How Noom’s Founders Shook Up a $250 Billion Industry With a Pandemic Hit That Took 10 Years to Build

NOOM CO-FOUNDER and CEO Saeju Jeong gets up in the morning in his Manhattan apartment near Central Park and blasts the kind of hard-driving heavy metal music that you might associate with mosh pits and death shrieks, not the perky weight-loss app his company is famous for. “It’s my routine of meditation,” he says matter-of-factly. “I take a heavy metal bath, let it wash over me. It’s the way I channel my mood, and then I am in the game, giving my every spiritual and physical energy to Noom. And then at night I listen to help me detox any unnecessary doubts. I just nail them with heavy metal music.”

This is not a put-on, some entrepreneurial personality quirk cultivated for the benefit of media and investor types. Sean Foster, Noom’s chief marketing officer, a ponytailed veteran of several innovative fashion, beauty, and wellness firms, marvels at the time when his son was learning electric guitar and made some videos of himself playing various metal riffs, which Foster shared with Jeong as a kind of name-that-tune game. “Saeju got it right every single time. I mean, this is a guy who took his mother to see a Megadeth concert.”

Put another way: Saeju Jeong is hardcore.

And he’d better be. Along with co-founder Artem Petakov, Jeong has led New York City-based Noom as it has become one of the breakout hits of the past two years. The company, which makes an app that employs psychological principles to nudge its users into making healthier lifestyle choices, increased its annual revenue from $237 million to $400 million in 2020 and says it has continued its fast growth in 2021; at presstime, the company was expecting more than $600 million in revenue for the year. It raised $540 million in a Series F investment round in May 2021, from such heavy hitters as Silver Lake and Sequoia Capital, and it’s been rumored to be eyeing an IPO in the coming year at a $10 billion valuation.

Noom also operates in an extremely hot market–or several hot markets, to be precise. Its signature product, Noom Weight, is a diet alternative that competes with incumbent giants such as Weight Watchers as well as a bundle of well-funded, tech-enabled newer entrants that offer everything from meal delivery to calorie-counting systems–many of which have boomed during the pandemic. Weight loss is a $250 billion global business, according to BCC Research, but to Jeong that’s just a starter market. Where Noom’s real potential lies, he believes, is in becoming a “habit-change platform.”

The company’s first foray beyond weight loss, Noom Mood, launched in October and aims to tackle another hot topic in the time of Covid: stress and anxiety. Jeong and his team think they can tackle myriad aspects of wellness and human behavior–and take on one market after another in the process. As Foster puts it, “Weight is an important starting point, but we have this incredible opportunity to take that platform and reapply it in so many different ways.”

It’s an ambitious plan, and not without risk: There is, after all, no guarantee that a product built to stoke one kind of behavioral change will naturally work for another. But aside from a faith in psychology, the Noom team has another advantage: failure. Before Noom was a pandemic hit, it was, for nearly 10 years, a series of ideas that never quite worked out.

Ten years. That’s an eon in startup time, and yet Jeong and Petakov, both immigrants, resisted the urge that might have overcome other founders to scrap the whole thing and build a different company some other day. Instead, they relentlessly kept evolving their product. In the process of finding their place in the market, that is, Jeong and Petakov also perfected the art of iteration–and perseverance. “And the way I was able to overcome the difficulties was I applied my heavy metal,” says Jeong. “My little joy.” And while that and a truckload of venture capital are no guarantee Noom can make its next big pivot, they’re going to be necessary.

THE STORY OF NOOM begins back in 2002 in the seaside town of Yeosu, South Korea. And it begins with Jeong’s father, WooGil, on his deathbed. WooGil was a prominent obstetrician-gynecologist who had built a local hospital but, a year after its opening, succumbed to lung cancer at age 51. It was an experience that shocked the then-21-year-old Saeju.

Before his father died, Saeju had been running a heavy metal music label he founded at 19 called BuyHard Productions. “I imported all the music I couldn’t get in South Korea,” he recalls. “I’m very proud of that, and it helped me discover I have a little talent for entrepreneurship and operating.” He was making good money from the music, but his father’s death forced him to step back and assess what he was doing with his life–to ask, he says, “Why am I working hard? For what?” He realized he needed a radical restart.

