David Weston - North Castle Partners & Shifts in Investor Appetites

Hey everybody, welcome to the Future of Fitness, a top-rated fitness industry podcast for over three years and running. I am your host, Eric Malzone, and I have the absolute pleasure of talking to entrepreneurs, innovators, and cutting-edge technology experts within the extremely fast-paced industries of fitness, wellness, and health sciences. Please stop by futurefitness.co to subscribe and learn more. One of the most important and undeniable trends in our industry is the ever-growing consumer demand for personalization. That personalization is driven by health data. If you are a consumer-focused health and wellness company, you know that acquiring and making use of that health data is traditionally expensive, complicated, and full of friction for the consumer, but not anymore. Thanks to the good people at Spread, a camera-enabled digital biomarker platform that connects any app to the human body. Formerly known as Elite HRB, the additive technology behind the Spread platform leverages a decade of research into physiology, behavior, and health insights, including collaboration with 117 universities, analysis of more than 4 billion biomarkers across 20 million users' design. Using the smartphone as the center, Sprint's evidence-based machine learning algorithms deliver actionable biomarker insights such as body composition, HRV, stress, recovery, progress tracking, and more, all through an easy-to-integrate SDK and API. Health and wellness companies are integrating Sprint to better understand their users' holistic health, make their apps more personalized and adaptive, demonstrate measurable progress, and empower their members to understand their bodies and make well-informed decisions for their well-being. Go to Sprin.com and learn more. That is S P Ren.com. To live your healthiest, longest life possible, you need to understand what's going on inside your body. People age at different speeds, and generic annual blood work doesn't properly evaluate your biological age, but Insight Tracker does. Insight Tracker is a truly personalized nutrition and performance system designed to extend your health span and slow down the aging process. Created by leading scientists in aging, genetics, and biometrics, Insight Tracker analyzes your blood, DNA, and fitness tracking data to identify where you're optimized and where you're not. You'll get a daily action plan with personalized guidance on the right exercise, nutrition, and supplementation for your body. Add InterAge 2.0 to any plan to calculate your true biological age and see how you're aging from the inside out. For a limited time, get 20% off the entire Insight Tracker store. Just go to insight tracker.com forward slash future. That's insight tracker.com forward slash future. All right, we are live. David Weston, welcome to the future of fitness.

Hey, thanks for having me, Eric. I appreciate it, man.

I am eager to learn from you. You are a part of North Castle Partners and Investment Group, and you've been, you know, in the investment world within the fitness health and wellness sector for for a while. I mean, I'll let you tell your background, but it's it's it's always good to get perspective because man, I constantly am getting asked, you know, hey, can you make some introductions to investors? And, you know, I know a handful of them. I'm I'm not like some uh investor conduit, uh, but I always like to learn what investors are looking for, who they want to talk to, and you know, what kind of introductions uh you guys are looking for. And and just your overall perspective on the market because you're very influential into obviously where the capital goes and uh where capital goes, that's fuel for business. So it's gonna be uh it's gonna be an interesting ride. I have so many questions for you, but let's start with this, David. As always, if you could just give us a little bit of your background for context and then we'll uh we'll get into the meat of it.

