Hi Everyone,

Our Wefunder campaign has now been extended through July. That should give the newly engaged angel groups and institutional investors enough time for their due diligence. 

PLEASE NOTE: If you have received an email from Wefunder requesting that you re-confirm your investment, please click on this link and re-confirm now.🙏This is a standard SEC requirement when a campaign is extended. If you have not received an email from Wefunder requesting that you re-confirm your investment, you’re all set and don’t need to do anything. 

On to the report…

KPIs (Key Performance Indicators - business performance metrics we track)

After the huge surge in new subscribers that you recall over the holidays and in January, we expected a relatively high rate of churn for some months after. (Churn is people cancelling their subscription.) That's been typical after a spike in new subscriptions. New members that arrive as the result of a one-off event -- like the millions who received a Meta Quest 2 for Christmas and downloaded VZfit -- are less likely to stick than the ones we cultivate through months of ongoing marketing. For instance, after subscriptions surged 72% in April and May of 2021, they declined slowly for several months (no more than 3% a month, and they eventually leveled off 60% higher than they had been, for a solid net gain.) So we expected another gentle decline.

A decline would also have made sense because of the seasonality of our business. When warm weather lures people back outdoors some members cancel their subscriptions and reactivate in the fall, as we've seen in past years. This shows up as churn in the data. 

Despite all that, we haven’t seen a new decline: March was our lowest churn month ever. Very surprising and very positive.

Sales in Q1 2022 were up 79% over Q1 2021.💪

One factor we can point to is improvements we’ve made in the customer experience. In late 2021 we shipped a new release of VZfit designed to expose new users to our "hook" features right away. (Hook features are what you’d guess: the ones that hook people on the product and retain them.) 

We have another new release coming in a few weeks that will do even more to show the hook features to new subscribers. The release will include new content as well, designed to improve both customer acquisition and retention. There will be an improved on-boarding process that we expect will increase conversions (from accounts to subscribers). New accounts have grown from a few hundred a day through most of 2021 to over 1,000 a day now. If we can meaningfully improve conversions and also retention, that will mean a significant ramp in MRR - even as we head into the spring and summer low season. Fingers crossed.🤞It's constant refinement, part science and a lot of art.

Great

This one needs a bit of history. At the beginning as you might know we made our own stationary bike. It had electronics built in that sent pedaling information to the computer. It had buttons on the handgrips for the games. We called it the VZ Bike and sold it on Amazon for $400. At the time this was the lowest friction way to get our brand new VR Fitness concept to market: If you had a Sony Playstation you could add the VR headset and our bike and have a great experience in our games. If you had a PC-based VR system, mainly the Oculus Rift or HTC Vive, you could just add the bike and away you went. 

No one was selling apps on a subscription model then. We made money on the bike, and our apps were free to download. We sold 2,800 bikes in two years, generating over $1M in sales, solidly proving that our special brand of VR fitness had a promising future.

Today our customers can use any stationary bike in the world plus a $30 off-the-shelf cadence sensor to use VZfit. Shifting to this model broadened our market and reduced our operating costs and increased gross margins dramatically. But the customer experience, while still excellent, got a little bit worse: cadence sensors do not synchronize closely with our VR apps the way the VZ Bike did. 

Enter the smart bike, stationary bikes already fitted with electronics. A number of vendors now offer these. A smart bike can talk via Bluetooth to VZfit on a Meta Quest headset. It works as well as our VZ Bike and adds something we didn’t have: since the smart bike’s resistance is electronically controlled we our VR apps can cause the pedaling effort increase when you go uphill and decrease when you go downhill in the game. The name for this is dynamic resistance. The sense of immersion is intense! The workout is more intense, too. 

We included this dynamic resistance feature in VZfit for Life Fitness commercial bikes for health clubs that sell for $15,000 and up. We'd always hoped to see a consumer bikes support it someday. We’ve been watching smart bikes develop because they’re such a great solution. The problem has been that they’ve cost from $1,500 to as high as $5,000. 

Until now. Some VZfit customers have made us aware of a smart bike that they’re using with VZfit. It works great, has dynamic resistance, and costs only $600!👌It’s truly the VZ Bike we always wanted and we don’t have to make it ourselves.

We're now in partnership discussions with the company that makes this smart bike. They’re as excited as we are. Stay tuned for future announcements.

Good

New potential sources of angel and institutional investment keep arriving while the conversations we’ve mentioned in previous updates continue to advance. Needless to say, we’re keeping busy! 

Bad (or maybe not) 

The Fed last week indicated its intention to raise interest rates dramatically to get inflation under control. That’s a good thing in the long run, but in the short run the stock market is adjusting and some economists think we might have a recession. 

If a recession happened, what would that mean for VirZOOM?

Historically, luxury products do poorly in a recession while money-saving products do even better than when the economy was booming. An example that economists like to use is haircuts: You still need a regular haircut even if your income has taken a hit, but you’ll look for a less expensive one. So discounted hair salons boom while high priced ones suffer. Less expensive substitutes for “need to have” products and services boom in recessions. 

Consumers still need an exercise solution even when times are tough. Between these options, which will do better? 

Gym - $40 - $200/mo subscription + inconvenience + possible COVID risk

Peloton Bike - Interactive in-home spin classes: $2,500 Peloton Bike + $40/mo Subscription

VZfit - Next generation metaverse exercise: $300 Meta Quest 2 + $150 bike + $10/month subscription 

We’re confident that the market for an exercise solution based on next generation technology (VR) can displace those based on old technology (tablet computers), especially when it costs 1/5th the price. A recession could actually accelerate adoption. 

Ugly

My grandparents were Ukrainian. It’s hard for me to not take the horrific events that are continuing in Ukraine personally. I’m happy to be busy and I remain focused on VirZOOM’s success. 

Thanks!

…for re-confirming your investment. If you haven’t already, please do so here: https://wefunder.com/virzoom/reconfirm 

Again, this only applies to you if Wefunder has emailed and asked you to do this. 

How you can help

The team really appreciates the kind words many of you offer in the comments section to these updates. If you have time please do leave us a note.  

All good wishes,

Eric Janszen, Co-Founder & CEO