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A conversation he’d had with his father shortly before his death grew into a kind of guiding principle. His father–one of many members of the extended Jeong family who worked in health care–was proud of having helped people in his career, but as he ­reflected on his life, he wondered why he had always treated people once they were already sick, even though he knew there was a whole population of people out there missing the chance to prevent or better manage their conditions. The question “really heavily got into my soul,” Saeju remembers, “and I became curious about why the health care industry worked really as a sick-care service.”

WooGil also counseled young Saeju to explore the world. The elder Jeong had gotten his medical training in the U.S., and he felt one of the greatest advantages of his life was the chance he’d had back then to be around talented people from every part of the world. Saeju, who’d been studying electrical engineering at Hongik University while running the record label, decided to drop all of that after his father’s death, serve his compulsory time in the South Korean army, and get out into the world.

“The way I was able to overcome the difficulties was I applied my heavy metal. My little joy.”–Saeju Jeong

Three years later, he was living in New York City, and only a few months after his arrival, at a dinner following a wedding he’d attended with his cousin, he found himself seated next to a young Ukrainian Princeton grad, Artem Petakov. It was 2005, and Petakov had just returned to the States after a stint in Berlin leading the development of a team of soccer-playing robots that went on to win that year’s world RoboCup in Japan. He ­explained to Jeong his twin fascinations with computers and the ­human mind. As a kid, he’d written a program that played Tetris using a neural network. The two bonded over their shared immigrant status and interest in technology, and that night’s conversation bled into many more over the coming months.

Petakov had taken a class at Princeton with the Nobel Prize-winning psychologist Daniel Kahneman, and it had led him to think about behavioral change. “How might we get people to do things like go to the gym and start getting healthier without spending a ton of money on personal training?” he mused to Jeong in one of their idea jams. Petakov had joined a fancy gym and booked some personal-training sessions, and he couldn’t believe how dated the technology was there.

The idea to build some kind of fitness catalyst hit Jeong in the heart, right where he’d been holding onto his dad’s most important life lesson. “Oh, my god, we have to build that company,” he replied.

Petakov was just starting a new job at Google, though, working to improve the geographic search function for the then-nascent Maps product, and he wanted to see where it would lead. Jeong, who went on to work odd jobs hawking Korean products to Americans–window blinds, 99¢ perfumes–as part of a state-sponsored program, wore his friend down by refusing to drop the idea. Within a year, Petakov was beginning to chafe at the limitations of his job. The geo-search team often tested its work by looking up places to get pizza in New York. “That’s nice for helping people find pizza,” he thought, “but am I making a giant change in people’s lives? No.”

Noom launched in early 2007 under the name WorkSmart Labs, and it was little more than a side project for the first two years, especially for Petakov, who didn’t leave Google until 2008. But even once Petakov joined full time, the two founders went another three years, until the end of 2011, before they turned their focus to weight loss–and another five years after that before they hit upon the model that would vault them into the startup stratosphere.

“WE MADE SO MANY mistakes,” Jeong says. It’s a clear fall day in New York, and sunlight and the sounds of the city pour in through the windows of his century-old apartment building, his remote pandemic office for much of the time that Noom has grown into a household name.

It’s a big change from that first year, when Jeong was the only full-time employee and lived in an illegal garage apartment in Queens where he had to wear a headlamp at night to use the bathroom. Back then, he’d commute into Manhattan for an early status meeting with Petakov, and then work out of Petakov’s apartment while the latter was at Google for the day. They funded the operations with Petakov’s salary and Jeong’s $3,000-per-month income from the sales gigs–and somehow managed to create a prototype of the company’s first product. They’d decided their startup’s mission would be to use technology to “help as many people as possible live healthier lives,” and their first attempt to do that was a touchscreen computer that attached to a stationary exercise bike and made the experience more rewarding.

There were a handful of other startups in the space at the time, Petakov remembers–“but they were exactly what you might expect from a bunch of nerds trying to think about fitness.” He recalls one out of MIT called CycleScore whose program, as users pedaled, had them flying around in balloons and dropping precision bombs. In WorkSmart’s version, users would pedal along on a rainbow catching butter­flies. They persuaded a gym in Queens to install the prototype, “and people absolutely loved it,” Petakov says. “There was positive and wonderful music playing in the background, and it felt so good to catch butterflies. People told us, ‘Wow, this is actually motivating me for the first time, as opposed to just being self-driven.’ “

They started working on additional prototypes for free weights and cable machines, but there were underlying problems–not with the technology, but with the business idea. For one, gyms were never going to be a huge market. Only a small percentage of all people have gym memberships, and a far smaller percentage actually go, let alone regularly. That was a deal-killer for potential tech investors, who chase ideas that scale naturally; they scarcely even took Jeong’s cold calls. Eventually, Jeong and Petakov realized gyms were a deal-killer for them, too: The narrow market segment would never let them live up to the “as many people as possible” part of their mission.

