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From the ground up: Building a startup in Ottawa

From the ground up: Building a startup in Ottawa

Posted by PanamericanWorld on April 25, 2016

Some nights, Lee Silverstone doesn’t sleep. His insomnia has developed since he co-founded Gymtrack two years ago with his childhood best friend, Pablo Srugo.

Silverstone can see the office from the 10th floor of his Centretown apartment. At times, when he’s restless, the sight is tempting enough for him to give in and head to work.

“Some nights I don’t sleep and just spend my whole night in the office. When you’re this excited about something all the time, it’s hard to sleep.” Silverstone gets inspired at night. He’s often startled awake by an idea and up until 3 or 4 a.m. tapping on his laptop.

“That kept happening so often I was like, ‘F’ this, I’m actually going to use these hours to be productive.”

On average, he clocks four to five hours of sleep. You couldn’t tell. The 24-year-old is all high-energy talk and vigorous hand gestures.

“I drink a crap ton of coffee every day. Like an unimaginable amount that people are like, what the hell’s wrong with you?”

Gymtrack, an Ottawa startup co-founded by Silverstone and Srugo (also 24), allows gym members to track and monitor their workouts with smart technology. In its two years, Gymtrack has seen a stint at a Silicon Valley accelerator, several million dollars in investment and customers in Algonquin College and Anytime Fitness, with more lined up.

But the startup has also had to balance multimillion-dollar budgets, fix glitches with the technology and they did lay off a third of the company’s 25 workers in early March. 

This is happening as high-tech employment levels in Ottawa have dropped to levels not seen since the mid-1990s, according to a Statistics Canada analysis. The National Capital Region went from the most tech-intensive workforce in the country in 2001 (more than 12 per cent of total workers) down to the national average (less than six per cent) in 2015. If Ottawa is looking for a Nortel-esque revival any time soon, it needs tech startups such as Gymtrack to succeed.

“If this isn’t a billion dollar company, I see this as a failure. Honestly,” said Silverstone. “I think we have such a massive opportunity in front of us to affect so many peoples’ lives and do so much that I think we can easily get there. And if we don’t, there’s no one to blame except for myself.”

GymTrack co-founder, Pablo Srugo, hard at work in the Bank Street office.

GymTrack co-founder, Pablo Srugo, hard at work in the Bank Street office. DARREN BROWN / OTTAWA CITIZEN

Started from the bottom…

Srugo and Silverstone met when they were both 10 at a Jewish private school in Ottawa. Both had dreams of pursuing traditional careers: Srugo as a lawyer, Silverstone as a doctor.

When they hit university those dreams were gone. Entrepreneurship, alternatively, offered an intriguing path of creativity and independence. Going into business together made sense for the best friends. 

Same goal, different people. Silverstone and Srugo are yin and yang. Silverstone is “really energetic, fast-paced, outgoing, likes to do things just quick, quick, quick, go, go, go,” said Srugo. Srugo is “an intellectual, a very smart person” and a “superhuman” who, as a roommate, took care of cleaning, bills and taxes, said Silverstone.

At work, Silverstone is talking to investors, networking in crowds, while Srugo handles the office, strategizing and managing.

“Lee and I are a good match because it’s hard if you lean too much in one direction,” said Srugo. “If you’re too much like me, you maybe don’t go out and do those things that change your business overnight. But if you don’t have enough of (me), you change your business every single day and you just can’t do that.”

Gymtrack was conceived in October 2013 when Silverstone and Srugo lived together in “one scummy house” (Silverstone’s words) on Fifth and Bronson, near the multimillion dollar homes on Madawaska Drive. 

The pair had just graduated (Srugo from Carleton University, Silverstone from the University of Ottawa) and were running a business together called MyTutor, a 30-person student tutoring company Srugo founded in fourth year, his first step into generating his own money. For 10 hours a week they’d run the business, then spend another 40 hours trying to cook up startup success.

At the same time, Silverstone and Srugo were hitting the gym three to four times a week, right when wearable fitness technology was getting hot. They started digging. Then it clicked.

“It was like: ‘Imagine if you could walk into the gym and everything you did was just tracked automatically’,” said Srugo. “It really was a light bulb moment. I know it’s a cliché. But I remember the room. There were four of us, me and Lee and two other guys. We were like, ‘Whoa, that could be cool. That could be huge’.”