Terrific. Well, all right, first and foremost, thanks for having me. Really appreciate uh you having me as a guest. And uh, you know, I'll start with Northcastle. Northcastle's uh a lower middle market private equity firm that's been around for about 25 years now. And ever since our founding, we've been a focus firm. And the way we define that focus is we invest in and partner with uh service-based retail and consumer products companies that promote uh healthy, active, and sustainable living. And really that boils down to five major verticals. Uh, you know, healthy nutrition, so think food and beverage, weight management, vitamins and supplements companies, uh, active lifestyle, so fitness clubs and fitness equipment. And I'll talk a little bit about our experience in the fitness industry, which dates back to the uh early 2000s. Uh, beauty and personal care, home and leisure, and uh experiential retail. And you know, we think there's a benefit to that focus. We've had the great fortune of partnering with you know wonderful entrepreneur founders, which is typically the size and stage of company that we get involved with, as well as operators and advisors and third parties, and you know, that combined with our investment team, uh, the cumulative amount of mistakes we've made, and we've made a ton, and you know, the the level of success that we've had collectively, which we've had you know a fair bit of, uh, we think that helps uh our businesses and allows us to be you know good partners for them and help them shepherd through their growth journey. Um so and fitness has been a you know core uh core focus for us. I've been at the firm about 15 years, been working in the fitness industry and overseeing a handful of our investments uh in that vertical for over that time. Um and our North Castle's history with fitness dates back to equinox when we invested. Uh they had a handful of clubs in New York. And then ultimately when we when we sold and executed on our plan, uh they had you know had expanded into multiple states, grew the footprint by you know 4x. Um and that was uh that was that was our first 4ay. And then uh you know, we've invested, I think, all over the the spectrum from uh you know the fitness club space uh in the high value, low price uh area. So uh we're investors in the Crunch Fitness franchisee down in the southeast. Uh we've invested in the premium end of the market. Uh so I mentioned Equinox before. Uh we've delved deep into boutique fitness, so Barry's, uh SLT, uh to name a few. And then we've also been partners with a couple of companies on the equipment side. So Octane Fitness, which was a leading elliptical company, uh Echelon Fitness, which is a connected fitness uh hardware and content business, um, and uh Hydro Massage, which is a dry hydrotherapy bed business that sells predominantly into the Fitness Club channel. So we've had an interesting vantage point um over the course of our history, and fitness is a place that we you know really have enjoyed partnering with in an industry that we think has has a long way to go from a growth perspective. So thanks for having me.

Yeah, yeah. So I want to go back before we dive into fitness too, because one of the things you said was experiential retail. What does that mean exactly?

It's any four-wall service-based retail uh environment that you know sells services as the product as opposed to physical products and sells experiences, whether it's a health and beauty service, whether it's uh an entertainment um as a as a service. So, for example, we're partners with a business called Five Iron Golf, uh, which is a indoor uh food and beverage golf simulator business. So you go and you you hit you hit golf balls, um, and that's become quite popular and we've expanded to multiple markets. We're also partners with a business called the Escape Game, which is a leading escape room operator. So eight people in the room trying to solve uh in 60 minutes, you know, a bunch of puzzles and clues to effectively get out of the room. So anything that really serves uh sells a service or entertainment as a as the product. That's that's kind of how we think about experiential retail.

Got it. Got it. Okay, thank you for that. Now let's get into fitness. And so I I've been in the industry now for 16 years. Uh there's been a lot of change. And you know, but I've never really thought about it from the investor standpoint or viewpoint for really uh up until like the last five years is when I've kind of been introduced to that because everything I've always done has been, you know, uh small to medium-sized business and um investors just weren't part of that game, right? So when you look back over like the last, let's just give it a time frame, time horizon of like 15 years, David. Like how how has the investor appetite and activity kind of started and shifted? Because the industry is so young, like you point out, it's got a lot of room to grow. I mean, it was it's been, you know, basically brick and mortar, and now we have so many different varieties of how you can get involved in fitness, health, and wellness markets. So give us a little summary of of how you've seen it change over time.

