Tonal, the at-home strength-training startup backed by Amazon and athletes such as Serena Williams, Maria Sharapova and Mike Tyson, has announced a restructuring, reducing its workforce by 35 per cent as part of a move to sustainable growth and profit.
The company said that while sales have continued to grow, so have costs, "particularly in light of the macroeconomic climate and global supply chain challenges”. The decision was cited as “responsible”.
Tonal is on record as employing around 700 people, suggesting there will be around 245 job cuts – staff are expected to receive severance packages and extended healthcare.
In March 2021 Tonal raised US$250m in Series E funding from Dragoneer, Cobalt Capital, L. Catterton and Sapphire Venture. During the previous year – the first twelve months of the pandemic – Tonal’s sales had multiplied eight times, the company announced a partnership with Nordstrom across 40 locations and it had received finance from its athlete investors and ambassadors.
At the time, Maria Sharapova said: “As an investor, I’ve always been drawn to companies that are developing a new approach to their category, and Tonal’s focus on AI and technology brings added accountability and a unique sense of motivation that I haven't yet seen in the space.”
In an internal memo CEO Aly Orady expressed his regret to the staff telling them he was “truly sorry” and that the decision was in “no way a reflection” of their work or contributions.
“It is heartbreaking to confront the reality that we must say goodbye to team members full of strength and passion,” he wrote. “For those impacted by today’s news, you have made a permanent imprint on Tonal and on the colleagues around you.”
Orady went on to explain how the decision had come about, saying. “Despite an economic landscape shaped by a pandemic, supply chain challenges and global instability, the past two years have been a period of rapid growth for Tonal.
“As our business scaled, we grew our teams rapidly to keep up with demand and competition. Our growth was supported by outside investors with large sums of capital, while those same global challenges were causing our costs to rise.
“These collective challenges accumulated in the macroeconomic environment. The capital markets began to deteriorate, triggering a new chain of events, including record-level inflation, rising interest rates, and now a potential recession – all of which are forcing most companies to re-evaluate their businesses.
“When it came down to it, we had to face these realities: to make it through what’s ahead, we must prioritise becoming a self-sustaining and profitable business. Becoming self-sustaining requires us to scale back significantly, both operationally and in our headcount.
“Our costs, growth, and investment levels were shaped by and built for a hyper-growth trajectory. We owe our members and our shareholders, including past and current employees, to be here for the long haul beyond the present economic downturn.”
Orady said that every possible option was evaluated to try and avoid job losses. “Given the rapid market deterioration, we knew we had a responsibility to act decisively for you and our members,” he continued.
“We kicked off a process to create a simplified, focused business strategy in line with a more sustainable cost model,” he wrote. “We reduced our strategic initiatives and assessed how each team mapped to each initiative, determining the right size and shape for each function. Then, we conducted a comprehensive review of each team, weighing decisions based on core competencies and how they mapped to our needs moving forward.
“None of these decisions happened without careful consideration. None of them was easy.”
Orady confirmed that in a bid to make the process as easy as possible that all affected employees would receive at least eight weeks of continued pay, while healthcare coverage would continue until the end of September.
“Please know this decision was part of becoming leaner as a business to tackle upcoming economic challenges, and ensure Tonal has a strong future ahead,” he concluded.
