this on the side so that, you know, we can make a better prototype and figure out how to do everything else. So it's like, okay, cool, this we have the the opportunity of a lifetime, let's go, let's go do it. And so we kind of had to figure out how to uh how to write a rejection letter to this job that we hunted really hard for.

• 6:57Harry Stebbings?

  What a fantastic founding and investing story that is. Um, I I I I'm intrigued because you said there about uh iterating, but going back a bit with the product. And you said about kind of iterating and testing. And and designing the product uh is is often a sticky point for founders of hardware products. And most hardware founders like manufacturing is the biggest pain point. Um, and so and so actually Mamun at Social, who's uh Chamath's partner, obviously, uh wants to know, how was the experience for you? And how do you approach iteration and testing within product development for Athos?

• 7:29Speaker 02

  Yeah, so for what we're doing, there is a ton of different challenges. One of the things that's like very unique to us is that no one has ever integrated technology into clothing the way we've done it. Um, there was no manufacturing process when we started doing it. We work with one of the best manufacturers in the world. They call it M A S, based in Sri Lanka, and they do work for Nike, Lululemon. Even at a facility like that, there was just no way of manufacturing this technology and how to do it. So we spent a lot of time actually developing the manufacturing process, the tools that go into it. How to how to integrate technology and apparel in a seamless way that can be mass produced.

• 8:09Speaker 02

  And then developing testing standards and how to create testing and how to do how to do washability testing. Because, you know, standard ways of doing these things weren't good enough. Or weren't able to cover all the things that we need to cover with our product. When we think about designing and iterating on these things, like, speed is very crucial because otherwise you kind of lo- lose your ability to iterate. We optimize a lot of the, the details of how we manufacture, we, we fly to different places a lot. Um, we understand and we work really collaboratively with all of our manufacturing partners to really optimize our development cycles to be very fast and very iterative, um, while we keep a very stable manufacturing process.

• 8:54Harry Stebbings?

  And speaking of fast iteration there, I actually had, uh, Ben Einstein at Bolt, a hardware investor, on the show the other day, and he said that speed's great for software companies, but it will cripple hardware companies if not managed with caution. Uh, to what extent do you agree with this statement? I'm, I'm intrigued. Obviously, you said that about rapid product iteration. So what do you think of this?

• 9:14Speaker 02

  I think the key point in there is that it's very important to manage it properly, which is making sure you capture the right metrics and you do enough testing around things. Definitely things that we've learned over time. You need to test everything and keep structured logs about like what, what's going on, what's breaking, what are you iterating? What's the next version? Why are you making that? But I think it's also very important to iterate really fast and like the speed is actually, uh, developing a manufacturing and hardware development cycle that is very rapid and making the right trade-offs to make that fast is actually a crucial, um, advantage.

• 9:54Speaker 02

  I think a good hardware company needs to have because you need to develop things, like, there's a lot of things that, um, help software companies by, because they are able to iterate fast. If you can take all the good things about being able to iterate fast, which means that you can test and try things out and get feedback and make things better without waiting a three-year cycle or one-year cycle to make something new and try it out. You actually have a higher probability of being successful. Like, you have to, you have to fail a bunch of times before you can get it right. The faster you can fail and the faster you can learn from those failures, the better, uh, the faster you can make an amazing product.

• 10:30Harry Stebbings?

  And I I have another question from an investor on similarly on that kind of vibe in terms of user testing. And I'm intrigued to hear, and so is Frederick Court at Felix, as to to your biggest learnings from watching users and consumers. Uh really play and and consume Athos as a product. So what's those learnings been?

• 10:49Speaker 02

  Yeah, I mean, there's there's just been a ton of things from from, I think one of the earliest ones is that. It's very important to disambiguate what you want for the product versus what the users want. Because I think one of the things that we definitely made the mistake of earlier was to think about what what are the versions that what what do we want from the product and just build that. Versus really listening to and looking through how our customers using it and then really addressing those needs and making the product really work for those customers. And then I think the other one is just simpler is always better, like make it as simple. And as targeted as possible to deliver the value they're expecting.

• 11:27Harry Stebbings?