Yeah, I think it's a great question. I think the the investor appetite for fitness has grown exponentially over the last 15 years. Um I think you know, a lot of investors uh you know may have had challenges in the early days investing in fitness. Maybe they had a previous you know company that had gone gone sideways or um, and I think fitness had a you know a little bit of a uh you know a dirty name in the investor community. But I think as the market has you know matured and grown up, I think investors have realized that you know fitness is here to stay and it provides an essential service for consumers, right? Not only to maintain physical health, but also uh you know prolong mental health, right? And that's become a really hot topic on in post-COVID world. And you know, 15 years ago, uh the fitness club landscape, which is where we spend a lot of time, uh, you know, was was was pretty fragmented. There were a couple big players out there, um, but there were, you know, I'd say there the value propositions have gotten increasingly good better over time. And I think you know what's happened is on the backs of the Great Recession, uh, you've kind of seen the winners in the space, you know, be at the either the top of that hourglass, so the premium, higher priced uh uh players that are offering a more elevated experience, elevated amenities. So, you know, the equinoxes of the world, the boutique fitness players that are you know on the higher end of the pricing spectrum. Or you've seen the incredible rise of uh high value low price or HVLP, as they call it in the industry, uh, fitness clubs. And that was led by Planet Fitness, and a lot of that growth got accelerated uh on the backs of the Great Recession in 08-09, as you had a lot of fitness club members um, you know, paying somewhere between $50 and $75 a month, and then you know, seeing the recession, seeing their bank accounts, unfortunately, you know, be rehurt uh by the Great Recession and the financial struggles, but realize that fitness is still an essential and a vital component of their overall uh lifestyle. And there you saw a lot of consumers start trading down, if you will, into the Planet Fitness of the world that offer you know fitness, uh strength and cardio for $9.99 a month, an unbelievably compelling value proposition. And that really propelled Planet Fitness's growth, which also led to substantial innovation and additional competition, as Planet Fitness proved that you can charge $10 a month and have an incredibly viable uh business model. And that led to a substantial amount of you know new entrance into the market on that end. And I think that as you fast forward, uh I think really Planet Fitness sort of paved the way and the investors took notice. And I think you know, we a lot of investors, we all we we talk about recession resiliency and someone like Planet Fitness, which is a you know, again, $10 a month, uh $20 a month player, uh, you know, proved that during the recession they they could perform extraordinarily well. And the great recession was was very deep and very long. And I think that opened the eyes of the investor community because you know, from investment perspective, the fitness industry is is exciting, right? I think the industry itself is $35 billion. So the size of the industry is is quite large. Um, so the total addressable market uh in the eyes of the investment community is is is is is large. Uh it's been growing five to seven percent a year uh for the last 10 years. And I think the the other thing that people love about the fitness industry, fitness club industry is the membership model and the recurring nature of the membership dues, some you know, stability of cash flows is something that investors uh you know get wide-eyed about. So I think that those components attracted a lot of investment over time and a lot of investor uh attention. And I think that's helped propel the growth of a lot of these businesses over the last 15 years. So it's been really interesting, you know, watching the the the market evolve one, but also uh the investor appetite for fitness uh evolve over time as well.

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The last three years uh have, as you said, been a wild ride. And we've you know, we've have we have multiple partnerships in the fitness industry, both on the club side and the and on the equipment side. So we've seen uh you know the the rise, the the fall, the fall, the rise, the resurgence. So it's been uh it's been it's been an interesting couple of years. But you know, on the I think on the connected fitness side, which is really where you know it's been getting a lot of attention from the investment community, we've all kind of followed the drama surrounding Peloton, um, where they had just an extraordinary uh you know takeoff and growth uh as a result of COVID, right? COVID unfortunately led to the closure of all fitness clubs across the country and really across the world. And with consumers having little choice uh you know to to from a workout perspective, the adoption of uh digital fitness just exploded, right? With with little with little choice, working out in your basement became really your only option. And businesses like Peloton and uh a handful of the other players just saw an absolutely uh extraordinary rise in not only demand for their pieces of equipment, um, but also the usage of their content. And that led a lot of these companies to need to invest heavily to support that level of usage and support that level of demand for their products. So all these businesses grew, you know, like multiples of you know, four or five hundred percent versus 2019, and then that that growth continued into 2021. And in order to support that level of growth, investment needs to be made in people, systems, and infrastructure, manufacturing capabilities. So you saw a lot of these businesses make those investments, and you know, it's easy to sit here on the other side of it and say, well, hindsight's 2020, they shouldn't have invested there, but it's it's it's it's just impossible to manage a business that grows 500% and then maybe grows another 40 or so percent the following year, and then the demand just drops off dramatically, which is what we're seeing now as the as COVID uh you know goes from pandemic to you know, hopefully we're in the endemic phase now, and we're seeing a lot of these companies just start retrenching, right? Now they're now they're right-sizing their infrastructure, and you're seeing these mass layoffs, which you know, everyone, I don't know why people you know relish in these in this news. It's kind of kind of strange. And you and I were talking about this before, Eric. Um, you know, these are people's lives, but this is this is what's going on in the industry. So I think that's that's what we've seen on the connected side. So it's been just a wild roller coaster ride on that front. And on the other side, on the fitness club and boutique fitness, you know, four-wall fitness side, the pandemic was incredibly challenging. Uh, you know, the there were varying levels of time that clubs and uh studios were closed for. The mandates on masks uh varied significantly from state to state and even county to county. So managing a business uh like that, where you're opening, you're opening with masks, you're closing, it it's it was incredibly difficult for our partners, uh you know, Barry's and SLT, two of our boutique fitness studio partners, who just did an extraordinary job managing through this incredibly difficult time. But what we're now seeing is the consumers come back. Um they're coming back in droves. And I think what people craved during the pandemic, um, and a lot of people were calling, uh, saying that digital fitness was going to permanently disrupt uh you know four-wall fitness. And you know, we didn't, we we thought we didn't ever we never really believed that. We thought that digital fitness would complement four-wall fitness. Um, because the the thing about four-wall fitness that's very difficult to replicate is that community aspect, being people love human connection, people love being around others and that competitive spirit that you only get from sweating next to somebody. Um and we're starting to see that uh people come back in droves and you know could be relieved that they're able to do this now that the the the pandemic is is entering the endemic phase. So it's been a it's been a wild ride. Uh, but it's uh you know, I think I think the industry is gonna be better for it.