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That year of struggles was also the year the iPhone launched, and the next year, 2008, came the debut of Android. Jeong and Petakov saw the app economy as their way out of the gym-equipment business and into the hands of consumers: Petakov left Google, they raised a couple hundred thousand dollars in angel investment capital (from a Google colleague of Petakov’s and two Korean contacts of Jeong’s), and launched CardioTrainer, an Android app for tracking runs and bike rides. It debuted at the same time as the Android marketplace.

The founders had figured that Android would quickly eclipse Apple’s iOS in user numbers, and that would give them instant scale. They were right, sort of. Over eight months, the app climbed to the top spot in the Android rankings of most-downloaded fitness apps. The problem was that Google’s more mass-market approach meant that users wanted free apps and were too often unwilling to ­upgrade to the paid premium version of CardioTrainer. Even though it was a hit, eventually amassing a million users, too many of them interacted with the app only occasionally and passively–which translated to a lot of noise in the user data. It was hard to draw insights to improve the product.

Petakov and Jeong did, however, notice one pattern among their users that would prove immensely helpful: An overwhelming number of their customers were using the app as a step counter rather than as a run tracker. And when the founders started polling users, they heard over and over that people had underlying health issues and needed to lose weight. They were counting steps because they couldn’t run. “And that’s the moment we said, ‘Wow, there’s a huge opportunity in the weight-loss market,’ ” Jeong recalls. Here was a direct way to engage people who needed the kind of preventive care that Jeong’s dying father had lamented not pursuing, and it had come to light through continual evolution of the company’s product and strategy–but never by changing the mission itself.

Noom’s mission is to change health care at maximum scale, to become what Sequoia Capital’s Ravi Gupta calls a “transformative company.”

The company’s evolution into the Noom we know today was far from complete, but Jeong and Petakov had ­cemented one of the principles that would continue to guide it. CardioTrainer’s app-store ranking not only gave the company lots of users, but eventually, in early 2011, also helped land an investment from the powerful Silicon Valley venture capital firm Kleiner Perkins, which led a $2.6 million seed round. The pressure to chase easy revenue and start carrying advertising was intense, though, and the founders thought doing so would detract from their mission. “We had multiple opportunities to increase revenue,” Jeong remembers, “and you can see today that there are many good fitness applications doing good business.” But when they really studied those opportunities, they saw a mismatch with their company. “We were naive back then, but we had a very strong belief, which we still have today, that if we deliver great health care value to end users in massive scale, then business will follow,” Jeong says. “That’s why we founded the company, and it’s still the way we make decisions.”

The WorkSmart team had taken its weight-loss insight and started a second app in 2010, a calorie-counting tool called Calorific, that also found an audience. But again they felt a series of perverse incentives to optimize for revenue first, rather than results. One of the company’s first angel investors, a Korean psychiatrist who was also Jeong’s sister’s boss, had long been hammering the view that the key to weight loss and healthy living was not diet but psychology. Jeong finally started hearing that message, and in 2011 Noom Weight Loss Coach launched with a freemium model that allowed users to pay to unlock access to personalized coaching.

The foundation for today’s Noom was in place. The company had drilled down through multiple products and user reactions to find its way to addressing the greatest number of people. In the process, Jeong both found his company’s purpose and honed a method for gathering ideas, testing them, discarding some, and refining others–and refining and refining. “I learned the importance of a very well-disciplined, unbiased sandbox for ideas,” he says. “Because many of the good ideas turn out not to be good ideas. We let our users be the judge.”

Most companies run tests, of course, but Noom had developed a grading system it called ICE (for impact, confidence, and ease of implementation) to measure how big the potential results of an idea would be, how much the team believed in it, and how doable it was. No matter who suggests them, all ideas get assessed this way internally, and the best make it to consumers, who issue their own verdicts. And the main way Noom determines whether something is working with consumers is by monitoring a single number, what Jeong calls the OMTM, or “the one metric that matters”: paid active weekly users. “Our team is laser focused and pays attention to that one single metric every day–every hour,” he says, sounding suddenly quite metal in his intensity.

