Running strong: How Runtastic became a leader in fitness apps and devices from humble beginnings

Apps, wristbands and a talking skiing helmet: here's how Runtastic became a global leader in fitness apps and hardware, fully bootstrapped until Axel Springer bought a 50.1% stake in late 2013.

Perhaps it's the clear mountain air and glacier streams, the snowy peaks and luscious green mountain meadows. Whatever the reason, Austrian startups seem to be obsessed by all things biotech and health-related tech (also see MySugr, for instance).

One of the more prominent of these health-oriented Austrian companies is Runtastic – a brand now well known globally. So well known, in fact, that it was one of the few apps featured at Apple's recent watch event.

The CEO of Runtastic has what must be the most unpronouncable name in tech, at least to those who don't speak German. His name is Florian Gschwandtner (pictured above, second from right - just call him Florian).

Together with three of his friends – Christian Kaar, Alfred Luger, and Rene Giretzlehner (respectively first, second and fourth from left in the featured image above) - Florian founded Runtastic six years ago, at the height of the economic crisis in Europe.

Their first project together involved measuring the performance of model sailboats on Austria's Neusiedler See. After tinkering with a few other ideas, eventually they came up with Runtastic.

They tried to get funding early on, but in those days were chased away with comments like "A startup? Why don't you start a real company?!"

Florian's parents went crazy when he told them he was turning down an offer for a corporate job which included a nice shiny Audi A3 as part of the package. The crisis of 2008 – 2009 also helped; Christian had already accepted a job offer from TomTom in the Netherlands but when it hit, the company was forced into downsizing and canceled the offer. Some people would argue that 4 is a bad number for any founding team. What say you?

Florian: Everyone told us it would never work. That we would argue about everything and could never make a decision. If not in the early days, surely we would have a falling out eventually, over money, when an exit appeared on the horizon. As it turned out, however, we've never had a major problem in decision making or managing the company. We had equal shares starting out and still do, even after Axel Springer bought a majority stake (note: more on that later).

In fact, we took this to extremes which seem comical today – we considered ourselves 4-way co-CEOs. Emails sent to "[email protected]" would go out to all four of us at the same time.

In the meantime we've reshuffled our various roles in the company – in fact we've done that several times over the years. Today, I'm the CEO and the public face of Runtastic – when our company appears somewhere on stage it's usually me. Alfred is the COO, Christian is CTO Mobile and Rene CTO Web.

Let's hear some numbers you're willing to share?

As a private company we unfortunately don't disclose revenues.

What I can tell you is that we are a profitable company with 105 employees. The Runtastic family of apps has been downloaded more than 115 million times. We get more than 140,000 downloads each day and that daily download number is growing nicely.

Runtastic is an example of that very rare creature: a fully bootstrapped company?

We tried getting funding in the early days, in 2009. There was no real startup ecosystem in Austria at the time so we were unable to raise any seed money. Therefore we started doing Web development for commercial customers and invested all of the money we got into Runtastic. Eventually we were able to focus on Runtastic 100%. We did receive funding, however, from the Austrian government.

We won 50,000 euros by winning a national startup competition and our total funding from the public sector came to about 200,000 euros. It's a good thing that our government supports startups and technology that way.

A few months after we launched we were approached by interested investors but we declined. It was already clear that things were going well and, indeed, after 18 months we became cashflow-positive just from Runtastic.

How are you different or better than the competition?

We actually have different types of competitors since we have both apps and hardware. In the app space our main competitors are Runkeeper and Endomondo. Compared to them, we are the only profitable company. We've never spent money on user acquisition, which we think is quite cool.

(Editorial note: Endomondo was recently acquired by Under Armour for $85 million)

You must have reached out to customers somehow – it can't only have been word of mouth?

Oh no, of course not. We have an international marketing team of 10 people and we work hard on our visibility and PR.

Our partnership with the large platform companies, Google and Apple, is critical for that. We are regularly showcased at major events like the recent Apple Watch announcement, as well as at Google I/O. That's not very common for a European company. Europeans are usually "relegated" to the European management of the tech giants. We have a direct relationship with both of them.

How did you achieve that?

Well first of all, we make sure our products, both the apps and the hardware, are extremely good and at the cutting edge of technology. Of course that's not enough by itself, so we've worked to develop personal relationships with key people. We have a small office in the Valley and an American colleague in charge of business development.

I travel to California very frequently and make it a point to nurture the partner relationship.