Yeah, it's it's interesting. I mean, and you look at uh the way I I look at it, and I I just released a podcast, and this, you know, by the time uh this one gets released, it's gonna be, you know, a a little bit of time. Uh but Lauren Fondauz from Forte, and we talked about you know digital fitness and what it means. And I I really like the positioning where digital fitness uh can be the like you said, the complement to the in-person experience because you know sometimes just to get people started, just to reduce that friction uh initially, it's it's a pretty great it's great to have digital fitness as almost like an onboarding tool, right? You can start it at home, right? You can learn some of the movements, you can get acquainted with how uh you know a particular gym culture may be from the comfort of your home where you're not intimidated by you know people who go to the gym all the time and you know are being lost as soon as you walk in. You can, you know, just have that that experience kind of warming you up and then getting a little bit of confidence and then going into the in person experience and then complimenting as well. It's like, hey, you can take you know some workouts with you when you travel, or maybe you just can't make it in today. I think that's a really nice balance. But I I I do believe, and I think most people in the industry uh believe it as well, is that the in person experience is still Really the foundation of what we do. And you know, I I I don't know. I hear so many arguments about it. It's it's one of those things where uh it reminds me it reminds me of the world of nutrition when everyone's arguing right about what's the optimal nutrition. Like is it paleo, is it vegan, is it you know macros based? Like what is it? And at the end of the day, like no one really knows, but everyone likes to argue about it. Uh, you know, who and it's it's just uh it's a fascinating thing. I guess uh when you when you look at what's happened over the last three years, David, and you know, specifically like this is uh we're in August 2022, sometime so summer, early fall. These companies that we we alluded to, the the Pelotons and the Tonals and uh F-45, which was you know surprising as well, these huge layoffs and people are you know, like I said, relishing in it. And a quick message for people like don't be a dick, right? Like if people are losing jobs, uh don't celebrate it. You know, understand that these are really humans. But when you see these recalibrations, these retoolings, um the right sizing, I think is how you address it for these companies. Who do you think is gonna who who from the digital side is is gonna be here to stay if you had to play some bets?

