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Noom signs up dieters as investors see new wins for weight loss

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Noom screen capture. Renee Richardson / Brainerd Dispatch
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This New Year's Day, 55,000 people signed up to lose weight with the smartphone app Noom. You've probably seen the ads -- it claims to have helped more than 350,000 get slimmer.

Dieting, not to mention keeping weight off, is an iffy proposition, but Americans spend billions each year trying.

Noom, which combines human coaches and AI, has attracted $114 million from A-list investors such as Sequoia Capital, Groupe Arnault-backed Aglaé Ventures, WhatsApp co-founder Jan Koum, Serena Williams, and other prominent names that see promise in its approach and growth.

The company's founders say they're in constant conversation with their investors who are watching the market to assess a possible IPO as soon as this year.

Indeed, in a competitive market, Noom has racked up impressive growth, driven in part by aggressive advertising: Noom closed 2019 with $237 million in revenue, up from $61 million and $12 million in the two previous years, respectively.

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"For a certain demographic, Weight Watchers is more comfortable and familiar," said David Katz, founding director of Yale University's Prevention Research Center. "For a younger, more digitally savvy audience, Noom is a different way to get a grip."

Shares in WW International Inc., the diet company formerly known as Weight Watchers, have more than doubled from last year's low in June. In September, WW announced the Oprah's 2020 Vision: Your Life In Focus Tour with shareholder Oprah Winfrey. Investors will have to wait for WW's fourth-quarter results in late February for a sense about early-year sign ups.

Industry analysts note the cyclical nature of the dieting industry and that Noom's robust start this year does not necessarily herald lasting success.

"You've got a lot of program starts after the holidays, and that's the nature of the business," said Steven Halper, a senior health-care IT and managed care analyst at Cantor Fitzgerald.

"You get in shape, you lose your weight, everyone wants to look good at the beach in the summer time, and lo and behold the weight comes back on," Halper said. He covers Tivity Health Inc., which acquired WW rival Nutrisystem in March.

Noom was founded over a decade ago by Artem Petakov, a former Google engineer, and Saeju Jeong, lover of heavy metal, who strayed from his family lineage of 29 medical doctors to be an entrepreneur.

"Noom's story didn't initially work," said Amy Sun, a partner at Sequoia Capital. Sequoia invested for the first time in the $58 million Series E round that Noom announced in May 2019.

"They tried a whole bunch of different angles, including doing pure AI where it's completely automated, and they tried 100% human coaches, and it wasn't until they married the two that the company started to grow," said Sun.

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The company now employs 1,600 remote, full-time coaches in 36 states.

"The product they have today is not what they started with," said Miyuki Matsumoto, head of U.S. investments at Groupe Arnault's tech venture-capital arm Aglaé Ventures. The firm invested the second most after Sequoia in the most recent funding round.

"We weren't thinking we were going to get our money back in two years or less, even though that's a possibility," Matsumoto said.

Sun notes that Sequoia is looking to capitalize on the trend of digital companies focused on helping people manage their health. Other investors saw that trend in Peloton Interactive Inc., which priced at $29 a share in its September IPO, but traded as low at $21 a share a month later.

"Peloton is quite different because so much of their revenue is hardware," Sun said. "It's hardware plus subscription, versus Noom is all digital."

Related Topics: HEALTH
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