On June 17, Kazakhstani startup 1Fit, which offers fitness services under a single-membership model across various fitness centers, announced its exit from Malaysia. The company’s CEO, Murat Alikhanov, who was included in the Forbes 30 Under 30 list in 2020, explained to Kursiv.media the reasons behind its misfortune in another overseas market.
In late April, the company announced it was shutting down operations in the Mexican market, citing significant financial strain after operating for less than a year in the country. A month and a half later, 1Fit cut operations in Malaysia — notably, for the same reasons. In 2023, 1Fit terminated its project in the U.K., where the expansion resulted in a $97,000 loss and operations lasted for less than six months. In 2022, the company wrapped up its project in Russia.
According to Alikhanov, Malaysian users were initially attracted to the startup. Over the past year, membership holders in Kuala Lumpur completed more than 365,000 training sessions across 600 gyms and fitness studios. During its time in operation, the business generated $2.7 million in the country, significantly less than the $4.2 million the company had invested in the project.
«When did the problems in Malaysia begin? At first, the situation there was a bit better than in Mexico. The unit economics were less negative, which is why we believed that if we continued investing in the market, we might eventually see good results. But when the Mexican incident occurred, unhappy users began posting angry comments on the social media pages of all our branches. This situation affected users in Malaysia the most,» Alikhanov said.
The platform’s sudden exit from the Mexican market caused a stir among users who had purchased memberships for six months or a year. 1Fit’s CEO believes this situation also impacted the Malaysian market.
As Alikhanov explained, the Malaysian user base consisted of 95% ethnic Chinese, known for their cohesion. They launched discussions about 1Fit on Rednote — a popular Chinese social media platform — and sales vanished. The company made only $1,000 a day instead of the regular $20,000. Employees of the Malaysian branch confirmed to the management that this situation led to the drop in sales.
He added that the company poured significant resources into closing its business in Mexico due to large-scale, disorganized refunds, which impacted its ability to invest in Malaysia. Initially, the startup intended to offset the losses using funds from its Kazakh and Uzbek branches but realized that would merely delay an inevitable failure.
Alikhanov also admitted that the company failed to raise necessary funding to keep its Malaysian business afloat. He believes that the global venture capital market is currently in decline, as there are fewer investors with risk-appetite. In Kazakhstan, the number of investors ready to support companies at the growth stage (Series B) is zero, while those who are willing to do so offer only small amounts of money, lowering a company’s value.
The startup tried to raise funds overseas, but the situation there has also changed. Investors are cautious, prefer larger deals, and want control over the business, «like in a classic private equity» (by investing in the capital of already-successful companies).
«We have a large business in Central Asia. We are the leading fitness company in the region. And this has actually turned out to be something of a curse, because foreign investors simply don’t understand our region. On the other hand, we’ve struggled in markets they are very familiar with. We tried to raise funds from local investors, but doing so while exiting two markets is nearly impossible. That’s why we had to sacrifice the Malaysian market,» Alikhanov said.
According to 1Fit’s CEO, the company will now focus on Central Asia, where it already has a strong presence. The key objective now is to increase operational efficiency.
Alikhanov admitted that the company had previously focused on rapid growth and profitability. However, this approach is more common among startups with ongoing access to capital, allowing them to cover expenditures through new funding rounds. 1Fit lacked such resources.
«We’re lucky to have stayed afloat on this uncertain path for so long. But now we’re shifting to a dividend company model — something we’ve already agreed on with our current investor, who continues to believe in us and said, ‘Okay, we are ready to wait for dividends.’ That’s why we’re reshaping our strategy and focusing on what we have. For now, we’re not considering any overseas launches — not until we’re strong enough to ensure they won’t result in disproportionate losses,» Alikhanov summarized.
He added that since last year, the company has invested about $7 million in launching in new markets, despite raising only $1.7 million. This situation is rare, as the startup used its own revenue to finance expansion.
Meanwhile, 1Fit continues to operate successfully in Kazakhstan, Uzbekistan and Azerbaijan. According to Forbes Kazakhstan, 1Fit generated $20.2 million in revenue in 2023.