Gymtrack’s product would do away with archiving exercises in a notebook. Every rep completed, every weight lifted, every calorie burned could be automatically catalogued through a wearable band that would sync with sensors attached on gym equipment, and feed the information into an app. It would be a huge benefit for those wanting to monitor their progress and stay motivated. Plug your earbuds into your phone, and the app would give instant auditory feedback, guiding beginner and advanced gym rats alike through a pre-set or individually crafted workout.

Over time, they hoped to add a community aspect, where friends could compare numbers and monitor a leaderboard. The average gym, so stripped of any technology more advanced than a television screen on a treadmill, could be made fun. 

“There’s still no one today that sells a system to gyms with the idea of tracking everything in the gym and integrating with the equipment, which is really, really cool,” said Srugo.

To see if their idea was attractive, and before the product was even made, Srugo and Silverstone blitzed 25 gyms in Ottawa in two weeks, unsolicited. They pitched gym managers and asked if they’d like to sign a letter saying they’d consider purchasing the product if it existed. All 25 signed without hesitation.

The next five months were spent building a core team to create technology that counts reps automatically. It wasn’t easy, but the pair called on their small network and eventually found software and hardware directors. Then after a hunt that took “forever because it was so unique,” they found a data science director to build Gymtrack’s first prototypes.

“They were these bulky things that would never fit on a machine,” said Srugo. “But they had a little light that went on that counted reps, so something was working.”

Then, the big break.

Silvestone and Srugo were accepted into Startup Garage in February 2014, a program that funds and supports student entrepreneurs in Ottawa. That netted $20,000, plus a free space to work at Invest Ottawa for three months. They sold MyTutor several months after that, giving them more money to focus full time on Gymtrack.

Meanwhile, Gymtrack grew from two people to five, and had a prototype. They had raised around $100,000 from friends, family and close connections.

Then a curveball — the good kind. Silverstone was in Montreal in late summer 2014 for a startup festival (aptly) titled Startupfest. He was working the crowd during a meetup when he was introduced to a man named Dave. Silverstone pitched him without thinking.

That man was Dave McClure, a well-known “super angel” investor in San Francisco and former Facebook investment fund director. (Angel investors are wealthy individuals who typically provide money to startups just getting on their feet. McClure was a “super angel.”)

This the wearable that GymTrack is developing to track and monitor workouts with smart technology.

This the wearable that GymTrack is developing to track and monitor workouts with smart technology.DARREN BROWN /  OTTAWA CITIZEN

McClure founded the hyper-competitive accelerator 500 Startups in Silicon Valley, a several-month program startups can enter for mentorship and a small amount of capital. In the round McClure was gathering at the time, around 2,000 startups had applied and only 30 would make it.

McClure handed Silverstone his card on Friday. On Saturday, they continued chatting, quickly forming a bond, and McClure extended an invitation: “You know, what you’re doing is awesome. I really like it. If you guys want 500 Startups, you’re in.”

The program started two days later. Either Silverstone or Srugo would have to move to San Francisco for three or four months. McClure gave them $100,000 to show his commitment. Srugo was bewildered.

“I’m like, ‘What is 500 Startups?’ And I look it up and I’m like, ‘Oh my god, this is big,’” he said.

“So we’re like, screw it. Let’s do it.”

The main point of 500 Startups, besides mentorship and training, is called Demo Day — where participants “pitch” an exclusive room of 200 or so investors. The hope is that several (or more) will bite.

Silverstone, the point man for sales and networking, headed to San Francisco for the next several months, living on top of a liquor and taco store in an area that crisscrossed between Google and Facebook employees on their way to work, and crack addicts lighting up near the subway. Srugo manned the ship in Ottawa.

Silverstone called his time at 500 Startups “hugely life changing.

“In San Fran, it’s: ‘Don’t waste your time on a law degree, don’t waste your time on an MBA, just go do it,’” said Silverstone. “I always felt that way. I always had that philosophy of just doing things that could be massive and trying to change the world. And everyone would always say, ‘Well don’t try to change the world, just try and change this one thing because that’s doable! No one can change the world.’ And I was always like, ‘F’ that.

“That’s the mentality of Silicon Valley. To do these massive things that are disruptive and people say you can’t do, you shouldn’t do. I love, love, love that.”