Often it's just small things – stopping by, saying hello, going for a coffee and talking about how the industry is developing. I was there in January, we met again in Barcelona at the Mobile World Congress and again at SXSW.

Do you have plans to relocate to the Valley?

No. I don't see that it's needed or necessary. We only have one person working there full-time and we are thinking of perhaps adding one more, but we are very happy with the way things are working now.

There are 23 nationalities working from your Pasching HQ. How do you motivate people from so many countries to come to a small Austrian town?

Hiring is obviously a critical issue. We do all kinds of things to make people feel welcome when they join Runtastic. We have three company flats here, where people can live for free for a certain time after arrival. Every two weeks we have an all-hands company breakfast. Once a month we have our "DONI" – Day of New Ideas – where people discuss all kinds of proposals and initiatives.

Runtastic Fasching 2015
The 'Runtastics' at the company's HQ in Austria

We also put a lot of effort in pointing out the attractiveness of the surrounding area – guiding them how to enjoy the mountains and nature around us.

Half a year ago we set up a highly professional HR team and the number of job applications we get increased dramatically. One of the most important factors there is just word of mouth from the employees, within their personal and professional networks.

Do you face any administrative issues with employing and relocating them?

Sometimes it's really a pain integrating someone into the company. In a recent example, a colleague joined us from Mexico. It took several months to get all the paperwork done!

Austria is still not a startup-friendly country. There are so many regulations that make our lives harder – things like working hour limitations and many others. Another example is investing – if you invest in a company and lose the money, you are not allowed to declare it as a loss on your tax statement.

I've discussed this often with Hansi Hansmann – there is still a lot of work to do to make Austria a better place for startups. Not just when compared to the US but also in comparison to other European countries such as the UK or France.

Have these things changed in Austria in the past few years?

The scene and the ecosystem have changed and improved a lot since we got started. A major force behind these changes is the Pioneers crew and everything they have done with Pioneers Festival and their other activities and events.

Some regulations have improved as well. There is now a "light" version of the GmbH legal entity which makes it easier and less expensive to start a company.

These are unfortunately minor improvements. To be honest – no, the regulatory environment hasn't improved very much.

Runtastic CEO Florian Gschwandtner
Runtastic CEO Florian Gschwandtner

Let's go back to Runtastic and your product line. You have a mix of software (apps) and hardware products. I've seen a helmet with speakers and a microphone, I'm guessing it can probably tell you how your skiing is going. How many different products do you have?

There are 16 hardware products, including some very small ones like reflector bands which don't have a lot of technical integrations. It's a bit hard to tell with the apps. When there's a free and premium version of the same app you could say it's one or two. But overall we have more than 15 apps on four platforms – iOS, Android, Windows Phone and Blackberry.

We still support Blackberry although we don't think there is a strong future for that one. With Microsoft it's a different story. Windows Phone is a very small part of our business, however I think Microsoft is making some very good strategic moves now, in particularly offering Windows 10 as a free upgrade to more than 1.5 billion devices.

We are seeing quite a bit of interest for the Microsoft platform in the BRIC countries. They just recently announced a 5-inch phone for 149 euros which is an amazing price for that kind of device.

The German media corporation Axel Springer acquired 50.1% of Runtastic shares in October of 2013. How have things changed since then?

Actually not that much has changed. We are still running the company as an independent organization, with all of the cofounders in the same roles as before. Axel Springer has many digital media properties – I believe it's more than 50. They are connecting the founders of those startups amongst themselves and can open doors to business partnerships for all of us that would have been really difficult without the backing of such a big, well-connected organization.

What's next for Runtastic?

We have to align and consolidate our branding. If you look at our products, you can see that they are a bit all over the map in terms of light version, pro version etc.

Strategically, the Runtastic Me app is critical for us. It will become the hub for all your health and fitness data, with our other apps and hardware devices communicating your data wirelessly to Runtastic Me.

In terms of our revenue model, this means a transition from a one-time payment for an app to a subscription-based service.

With regards to the business itself, we see a lot of growth potential in better understanding the lifetime customer value of our business with each of our customers. We're really happy with the growth we've achieved so far, but we still have a lot to learn about how our customers use our various software and hardware products and what exactly that means for the revenue we get from each customer. Once we move forward with a better understanding of that part of our business, I'm sure we'll be unlocking a lot of hidden value. I'm sure we can build this into a 500 million or billion dollar company!

(All images credit to Runtastic)

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