I I I I think the digital players that are gonna be here to stay are the digital players that ultimately can become a sustaining business on their own from a cash flow perspective and generate their own level of profitability. I think you you had you had asked the question about what the amount of capital that's gone into the space. And you're right, the the amount of capital that's gone to the space is just staggering. And I think a lot of investors have treated these digital fitness companies like tech companies. And you know, valuation is based on you know growth and the prospects of you know generating profits in the future, right? And a lot of these businesses put these outsized tech valuations and had these businesses and ask them to grow at all costs and acquire customers at all costs, you know, burning tons and tons of cash. And I think that as the market has evolved, those businesses, the the music's gonna stop at some point. And I think the music has stopped. I think it's it's very difficult uh if you're not a sustaining business from a profitability perspective in this market. Uh I think those are the ones that are gonna that are gonna survive. And from a specific bets, you know, I'm I'm not making any bets, but I I I have a lot of admiration for what Peloton has done, right? They have three million subs, they're in an enormous amount of households in the U.S. They've got incredible content. Um, so you know, I think a lot of people have have counted them out uh because of what's happened to their stock price, which really has you know very little to do with what's going on uh in their business and the fundamentals of their business, but their fundamentals are are extraordinarily strong. Their churn is incredibly low. Their you know consumer loyalty is very high. Uh it's a beloved brand. Um so you know, I think before we all count Palatan out and and you know knock them, throw stones for what's happened, I think uh, you know, I think they're they're they're one in particular that will will continue to thrive.

Yeah, interesting. So something I I've been I like to ask people like yourself in in the space. I've had the pleasure of working with various founders of companies. And you know, if you're a founder and your business is, you know, uh you need capital to get out of the gates. Raising capital is not easy. I I do not envy founders. Like I've never, I've only had to, you know, do a couple of pitches and uh you know it's brutal, man. It can be really brutal out there, and it's it's a hard job. You get a lot of rejection out of the gates, and you just gotta keep doing it. And I found that a lot of businesses that you know are successful early on, it's because they have founders who are good at raising capital, they have the relationships or they have you know uh the courage to sit there in front of lots of people and hear no lots of time. So you know, from your standpoint, when if if someone's listening, they're a founder or they're working for a startup and that company needs a little bit of gas in the tank to get out of the gates. Uh so they're pitching a lot of investors. What what advice do you have for these people that can maybe help them uh you know avoid some early mistakes?

Yeah, I mean, I think uh some of the best advice that I can give is know your you know, A, just have an incredible level of conviction in your vision. I think passion is really infectious to the investment community. Um and if if if you're half in, I've seen a lot of founders that are you know maybe halfway in questioning you know their vision, but you know, kind of that conviction is truly infectious. So I think that's that's that's a that's an important aspect to the puzzle. The other piece is you know, if you are an operating business, it's it's really important to develop proof points of success. Um, whether that's hey, we can acquire customers uh you know for X, and we those customers will stay with us for Y and generate uh a substantial amount of uh lifetime value, or it's hey, we've opened two locations in two separate markets, and the unit economics of our locations are uh you know are replicable, and having those proof points of success to give an investor a reason to believe that this can continue to be replicated over time, um, I think is really critical and helps the founder make their pitch even stronger as opposed to just saying saying, hey, trust me, believe me. Um and the other piece that I'd give from an advice perspective where we've seen some founders make mistakes, is you know, choose your partner carefully and choose your partner for the right reasons. Um, some of the mistakes that that we've observed over time is some founders will choose their partner based on the highest valuation and the least amount of dilution. And you know, a partnership with an investor uh is it's like a marriage. Uh it really is. And you you want to truly understand who the who the firm is, what their values are, um, ensure up front that you're aligned on where you're going. You know, Northcastle, we spend a lot of time uh you know formulating what our collective vision is with our you know founders or CEOs, uh, and we lock arms with that founder and CEO on where we want to get to. And alignment is really important because misalignment can really create a lot of friction and a lot of a lot of um a lot of tension. Um so I think you know taking the highest price and the least amount of dilution, uh, you know, a lot of people will will will do that. But I think it's it's it's a little short-sighted because uh you know you want a partner that's not only a good partner when uh the business is up and to the right, uh, you want a good partner who's there in the trenches with you, helping you think through uh how to approach landlords and what to do with your you know your incredibly valuable employees and to help them through the pandemic when your doors close and your revenues are down 100% year over year. You want someone who is gonna be there for you during the hard times, not only someone who's gonna be there when you're growing and everything's going well. So I think choosing your partner is one of the most critical decisions that any founder or entrepreneur uh can ultimately make.