  Absolutely. No, I'm completely with you on simple and and and simple also translates to the software element. Um I, as we said earlier, I've got uh the app or the upper body. Um so I'm fully aware of the brilliance of the product and the simplicity of the software. So I want to talk about the software now. And and the integration of hardware with beautifully designed software. And to what extent you agree with. A statement made by Andreessen that software is what distinguishes hardware winners. Do you do you agree with this statement of the importance of software in this hardware world that we're in?

• 11:57Speaker 02

  I I kind of don't think about it in terms of that. I think people buy experiences and people want to be part of experiences. And for us, we're we're really focused on delivering an exceptional experience to all of our customers. All of our athletes should be able to grab the gear and get a much better training experience with us than without us. And that's that's the only part that matters. And to make that possible, you need to have exceptionally designed hardware that is simple, reliable, consistent. As well as software that provides a value, um simplicity that. Everybody can have the the same takeaways and makes their experience with us fantastic.

• 12:35Harry Stebbings?

  And and I want to touch then on business models for hardware and with with the rise of. The likes of Fitbit who have their premium software. I want to discuss the alternatives available to you in terms of business models. So so how do you approach the business model conundrum? And are you entering into the hardware enabled services where you have a similar form to Fitbit with the paid product? Up front and then the optionality for a premium software to accompany it. Is that the business model that you're going to optimize for in the future?

• 13:03Speaker 02

  Honestly, I think everything we do is iteration. Let's figure out like what are all the different things we can try and let's figure out what are the best things to be. Uh for us to try and take an approach and like test and iterate on those things. Um and I think business model is also one of those things. There are so many different um opportunities available. With the product we're doing, there's there are almost three different aspects. There is the apparel itself, there's the hardware components as well as a software. And there's very different combinations of ways you can think about generating revenue on that. We're we're really just focused on like the right now, it's like, let's uh let's go through a very traditional model where. The clothing and the hardware you purchase, the physical product and the software is completely free.

• 13:47Speaker 02

  But over time, based on how people are using on what value they're getting and how they generate value, we'll optimize to. Um get the the pricing model in a way that as many athletes as possible can be using our product. And at the same time, everybody can be successful.

• 14:02Harry Stebbings?

  And and you mentioned that athletes using the product and it slightly reminds me of Beats in terms of the brand. And so I'm intrigued as to how central a role you you consider brand to play in the evolution of Athos. And and what you think the core components are to building a brand in this space?

• 14:18Speaker 02

  I think brand is an exceptionally important thing in this space, especially to really distinguish yourself and separate from everything that's going on. And I think brand is beyond just being aware of what you're doing, it's also building an experience that like. Athletes and everybody associated with wanna be like that that wanna have a belonging to. And that that generates validation and trust and then helps you um expand the market as well as to capture the mind share. So I think brand is a core element of things that you need to build to be successful in this in this space.

• 14:54Harry Stebbings?

  So what do you do then to build that brand in this space with the kind of rise of millennials and and potentially their lack of consumer loyalty?

• 15:01Speaker 02

  Um. I think lack of consumer loyalty is sort of a hard word to say. I think it like if if if there's a lot of undifferentiated products that have no reasoning for brand loyalty. Then it's completely understandable when the switching cost is low. But at the same time, if you build a product experience that delivers value and you trust, I think that's where the the most value of a brand comes in, where you can capture somebody's trust, at which point, I think, especially with things like health and fitness. You want people to trust the thing that's giving you advice on your health and fitness to be to be associated with the brand that trusts you. And then that that is what kind of retains you in there because you you're not going to go to a system that you don't have trust in.

• 15:44Speaker 02

  Um. Just because it's lower qua- quality or or sorry, lower price.

• 15:48Harry Stebbings?

  But I want to then touch on, it is a V C show, so I feel we must touch on this at some point, and that's the the funding. And you mentioned the kind of social's uh entry into your funding path, but you have raised further funding. So I want to talk about the financing and and how the fundraising process was for you, how the rounds differed. So let's start with that. How was the fundraising process as a whole and how did the rounds differ as you've progressed?