JEONG’S BOYISH ENTHUSIASM has a way of zooming from unbridled joy and gratitude to pure hustle. He believes deeply in what he’s building, and he’s in a hurry to tell you about it, with no time for dawdling. He’s 41 years old this year, just 10 years younger than his father was when he died, and the thought of having the same kind of limited time here has long nagged at him and urged him forward–to the point, he says, that his wife got worried about him a few years ago, because of the intensity with which he was working, and the seemingly endless hours he was putting in. She even reached out to his therapist. Jeong reassured his wife that he was not in imminent danger because he eats well and uses Noom. Still, he says, the vivid memory of his father’s passing regularly reminds him of life’s fragility and reinforces his sense of purpose.

That’s the kind of story Jeong tells often–sweet and sincere, and selling hard. Which is also an apt description of Noom today. It was 2016 when the company finally hit upon its winning formula. The 2012 version of the weight-loss app had offered its coaching via artificial intelligence, mainly because that’s what made sense to Petakov and his team of engineers, some of whom had followed him to Noom after working with him building soccer robots in Berlin. But then, in 2014, the company brought on a full-time chief of psychology, a clinician from Long Island named Andreas Michaelides, and he started hiring human coaches to supplement the A.I. These were entry-level positions for “really passionate people from different backgrounds,” as Michaelides puts it. He developed a training program to teach them basic psychological principles and how to communicate with empathy and enthusiasm. Meanwhile the company infused the app’s content with the principles of cognitive behavioral therapy, a form of psychological treatment that focuses on changing underlying thought patterns rather than, say, exploring buried trauma.

Today’s Noom is a chipper mix of quizzes and exercises and short reading assignments combined with chatty prompts from a user’s designated coach, all tailored by A.I. to each user’s specific case and ­informed by pretty standard food and weight logging. The coaches are now the center of the operation, and Jeong says the company’s “core IP” is how the A.I. allocates coaches’ time to eliminate ­repetitive work and maximize meaningful exchanges with users. (That’s what allows each of the company’s now 3,000 full-time coaches to have a few hundred clients, whereas a typical therapist might have a few dozen.) The tone of the app’s actual content, which Noom constantly tests and optimizes, is meant to be motivational but, depending on your level of cynicism, can feel like standard ad copywriting voice, as if it were always trying to sell you on its own efficacy, with every passage ending with a rimshot.

That tension between high-minded purpose and mass marketing extends to the company’s revenue model. In 2016, Noom abandoned its freemium business and put up a paywall for all customers. “Behavior change requires a lot of commitment,” Jeong explains. “So we want to screen out the people who aren’t going to make the effort.” As innumerable subscription companies have found, though, getting people signed up and to stay signed up requires a careful dance of special offers, long-term deals, and fine print. In Noom’s case, complaints started ­appearing on the internet from people claiming they’d been hit with “surprise” $199 annual subscription charges after their trial offers expired, or that they got the runaround when trying to cancel–so much so that a $100 million class-action lawsuit is pending in a New York federal court.

Nobody at Noom will comment about an active lawsuit, but in ­August 2020, Jeong published an open letter in response to it in which he pledged to expand the customer-service operation and honor cancellation requests even if they come in past the stated deadline. “Our refund rate, if they ask, is 99.9 percent or more,” he told me crisply. “I think that’s quite high, and we don’t make it tricky at all. I take a lot of pride in my team, and we are here to make sure that we deliver what we promise, period.”

The lawsuit hasn’t slowed investors’ enthusiasm for Noom. In May 2021, the company announced it had raised that whopping $540 million round of venture capital. “Noom’s combination of technology and human coaching is compelling,” says Ravi Gupta, who led Sequoia Capital’s piece of the investment. “In our experience, the best A.I. companies are not artificial intelligence but augmented intelligence. And, in Noom’s case, the success they’ve seen in weight loss has real potential to be applicable elsewhere. We see them becoming a digital-health platform, much more than a point solution.”

ACCORDING TO A SURVEY by the American Psychological Association, some 42 percent of U.S. adults gained unwanted weight in the first year of the pandemic–which helps explain the monster year Noom had for its weight-loss service in 2020. The same APA survey found that two-thirds of Americans were having pandemic sleep trouble, and half were experiencing extra stress. Noom, meanwhile, heard firsthand from its users how those figures were connected. In its user research, when the company would ask its weight-loss customers what else they were struggling with, stress was the number one answer.

