FitKey, an app that connects users to a range of geo-located exercise classes, has received "six-figure" investment from Cape Town-based entrepreneur and angel investor, Justin Stanford.
The app that entered beta in May this year is poised to open to the public and expand across the country. The start-up believes that its solution is a product of two of the Cape's fastest-growing industries - exercise and technology.
The app allows the user to join an extensive range of fitness and exercise classes without being locked into a specific contract, it says. Stanford and FitKey founders, Evan Walther and Joshua Shimkin, signed the final agreements in August this year. The pre-seed investment from Stanford puts the start-up in an optimum position to build the business and scale.
"It is a six-figure amount in South African rand, and to date, Justin's largest investment for comparable businesses at FitKey's stage of development," says Walther. "The exact amount is not being disclosed. Justin invested because he saw the opportunity for a South African business with big growth potential, which solves an existing problem that people already understand."
He reveals the finance will be used for marketing and to support expansion to Johannesburg, Pretoria, and Durban.
"We were broke and bootstrapping the business. Financing off of credit cards and selling some of our personal things and borrowing money from family to make ends meet."
The app is currently live on the App Store and Google Play. To subscribe, a user must request an invite on fitkey.co.za. "We're currently inviting members in Cape Town. Johannesburg is coming very soon," Walther notes.
The two parties have decided to raise capital on the Simple Agreement for Future Equity (SAFE), the YCombinator standard. Described as an evolution of the convertible note, SAFE exemplifies equality for both investors and founders. The simple investment strategy, developed by YCombinator in Silicon Valley, was designed to reduce the often onerous and expensive management of deal terms.
SAFE is different from a convertible note as it is not a debt instrument and does not bear maturity dates, regulations or security interests, making it less risky for the founders. It ultimately de-risks early stage investments for investors as well, where slow deals and onerous terms often kill early stage companies. YCombinator developed it as an open source investment process for immediate financing or pre-seed rounds.
"We are the first South African company domiciled in South Africa to raise on SAFE, though with Barclays' Tech Lab's Africa accelerator in Cape Town using SAFE, it's quickly becoming the standard. It is going to change the rate at which early stage companies in SA can raise funding and do so in a manner that prepares them for later rounds," says Walther. "Our round is oversubscribed and we've raised enough capital to reach breakeven. Though, we're still accepting investment from value-add investors through the end of the month," he added.
Stanford's investment will be used to build out the FitKey team to ensure that it has the resources to scale rapidly across the country. "Although we use tech, it's actually a very human business. We know that by including some more great people in our team we can grow this business exponentially in the next year," concludes Walther.
Stanford is a passionate angel investor from Cape Town. He has been involved in tech start-ups and entrepreneurial endeavours ever since founding his first start-up at the age of 18. Despite years of struggles and false starts, he ultimately went on to successfully launch and grow a pan-African Internet-based software company from a garage in Cape Town.
He is today the co-founder and MD of 4Di Group, a diversified investment management group, and co-founding General Partner of early-stage technology venture capital firm 4Di Capital. He is also an active angel investor in Africa and around the world.