Yeah, yeah, that's great advice. And and when you uh when you look at the actual pitches, right? You mentioned passion. What what else and and you know, uh reoccurring, I guess, revenue streams as well, you know, how how what they're planning is retain and and build the clients. Anything like in the actual granular aspects of the pitch, right? Like how someone behaves, like you know, from the little things, like how they introduce themselves, like what what about those little aspects? And and this is just me, you know, being naive and curious about it, like you know, because a lot of times I would imagine nerves are high for someone who's pitching to you guys, or um, you know, how how do you navigate those little things?

It's it's a it's a good question. I think people people are, you know, people definitely are somewhat nervous when they pitch, uh, but I think you know, someone we we like to partner with people who are uh, you know, who who know what they know and then admit what they don't know. Um and part of our job as partner to them is to help them think about how do we bring in, you know, augment your management team and fill out your organization to surround you with the right people who have subject matter expertise that can get you to where you want to go. Um, you know, we like partnering with uh founders who have a growth mindset, a mindset of, hey, you know, I don't know everything, but I'm willing to learn. And I would love to surround myself with the best and brightest. Um that's I think that's you know one of the things that we find to be you know one of the most refreshing things about some some founders. I mean, that there's you know, I think that's why a lot of times why we when we get involved in founder entrepreneur-led companies, it's the founder realizes that they've taken the company as far as they can on their own. And now, you know, an injection of capital, a partner, a private equity firm who you know has has some resources that they can bring to bear uh to help them augment their team, make investments and in and think about where to invest and in the right places. Um, you know, those are the types of founders that we we really want to you know align ourselves with.

Yeah, that's solid advice. So it let's let's kind of face forward now, David. Like what uh what what time horizon do you look at when you're investing? Like, you know, is it a 10, 20 year what generally is your mindset when you're when you're looking at opportunities?

So we are typically four to five year investors. Um and we're well, you know, we'll typically think about our investments as four to five years. Some of them uh will execute their plans substantially faster. Some it may take much longer. Um sometimes, you know, we'll alongside our CEO partners say, hey, we've got uh a new product launching, and we we think we want to wait until you know we can develop some level of proof point uh there. So we're gonna extend the runway that we partner for the next couple of years because we think there's incremental value that can be created together and we make those decisions with our with our partners. Um but but typically it's it's four to five years. But I think the other thing that we spend a lot of time thinking about is not only what we think we can accomplish with uh alongside our management teams in a four to five year period, but also what the business will look like in four to five years and if there will be enough growth for the next investor. So I think it's for Northcastle, it's four to five years, but we really do have to think about a 10-year period to ensure that when we you know go and and and sell, and unfortunately, you know, we develop amazing relationships with our teams, and it's one of the saddest moments uh when we have to sell. But we we do have to sell. That's that's that's the business that we are in. Um but the the understanding what the business could look like between years six and 10, 6 and 11 to ensure that the next investor has uh has runway and an ability to generate an appropriate return on their investment is also something that we spend a lot of time thinking about uh when we enter into any new new investment.

Yeah, interesting. And I, you know, looking at the the next, let's just put you know, the 10 years, it's a nice, nice number, right? Uh what trends, what forecasting, what kind of things are you seeing in the fitness, health, and wellness area, uh or maybe just you know niches within the verticals that that you find really interesting that you guys are looking at? What what can you uh dust off your old crystal ball, David? What are you seeing?

