Joel Neoh’s funding strategy to maximize equity

• US$3.2m funding round to last 10 to 12 months before next round
• Gym partners happy, though some reaction from full paying members

He may have just raised US$3.2 million (RM 12.2 million) in funding led by Sequoia Capital, within four months of launching KFit, an Asian healthy lifestyle startup, yet Joel Neoh seems unsure of calling it a seed round following the friends and family round he raised in March/April.
 
However, he has no doubts about his fund raising strategy for Kfit.  This is anchored in the desire to keep as much equity as possible and making sure there is value for the subsequent investors to come in.  He is also clear on how much his next round will be – in the “double digit US dollar million” range, without going into specifics.
 
“Any funding we raise is all about the equity because we know the value [of KFit] will keep going up and so the strategy is to keep raising just enough so that it is also appetizing for the next investor to come in,” Neoh explained.
 
That goes to explain why the current round of funding was not as large as it could have been. Neoh said if KFit had done a large round now or in the future at a high valuation, “it then becomes very hard for subsequent investors to come in.”
 
“You know, different stages of a startups growth will attract different types of investors, some of who can add a lot of value, so we have to make sure that the way we raise funds will make sense for them to come in later,” he added.
 

Neoh (pic, above) began his entrepreneurial journey back in 2008 while still in university, hitting RM1 million in revenue while still a full time student.
 
He made a name for himself in the startup scene after selling his four month old deal site to US discount shopping giant Groupon and running its Asian expansion for almost five years before he quit in March.
 
In a conversation last week at Startup Grind Kuala Lumpur, he shared how he ran Groupon’s Asian expansion with a startup mentality and culture even though he was a professional manager.
 
The approach he took while at Groupon probably explains the speed at which he is executing KFit now, and possibly one of the qualities that attracted Sequoia’s funding.
 
In the press release on the funding, Shailendra Singh, Sequoia Capital India Advisors managing director said, “Within weeks of launch, the company [KFit] was off to a blazing start and we are very excited by its early progress and ambitious roadmap ahead.”
 
Interestingly, Neoh said the investment from Sequoia was triggered by a conversation between a venture capitalist from the firm and his chief technology officer, Arzumy MD Yusof.  That led to a call between Neoh and Sequoia’s Singapore team on a Thursday with Neoh flying down for a meet on the following Monday which then culminated two months later with the announcement last Monday (July 20).
 
“They are long term investors keen on building enduring companies and liked our purpose of aiming to reshape the future of fitness and transform an industry,” added Neoh, pointing out that KFit is one of the earliest stage investments made by Sequoia, which usually invests at the Series A level onwards.
 
The idea behind KFit is to provide paying members access to a variety of fitness clubs, sports facilities and workout classes in the city, for a fixed monthly fee (RM99 in Malaysia, for example).  Members get to use the facilities of a network of fitness venues rather than being tied to one specific club.
 
With around 100 staff across 10 cities and a target of between 15 to 20 cities by the end of the year, Neoh estimated that he will need to raise his next round in 10 to 12 months’ time.  “But if our traction goes better than expected, i.e. more members signing up, I will accelerate the next funding round to add more arrows to our bow,” he said.
 
Neoh said KFit is not ready to share how many of the claimed 150,000 signups have actually gone on to become paying members of KFit. “We are still in the early stages of getting people to become our paying members and will not be announcing those numbers yet.” 

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