• 16:10Speaker 02

  I find it very hard to comment in how the fundraising process has been. I feel like this is the only company I've worked at and have started, so I've only been through our fundraising process, so I don't really know how to compare it per se, but I feel we like we've been really fortunate in this whole process that we've had an amazing set of investors and we've been fortunate to pick and choose which ones we wanna have as po- with us on this journey, really crafting a way that like can help uh drive the product and give us a lot of different perspectives on where the world is headed and how we should build the products for the future.

• 16:45Harry Stebbings?

  And what do you think you did well at then? And what would you like to improve on for the next funding round?

• 16:50Speaker 02

  Um. Looking back through the history of things, I I I always feel like, wow, I can't believe somebody funded on that because we've gotten so much better over time. Um. So I think for me, it's like always let's make sure we're getting much better and demonstrating real progress. For us, I think it's it's just been how far we've come on the technology, the customer validation, those things have been um really useful and like for the next round, I I want to make sure that we we articulate that and then capture the the vision and where that that really expands to and how massive an opportunity this is. Uh. Better and better as we get better and better at understanding and discovering and validating that pathway.

• 17:29Harry Stebbings?

  And I wanna finish now on a quick fire round. So I say a short statement and you give me your immediate thoughts. How does that sound?

• 17:35Speaker 02

  Sounds great.

• 17:36Harry Stebbings?

  So about sixty seconds per one. So let's start with your favourite book and why?

• 17:41Speaker 02

  The Seven Losses of Velocity by Stefan Olander and um the CEO of AKQA. Just because I think they they talk about the future and how interaction paradigms are changing and how like people's behaviour patterns have been. And I think I find it super fascinating as to how um other people are thinking about just the the world evolving and where that's headed.

• 18:06Harry Stebbings?

  And then the best piece of advice given to you, what's it been?

• 18:09Speaker 02

  You're the amount of times that you'll have a right, you'll make the right decision is just about the average of the batting average of a major league um hitter, so about point three percent of the time. So it's okay to be wrong. The most important thing is to not make the same mistake.

• 18:25Harry Stebbings?

  And then pros and cons of being founder of Athos. What are the what are the benefits and what's the downsides?

• 18:31Speaker 02

  I would say that one of the benefits is that I get to do the thing that I love the most doing. Um I get to work on some amazing problems, get to create the future with some of the best people in the world. Um I can't imagine doing anything else. The cons are it's a startup. You always have a lot of problems to solve, challenges that you're faced with every day, and learning to love the grind is the most important thing.

• 18:52Harry Stebbings?

  Penultimate question, the morning routine for you, what's involved?

• 18:55Speaker 02

  Drink coffee, um workout.

• 18:58Harry Stebbings?

  Coffee before the workout, espresso?

• 18:59Speaker 02

  Um yeah, I'm not a very functional human being before coffee.

• 19:05Harry Stebbings?

  And and then I wanna finish on the next five years for you and for Athos. What have we got in store?

• 19:10Speaker 02

  We're really focused on capturing and really enabling high school athletes to perform at their best. How do we do that is gonna evolve over time as we expand the market of all these high school athletes that really could use the best trainers training them, making sure that they're doing the right workouts, making them the best athletes possible, making sure that they're doing it as perfectly as possible. And for the next while, we're just gonna be focused on going after that market. For me, it's like, how do I become a better and better um CEO and how do I help lead this company to be a massive success?

• 19:46Harry Stebbings?

  Well DJ, thank you so much for coming on the show today. It's been such a pleasure hearing the Athos story. I'll continue to get a completely out of proportion body with my upper body and not my lower body, but I thank you so much for giving up the time today. Of course, thank you for having me.

• 20:02Harry Stebbings?

  Absolutely fantastic to have DJ on the show and hear the incredible journey of building Athos into the company it is today. And if you're loving the show, then you can follow me on Snapchat at H Stebbings for all the behind the scenes footage of what goes on at the 20 Minute VC. Likewise, you can sign up for updates and new episodes on our newsletter from the website, the20minutvc.com. As always, we so appreciate all your support and look very forward to bringing you Monday's episode.