Well, I definitely don't have a don't have a crystal ball, but the the the the I think the place where uh you know we're we're spending a lot of time is we're we're we're thinking about wellness more holistically. So thinking about not just fitness and physical fitness, but also mental health and recovery, um and you know, spirituality and and you know, and breath work and meditation, and and we're starting to see some businesses rise up uh that are putting you know a lot of these different modalities under one roof. Um I think you're starting to see the Gen Z and millennials on the backs of the of the pandemic. I mean, we had a mental health crisis before the pandemic, but that got unfortunately extraordinarily accelerated uh through the pandemic as everyone was was locked down and and you know that was just a very challenging time for people. So I think put finding these this holistic wellness where people are taking care of their mind, their body, and their spirit, um, I think that's the next wave of of uh of innovation. And you're starting to see some of these social wellness clubs pop up, whether it's uh Remedy Place or Othership, um, which you know they're they're they're they're growing and adding locations, uh, and I think consumers are really being receptive to. You see you've seen the rise of Restore Hyperwellness, which you know has uh IV, has cryotherapy, um, has other recovery. Uh so I think on the backs of years and years of consumers and fitness members uh you know going through rigorous exercising, I think people are going to need havens uh to put themselves back together uh from a recovery perspective. So I think that's where we're you know really spending a lot of time just thinking about that category and how the dynamics change and who you know who the winners uh of that space will eventually be. But holistic wellness is a space that we're just spending some time.

Yeah. You know, it's interesting. I I've been looking at some of these social clubs, and you know, from a consumer standpoint, these things aren't cheap. You know? Uh and I'm I'm wondering like for for people who the stuff that interests me is how do we get mental wellness, right? Especially, I mean, that that that is a huge thing. I mean, it it's everyone seems to be anxious and depressed now nowadays. It's and I'm laughing because uh I don't know, I it's not funny. It's just all you know, it it seems very commonplace in conversations. And you know, I always look back at like my grandma's generation who, you know, she made it through World War I, II and a Great Depression. And I'm like, God, do you think she like they talked about anxiety? Or was it just like that's understood, right? They're like, of course you're anxious, we're going through World War. Um but how do we like you know, for it can be expensive to take care of your mental and emotional health? Like sometimes it's not cheap. So do you see any companies out there or you know making it, I guess democratizing that where it's like you don't have to spend, you know, thousand dollars or even you know, a couple hundred dollars a month to do that?

Yeah, I think you're seeing the rise of that, right? That democratizing, as you said, um, whether it's the almas or the COAs uh or the two chairs um who are you know, I think taking a very broken system, right? I think one of the biggest challenges with mental health and seeking uh is seeking out a physical therapist, is seeking out a therapist, right? And I think I was having a conversation the other day, and you know, one of my friends was was telling me, oh, I've called all of these therapists, none of them are taking new clients. These are the ones that are on my health care that take my insurance, but none of them are taking new clients. And I think these companies are trying to solve for that. And I think the pandemic, um, one of the biggest challenges was uh you know physical location, right? But with the pandemic, telehealth became incredibly prevalent and became uh you know a uh a channel that consumers are very accustomed to to you know having services on, right? With the rise of Zoom. So I think that has really changed the game as it pertains to uh the mental mental health space. And now these companies are trying to make it easier and using technology and you know AI to match you with the right therapist based on you know what your challenges are, whether it's anxiety or depression. Um so there are players that are that are that are you know some upstarts that are taking some share um and trying to fix a system that's been, I think, incredibly frustrating for uh consumers for a long time.

Yeah, it's uh and then that's a good thing, you know, and just anecdotally for me too, like I'll see a uh a therapist every once in a while. She's great. I think she's awesome. I call her my emotional consigliare. Uh but it's expensive, man. You know, it's like my insurance, my deductible isn't cost enough. So every time I go, I gotta, I gotta, you know, bounce to write a check for 170 bucks. And uh that's just cost prohibitive. Like even if you want to see somebody, you know, got I don't know how many, if I start every other week, right, that's that's thousands of dollars throughout the year. And I think for a lot of people, I'm I'm fortunate that you know I can afford that, but for a lot of people, it's very cost prohibitive. And that gets a lot of people, you know, um frustrated and even more, you know, deep into the the rabbit hole that they're going in. So I that that's such a huge opportunity. Uh, and I'm sure there's a ton of consumer demand to do that. Um I guess to to kind of wrap this thing up, you know, when you look at uh this year, 2022, um what what positive advice do you have for people in the fitness industry coming out of this? Like we had mentioned the growth perspective of five to seven percent per year, but when you look at it from macro level, how how excited are you about the fitness health and wellness vertical right now?