Gymtrack’s entry into 500 Startups led to coverage from technology media outlets such as TechCrunch, and Canadian investors took notice. Gymtrack ended up raising a $2.5 million seed round, typically initial capital used to fund a young business, from Real Ventures, White Star Capital, Relentless Pursuit Partners and the Business Development Bank of Canada.

“We were complete nobodies,” said Srugo. “Then we got into 500 Startups and everybody’s like, ‘Oh my god, Gymtrack! They’re huge now.’ And nothing had really changed!”

Nearing the end of 500 Startups, the team had come up with a 3D-printed prototype that (sort of) worked — if you put it in the gym, the plastic would break and the motion sensor was sometimes inaccurate — but that kind of result was considered “normal” six months after starting full time, said Srugo. Crucially, the pair also closed deals with their first two major customers: Algonquin College and Anytime Fitness, the largest fitness company in the world by number of locations, with 3,000.

Algonquin was secured after Silverstone and Srugo were introduced to a member of the college’s Applied Research and Innovation program, where they would eventually work on a full commercial deployment aimed for May 2015.

As for Anytime, Silverstone happened to be in the Valley the same time the CEO was.

“Lee pitched him the idea and the guy said, ‘This is awesome, exactly the kind of thing I’m looking for five years out, so let’s do a pilot,’” said Srugo.

Their first customers in hand, the company set prices to outfit the gym’s equipment with sensors and provide wearable bands ranging from $3,000 to $25,000 depending on the size of the gym, plus a monthly subscription fee between $400 to $1,500. 

All in all, 2014 was ending on a high note.

Wayne Boucher, fitness and wellness co-ordinator at Algonquin College, shows off old and new technology with a Gymtrack wearable technology on one arm and his notebook in the other.

Wayne Boucher, fitness and wellness co-ordinator at Algonquin College, shows off old and new technology with a Gymtrack wearable technology on one arm and his notebook in the other. DARREN BROWN / OTTAWA CITIZEN

…Now we’re here

Gymtrack moved its growing team in early 2015 — from about 10 people to 30 — into a 6,000 square foot office on Bank Street and Somerset Street West, right above the Dollar It!. 

Their office looks like a lab designed by Ikea. In fact, when Srugo and Silverstone secured the space, they raided the megastore and came back with a few dozen desks and chairs, some fake plants and knick-knacks. 

The office is roughly divided in half. On the right: a long row of meeting rooms with a small kitchen, couch, television and two Xbox game controllers at the back.

The team’s employees are on the left side with administration, sales and marketing up front, product development (including software and data science) in the middle and hardware behind it. A fully stocked test gym is at the very back.

This February, the team was busy prepping for a big project: a soft launch one month later at Algonquin on March 7. A pilot the year before, also at Algonquin, experienced several hiccups.

For one, they had an older version of their wearable which was “super prototype-y,” according to Srugo, and offered a more limited number of tracked exercises. Then there was the smart pin idea. Almost all workout machines have slots for a pin. Srugo and Silverstone’s idea was to switch it out with a smart pin, and presto, a smart machine was born. But in practice, it was not nearly that easy: the pin had to be facing down for it to work, would sometimes not track reps properly and had a short battery life.

“We just tried to push out a technology that wasn’t there,” said Silverstone. “Users would go on the platform and use it for a workout and be like, ‘I got 50 per cent of my data.’”

The tech team went back to the drawing board, and came up with a repcounter, a small box that clips onto any exercise machine. It addressed the core issues the pin had raised. Battery life improved from two weeks to a year. Accuracy issues vanished as the box had room for more sensors.

Meeting time

At noon on this past Feb. 11, the Citizen watched as Srugo and four others gathered in one of Gymtrack’s meeting rooms, poring over an Excel spreadsheet for the Algonquin soft launch. The college’s Fitness Zone had 25 weight stack machines, a double rack of dumbbells, and a “s**tload of cardio,” said Srugo — in other words, not a small amount of work to outfit with sensors.

The group bounced back and forth ideas on making the new launch better than the previous one, trying to apply lessons learned from last May. Then Brooke Hansen, the team’s customer support assistant, had a burst of inspiration. What if the team incorporated the workouts of Wayne Boucher, Algonquin’s ever-present head instructor, into the launch?