Michaelides, the chief psychologist, knew that the methods he’d helped implement for Noom Weight were made for treating other conditions. “There’s a large population of folks who don’t really meet the criteria for a diagnosis and don’t necessarily need to be in therapy, but also need a lot of skills that can help them cope with their day-to-day lives,” he says. Hence the launch of Noom Mood, the first of multiple new verticals to come in the near future, based on four pillars of care: nutrition, exercise, sleep, and stress management. The company is also diving into the enterprise market, as employers look for ways to provide healthy work conditions for employees who may never return full time to the office.

All of which is occurring against a broader backdrop of innovation and deal-making in the digital wellness space in recent years–perhaps most notably the merger announced in August between well-known mindfulness app Headspace and the on-demand therapy platform Ginger. Michaelides sees Noom’s services filling a space directly between those two players. “Programs that offer digital therapy are really targeting a more clinical population. And there are a lot of great mindfulness apps out there, but mindfulness is just one skill,” he says. Noom Mood, he contends, is complementary to those. He calls it a “psychoeducational approach.”

That approach has largely worked for weight loss, where the results are physical–easy to see, feel, and measure. Whether it works for stress management, a much fuzzier concept, remains to be seen. Plenty of studies have shown online cognitive behavioral therapy to be a viable and effective alternative to in-person therapy. But will Noom’s army of coaches and bite-size breezy quizzes ­deliver a version that works?

It’s a different question from whether Noom can sell the concept. No doubt there’s a market for the latest self-improvement scheme, as innumerable lifestyle and success gurus have found. And Noom has built a formidable alternative to Weight Watchers and Jenny Craig, as innumerable App Store reviewers and hundreds of millions in revenue attest. But those are not the benchmarks Jeong set for himself when his father passed away. Noom’s mission is to change health care at maximum scale, to become what Gupta calls “a transformative company.” And getting there is going to take more time. And dollars.

“Five hundred and forty million dollars is a lot of money, but I don’t think of it that way,” Jeong says, his eye on the long-term goal, focused on building out his vision. “As the CEO, I don’t think this is enough dollars. We need more money.” That, and a continuing regimen of heavy metal baths.

Noom’s Journey of Self-Discovery

The pandemic’s favorite weight-loss program seemed like an overnight hit. In reality, it took more like a decade.

1999

Saeju Jeong, 19, starts South Korean heavy metal record label BuyHard Productions.

2002

Inspired by his father’s dying words, Jeong pivots his dream from music to health care.

2002 – 2004

Jeong enters the South Korean army as an IT specialist.

2005

Jeong moves to NYC and meets Artem Petakov, a Ukrainian immigrant software developer.

2007

Jeong and Petakov create WorkSmart Labs and their first prototype, a stationary-bike gamification accessory.

2008

Petakov leaves Google to go full time with Jeong; they raise funding from acquaintances to build prototypes for other gym equipment.

2008

Jeong and Petakov launch CardioTrainer, one of the first apps in the Android marketplace.

2010

After learning that users are using their app to count steps, the duo launch calorie-counting app Calorific.

2011

WorkSmart Labs changes its name to Noom and raises a $2.6 million seed round led by Silicon Valley firm Kleiner Perkins.

2011

Noom Weight Loss Coach, a freemium app that charges for A.I. weight-loss coaching, launches on Android.

2012

The Noom team starts to shift its focus to psychological solutions.

2013

Noom secures an NIH grant to study binge eating, raises $12 million more, and tinkers with a B2B solution.

2014

Noom completes its pivot to the psychology of weight loss and hires therapist Andreas Michaelides as its chief of psychology. The company raises $16.2 million more.

2015

After experimenting with peer-led group therapy, Michaelides starts hiring human weight-loss coaches. The first, Peter Athans, will still be with Noom in 2021.

2017

Armed with $14.5 million more in venture capital, Noom Healthy Weight launches, focused on the B2C market, with human coaches as the centerpiece.

2019

After a $58 million Series E on the heels of $14 million in 2018, Noom’s annual revenue tops $200 million.

2020

With millions of people packing pandemic weight, Noom’s revenue soars from $237 million to $400 million.

2021

A certified hit, Noom raises $540 million more, aiming to expand beyond weight loss. Next up: Noom Mood.

From the Winter 2021/2022 issue of Inc. Magazine

https://www.inc.com/magazine/202112/tom-foster/noom-weight-loss-behavior-app-saeju-jeong-artem-petakov.html