I'm extraordinarily excited, and I'm obviously biased because we have a couple partnerships in the space, but I am excited because the thing about fitness and health and wellness in general, as you take it from a macro perspective, it's not a fad, right? No one is ever going to aspire to be less healthy. So you have permanent tailwinds there, which I think will propel the industry for years to come. Um, and I think on the backs of the pandemic, people realize that you know, fitness is not just about physical fitness and health and exercise. It's it's it's a haven for people to help with their mental wellness. So I do think fitness will fit into that overall um you know, holistic uh you know, wellness that we were talking about before. Um and you know, fitness, the fitness is market is thriving now. People are getting back into the clubs, um, into the studios, and I think the the the industry has you know quite quite the runway ahead of it. Um so I think it's a great place to to invest, it's a great space. Uh we've really enjoyed the partnerships we've had um and continue to look for opportunities um because we just think the the the this the this this fitness thing is it isn't going away, uh that's for sure.

That's great. So uh if people do want to who do you want to two questions. Who who do you want to hear from, David? Uh if people were listening, like, yeah, this I kind of want to talk to this guy. Uh and then how do you uh want people to learn more and reach out to you?

Yeah, I mean, I think we're uh we're happy to talk to anyone in the space. I mean, Northcastle, uh, you know, the the the investments that we make you know from a size and stage of company. I mean, we look at a lot of opportunities uh, you know, every every month. Uh some companies are you know too early stage for us. But typically, you know, we're partnering with businesses that have you know a minimum level of cash flow or profitability of you know somewhere between three and four million dollars. And that could mean your revenue is $20 million, it can mean it's $50 million, it can mean it's $10 million if the business is unbelievably profitable. Um, from an investment opportunity perspective, uh, you know, in any of the verticals that I mentioned at the beginning, those are definitely uh you know conversations we want to have. But I also uh would love to talk to anybody that wants to talk about the space or has a you know business that might be in the early stages uh because A, you know, if anyone thinks my advice is worth anything, I'm happy to do it. I just uh I love the space, I'm very passionate about it. Um but also you know, I think a business that may be too early for us today, you know, in three or four years, might be you know ripe for us to be a partner, right? It's uh it's we call it seed planting in in the in our new business development uh as we continue to think about opportunities. So more than happy to talk to anyone. Um I like talking uh and I love listening. So, you know, people can certainly you know reach out and look at our look at our website and reach out. So uh, but yeah, I would love to have conversations with anyone who you know may want advice and and think mine's worth uh worth anything.

Yeah, I appreciate it, man. It is. It's uh I learned a lot today, and and I think we offered a a bit of education to to the uh the listeners at home. So really appreciate your time, David. It's uh I know it's valuable. And uh yeah, thank you so much for for joining us. And ladies and gentlemen, David Weston, thanks so much, Ark.

Really appreciate it.

Hey, wait, don't leave yet. This is your host, Eric Malzone, and I hope you enjoyed this episode of Future of Minutes. If you did, I'm gonna ask you to do three simple things. It takes under five minutes, and it goes such a long way. We really appreciate it. Number one, please subscribe to our show wherever you listen to it, iTunes, Spotify, Catbox, whatever it may be. Number two, please leave us a favorable free review. Number three, share. Put it on social media, talk about it to your friends, send it in a text message, whatever it may be. Please share this episode because we put a lot of work into it and want to make sure that many people are getting value out of it at Fox. Lastly, if you'd like to learn more, get in touch with me, simply go to the feature of fitness.co. You can subscribe to our newsletter there, or you can simply get in touch with me. I'd love to hear from our listeners. So thank you so much. This is Derek Countdown, and this is the feature of finitive.