Boucher is a big, burly man with a loud laugh, tattoos blanketing both arms and infectious energy. If Hansen’s idea panned out, Boucher would craft his own workouts for Gymtrack’s app as a challenge to users.

Srugo clapped once, loudly. “Yo, we should just launch with that. That’s dope.” (Dope — for the uninitiated — can mean “cool,” and was a word thrown around a lot at the meeting.)

Srugo ended with a verbal pat on the back: “Definitely a lot of progress. A lot of great ideas.”

At a second meeting a week-and-a-half later, the group checked in on progress and debated, among other things, the posters for the soft launch. 

After a discussion over the text, Rob Woodbridge, vice-president of marketing, suggested something simple — they settled on “Tap here, get fit.” The posters would be clean, with plenty of white space, something that stood out from the colourful chaos of the gym.

Srugo said he felt “good” about the launch, as long as the posters, email blasts, digital marketing strategy — essentially everything they had talked about for the past several weeks — got done.

And then, some difficult news

Five days before the Algonquin soft launch on March 7, Srugo reported that Gymtrack had laid off nine people out of 25. 

“Feedback from venture capitalists was, ‘Things are really good, what you guys are doing is amazing, but I need more numbers. I need more gyms, I need more user data.’ That kind of stuff,” said Srugo. “And we said, ‘Okay, we’re going to need more time to get those gyms and those user numbers, so how do we accomplish that?’”

The solution was to lower spending on Gymtrack while they figured out how to increase numbers. Layoffs were one of the only options that made sense.

“(The layoffs) were stressful for sure,” said Srugo. “But everyone took it well … which I think is a testament to the fact that they worked with people that care for the company and aren’t just thinking about themselves. I’m okay with it just because I knew it had to be done. I’m not regretting it.”

Andrew Doucet, 23, was one of the software developers laid off at Gymtrack. He had nothing but kind words about his time at the company.

“It was awesome. One of the best places I think you could possibly work at. The culture, environment, it made it feel like it wasn’t a job whatsoever. Even with the high amount of stress, the very long work hours, I still went to work everyday with a smile on my face.”

Benjamin Sweett, 22, another laid off software developer, called his experience “fun and challenging.” He even had several suggestions where the company could further evolve, including user experience.

“We’re such a new product and kind of squeezing ourselves into an area where people don’t normally use technology,” said Sweett. “There are a lot of old people that go to the gym that don’t want a device in their hand or something on their wrist.

Members of the GymTrack team discuss the user interface of sign-up and log-in procedure on their smartphone app.

Members of the GymTrack team discuss the user interface of sign-up and log-in procedure on their smartphone app. DARREN BROWN /  OTTAWA CITIZEN

“Gymtrack needs to be able to get people up to speed with how it works without an ton of explanation. As a tech person, it comes very naturally for me to use Gymtrack. Not everyone that goes to the gym is like that.”

Srugo agreed user experience is a “huge, huge component” any new technology needs to deal with. Silverstone acknowledged the “really unique challenge” they have in tailoring the product to suit each gym user. Both said the company is actively pursuing a hands-free system.

“The reason we’d want (a hands-free system) is to improve the user experience and make it less of a technology,” said Srugo. “The less extra things you have to do, the more it seems like (the wristband) is just a little thing you put on, then you just do your normal workout.”

Algonquin launch: The good and the bad

Just before the big launch at Algonquin on the first Monday of March, Srugo and a small handful of his employees spent the weekend buzzing around the Fitness Zone gym, outfitting its equipment with smart technology. It took about an hour — way quicker than it had in the past.

Come Monday, the Algonquin gym was slowly picking up before the lunch hour rush, with around 30 young, tank-topped men and women grunting and puffing their way through rigorous lifts and squats. Near the gym’s entrance and at the reception desk were clean white posters with red font that read “Tap here, GET FIT” — just as Woodbridge had suggested. A box of plastic-rubber bands and a row of 10 wearable smart pods, which slot into the bands, sat at the desk.

No one at the gym was using Gymtrack’s wristbands just before lunchtime on Monday, but Srugo and Silverstone said their big marketing push mainly took place behind the scenes through Facebook and email blasts. As the week rolled on, they said more and more people (93 at week’s end) downloaded Gymtrack’s app to their phones.

