Having just started two years ago in early 2016, Mukesh Bansal's health startup Cure.fit raised a gigantic $120MM to fuel its growth to organize and conquer India's health market. 

Even with India's increased pace of funding, this speed is unprecedented. BYJU's took 8 years, Zomato took 6, poster boy Flipkart took 5 and Swiggy took 3.

Raising capital at such velocity is to do one thing "move fast and break things" i.e. hypergrowth. All these companies have gone on to raise further capital, become legendary "unicorns", and virtually become number 1 or 2 in the markets they operate. There is thus no question that the expectations of Cure.Fit are similar, or more.

But before we delve into the question of whether Cure.Fit can hit these expectations, what on earth is Cure.Fit?

Cure.Fit's website exalts you to "be better everyday". Where it gets confusing is if you look at it purely operationally as a business.

It is a mash of food delivery, fitness studios, yoga centres and health clinics. To put it into perspective, it is a combination of Swiggy, Gold's Gym, Baba Ramdev and Metropolis.

For a startup, being present in many different verticals can be extremely difficult when each of these massive markets are competitive. In his excellent book, Zero to One, Peter Thiel talks about how startups should focus on small markets, monopolize them, go after a bigger "small" market and repeat.

Contrary to Thiel, neither is Cure.Fit focusing on just one city (it's already in 4) or one vertical (it's already in 4). It's going after as many as 16 different "markets" all at once, and thus needs to be very well resourced (i.e. capital) to win. All the 4 verticals need very different strategies as a business.

What is the unified strategy Cure.Fit is playing out?

Cure.Fit says that it is going after the "$100 Bn health market", which is indeed large. Each of the 4 verticals Cure.Fit is targeting is also fragmented and disorganized, and most of these verticals don't talk to each other.

From a consumer perspective, the lack of communication between verticals makes the customer "healthcare journey" fragmented. Nobody has really bothered to solve health as a horizontal, either because the verticals were too lucrative individually or it was too hard to solve horizontally.

The same will hold true for Cure.Fit, and it has taken a largely inorganic approach to enter each of these verticals. It acquired Cult to start cult.fit, Kristys to launch eat.fit, a1000yoga to start mind.fit.

For a "young" 2-year-old startup making so many acquisitions, Cure.Fit behaves almost like a private equity firm - raising capital and acquiring controlling stakes in companies. Is this what Cure.Fit really is, or as Mr. Bansal says "a movement"?

It does look like a movement, with its slick marketing and multiple celebrity endorsements.

Cure.Fit wants to attract a lot of customers, and it also wants to keep them engaged for all health needs. Beneath all its buzz, Cure.Fit says it wants to become a one-stop healthcare platform. 

It is here that we start getting closer to what Cure.Fit likely is. Cure.Fit is not a company providing disparate services, it is a healthcare data company. All this marketing, and these various verticals, is to acquire highly lucrative and valuable customer health data.

Just like your data allows Facebook and Google to sell you products better, Cure.Fit will sell you healthcare services better. With all your health data, experience and journey locked into Cure.Fit, you will be served better, remain retained and likely purchase more.

The acquisitions are just more service lines that utilize/generate health data. You could even be sold health insurance or fitness apparel next. Cure.Fit is thus a healthcare data company, that is marketing a vision aggressively, to acquire more customers (and their data).

How is the business really doing, and does it justify this raise, now that we have some clarity on Cure.Fit?

The company had roughly 50K customers in March 2018, on an annual revenue run rate of $20MM ($400/customer annually). It aimed to get to an ARR of $100MM of revenue in 2019.

Assuming it is going to hit numbers, it is roughly $50MM of run rate today. A raise of $120MM would likely be at a $600MM valuation, implying a 12x run rate multiple on current financials.

As an example, Swiggy does roughly 900,000 orders daily, assuming an average order to be $3, with Swiggy taking 20% ($0.6), Swiggy's revenue stands at $600MM. Swiggy, therefore, is valued at 2x revenue, a more stable expectation.

Assuming Cure.Fit will also be valued at 2x revenue at greater maturity, for investors to make 1x money on this 12x run rate valuation, the company should at least grow 6 times. 

Additionally, how do customer unit economics look?

While there are no customer acquisition costs available, we can use a news source to deduce. The company claims that it is running a marketing campaign that will earn "15 Cr of revenue" for "40% discount" and acquire "15,000 customers".

That implies, they are effectively spending 6 Cr (15*0.4) to acquire 15K customers, ergo 4,000 INR ($60) of customer acquisition cost. As mentioned earlier, their average customer gave them $400 annually.

I expect that the business gross margin will track that of a gym+food delivery business, and both are not high. Assuming a year as average lifetime, at a 20% margin, the annual LTV margin ($400*0.2 = $80) gets dangerously close to the CAC ($60).

Additionally, this CAC is during a "mega sale day", which is usually lower than everyday CAC. This essentially means that the business will take close to a year to just recover the cost of acquiring a new customer (one year payback).

Given these economics, the company's valuation looks expensive, and the business does not look very attractive just yet. As Mint succinctly puts it "Cure.Fit's vision is bigger, but also riskier".

Will Cure.Fit be able to give India a fitness pill (and some more), or will it "burn out"?