The week after the launch, Srugo called it “really good, really positive. Everybody’s saying, ‘Oh, this is way easier than I thought it would be,’ which is much better than the feedback we had at our original launch day last year, so those are super big improvements.”

Boucher, the gym’s head fitness and wellness co-ordinator, as well as the Wayne in “Wayne’s workouts,” said Gymtrack has the potential to be a huge benefit for athletes of all levels.

“Tracking keeps you honest. Because when a client works out with me, that’s great, of course everything’s done correctly,” said Boucher. “But when I don’t see them, are they telling the truth about all the sets and all the reps and weights lifted? Now I can see.”

Boucher, however, said Gymtrack’s soft launch this March was hurt by “poor timing” as many students were away on placements or loaded down with studying for finals.

“I’m still optimistic about the product, but I literally just think it was poor timing,” said Boucher, who estimated the gym saw a 30 per cent reduction in March of the 1,100 people that would come in on a typical busy day. “The people that did use it told me they really enjoyed it. But that’s such a small number.” 

Srugo said the company knew the soft launch would be during a slow part of the season for the gym, but said “it’s not really a concern for us.”

Gymtrack opted not to do the soft launch in the busiest months of January or September because “we didn’t want to put anything in there that wasn’t perfect, so we were just testing some more stuff and made changes to the product to make installation easier.”

Now, the focus will be on a hard launch in September, with new features, for the gym’s most crowded time of the year. 

Eyeing the future

A year ago, Gymtrack found a fan in a four-time Olympian and gold and silver medalist Simon Whitfield who is now involved in Relentless Pursuit Partners, an investment firm he co-founded. The retired triathlete heard about Gymtrack through his sister, an engineer and senior project manager who lives in Ottawa, and popped over to the company’s office last year to try the tech in its outfitted gym. 

“To be honest, it was one of those fun moments of like, ‘How did this not exist before?’” said Whitfield. “I was impressed. They were addressing something that in my career I certainly could have used in terms of being able to actually track progress and have a quantifiable metric about what’s going on and where you’re at. And that’s why I made the investment.”

Two angel investors, an angel fund investment firm and an early stage venture capitalist the Citizen talked to were, above all, impressed by Srugo and Silverstone, a key factor investors keep in mind when deciding whether to finance embryonic startups who don’t yet have much to show.

Brian O’Higgins, co-founder of Entrust security company and an angel investor in Gymtrack, said the pair “came across very well, which is unusual for people so young.”

Janet Bannister, a general partner at Real Ventures, an early stage VC firm, called Srugo and Silverstone “terrific. They’re very street smart, they’re a good complement to each other, they work well together as a team. In terms of the vision, we immediately saw a huge potential opportunity and something we wanted to get involved in.”

Parm Gill, an Ottawa angel investor, decided on the spot to invest in Gymtrack after he saw Silverstone secure a 500 Startups spot. The only way he sees the startup failing is if it, for whatever reason, mishandle its finances, “which I don’t see happening.

“They’re very responsible with the way they’re spending money. There are so many large gym chains that have so many customers. So I don’t know how it could fail, to be honest.”

A working technological model in hand, Srugo and Silverstone are now eyeing the future with a vision of scaling and deploying to more gyms as close as Ottawa and as far away as Europe. Their target is a few hundred gyms in the next little while.

On the personal side, two years into what has been a wild ride, Srugo and Silverstone are relishing (a little) more downtime. 

Srugo said work-life balance is attainable, even if he freely admitted it’s near impossible to leave work at work. He has a girlfriend of three years, Alicia, and sees his family every Sunday for a meal. He also plays soccer twice a week, rock climbs and will (sometimes) go out on weekends.

“It would be bad if things were passing me by, but I don’t feel that way,” said Srugo. “I do feel like managing multimillion dollar budgets, deciding who to hire, who to let go, all these kinds of things are stresses a normal 24 year old doesn’t have to deal with and that does make you mature faster.”

Silverstone unwinds by working out, playing video games and watching Netflix — but, unlike Srugo, he said work-life balance “just doesn’t exist.

“I’ve definitely (sacrificed) a lot of personal relationships. Also sleep. Outside of that, I don’t really feel like I’ve sacrificed anything. As a matter of fact, I’ve gotten way more than I ever thought I would get at this point in my life.”

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