Past Issues

The business of fitness and wellness.

Initial Peloton Offering


After months of speculation, connected equipment and streaming content company Peloton has filed, confidentially, to go public. The confidential nature of the filing means we don’t know many of the specifics (for now), but here’s what we do know: For starters, the company’s most recent funding round attracted $550M at a $4.15B valuation. They’ve built a cult-like following and loyal subscriber base. And they have first-mover advantage, having pioneered the content + connected equipment category. So currently, it’s a race for second among Peloton’s competitors. However, that doesn’t mean the company will cruise to the podium. 
While we await the S-1 filing, consider a few potential risks. 
First, there will be more competition at a premium as well as at a lower price point. In the at-home category, Mirror, Tonal, and Hydrow have been gaining steam. Technogym and Flywheel have entered the space. And SoulCycle hasn’t ruled out an at-home option. Meanwhile, Echelon (bike + content) and Zwift (content-only) already offer a less expensive option. Plus, there are a growing number of streaming, on-demand, and audio fitness options — think Aaptiv, Freeletics, Daily Burn, and Sweat. All that to say, Peloton will face challenges in consumer acquisition and retention as the category becomes more competitive. 
Speaking of retention, churn will be the subject of many a Ctrl-F when the S-1 drops. While Peloton puts its retention rate above 90%, analytics firm Second Measure put that number much lower, closer to 73% (which is still impressive). While the real number will be revealing, it’s almost guaranteed to dip over time. 
Building a company around behavior modification, like convincing people to start and adhere to an exercise habit, is incredibly difficult. Historically, the entire fitness industry (digital and in-person) has been built on breakage — the idea that people will sign up for a membership they’ll never use. Peloton is banking on the exact opposite: that their equipment and content is so good that users will come back consistently, for years. 
From this perspective, betting on Peloton isn’t actually a wager on their ability to execute, it’s a bet that users will stick to their fitness routine over time. In reality, even if Peloton or its competitors create the most exceptional exercise experience the world has ever known, the average person will drop off. 
Of course, the argument against that fact is the $2,000 upfront cost of the bike. But that argument simply doesn’t hold up. If it did, the golf clubs, skis, and mountain bike in the garage wouldn’t be collecting spider webs. Plus, there’s nothing stopping people from selling or buying a bike secondhand. At this point, it might not be too large an issue, but it will be. Especially when there are bikes for sale on Craigslist for under $1,500. 
In theory, the solution to creating stickiness among users is threefold: the content, instructors, and product innovation. 
There’s no denying that Peloton’s content is top-notch. And all signs point toward that continuing to be the case. The company recently hired two television and digital-media execs to lead its original content division. This move comes as Peloton prepares to open new production studios in New York and London amid plans to produce more than 300 classes per week across indoor cycling, indoor/outdoor running and walking, bootcamp, yoga, meditation, strength training, and stretching.
Like their content capabilities, Peloton’s roster of instructors is second to none. The company credits trainers like Robin Arzon as being essential to its success. And for the trainers, working for Peloton is a dream job — they’re paid well and are achieving celebrity status. But this asset could prove to be a liability for Peloton. As more competitors enter the space and the instructor marketplace heats up, Peloton is at risk of having their talent poached. Sure, they can defend against it with contracts and compensation, and users will find new favorites, but losing a top instructor is inevitable. 
Then there’s Peloton’s Tread offering. Hoping to replicate the success of its bike, the company introduced a $4,000 treadmill. However, the Tread hasn’t popped like the bike. In an effort to expand its customer base and product offering, the company also introduced Peloton Digital — a live and on-demand audio app. As a more accessible version of Peloton’s content, the app is sure to fair well. However, the barrier to entry for fitness apps is low and the space is already crowded, making it difficult for Peloton to separate itself here. 
While there were rumors that the company would introduce “a third piece of fitness equipment”, there hasn’t been much movement on the product innovation front. This makes Peloton’s recent hiring of an M&A lead much more interesting. In speaking with Bloomberg, Peloton CEO John Foley said: “We do consider ourselves an innovation and technology shop first, so we have some pretty sexy, cool stuff on the horizon in the R&D shop.” Foley then went on to say the company will be opportunistic in the M&A space.
Looking ahead, whether it’s upstart competitors, consolidation in the space, or Peloton’s eventual IPO, there’s never been more innovation in the fitness space. While we could continue to speculate as to winners, losers, and what’s next, we’ll have to let it play out. Now we wait.

Headlines & Happenings

🏕️ The Outdoor Marketplace

Back in Issue 26, one of our Headlines looked at the boom in camping and outdoor activities among millennials. Returning to the topic, it’s possible—and even likely–that spending time in the great outdoors will continue to grow in popularity. The reason? Access. 
“The number of new, verticalized marketplaces and platforms facilitating outdoor experiences is reaching an inflection point.” 
- Amrit Singh, TechNexus investor
Writing in a post on Medium, Amrit Singh, an investor at TechNexus, laid out a clear thesis: “New platforms will make outdoor experiences as easy to access and navigate as vacationing in a metropolitan area.” Like Airbnb, Google Maps, and OpenTable before them, startups like Hipcamp, Outdoorsy, and Fixers are breaking down the wall between consumers and outdoor adventures.
Additionally, Singh expects a new customer segment to emerge—what he refers to as the inexperienced outdoorsman—opening the door for more tech-enabled tools aimed at increasing access and building community.

🔬 DNA Treasure Trove

Last year was a turning point for at-home DNA testing company 23andMe. Founded in 2006, the company faced years of slow customer adoption and challenges from the FDA. Then in 2018, some 5M customers signed up, mailing in a tube of their saliva to get ancestry or genetic health risk results. The upswing generated an estimated $475M in revenue. 

While the company has yet to turn a profit, CEO Anne Wojcicki is equal parts optimistic and ambitious about what comes next.

Having created the world’s largest genetic research database, 23andMe plans to become a “biotech machine” that will identify the predisposition for diseases and help create the drugs to treat them. This move comes after the pharmaceutical giant GSK invested $300M into 23andMe, valuing the company at $2.5B. In short, GSK will have access to 23andMe’s DNA database of 8M customers records to identify the potential for new drugs. If something pans out, the two companies will share in the development and profits of the new drugs.

In addition to creating new drugs, Wojcicki hopes to use the results of 23andMe’s genetic tests to provide customers with personalized health coaching. But there’s a catch: the accuracy of at-home genetic tests—for ancestry or health—are largely overstated. In fact, the health kits the company sells state they’re, “not intended to tell you anything about your current state of health, or to be used to make medical decisions.” 

In that way, the tests are kind of a bait and switch — or spit and switch. As 23andMe’s Robin Smith told NBC News, the ancestry kits are “just for fun”. As it turns out, they’re also the top of the funnel for acquiring a customer’s DNA. From there, personalized health is the short-term solution and Big Pharma is the long-term play. So, is this sleight of hand or a billion-dollar business? For now, it’s a little bit of both.


A quick announcement… we’re hiring a creative and data-driven contributing writer to join the Fitt Insider team. All the details are posted here.

💰 Money Moves

Plant-based meat company Before the Butcher has been acquired by private investors Gregg and Jeff Hamann, owners of ground beef producer Jensen Meat Company.

BurnAlong, a streaming fitness platform that offers classes as a corporate benefit, is preparing to raise its Series A. The has raised $5M to date.

Pillo Health, a technology company helping patients managing their health at home, closed $11M in funding to build out its voice-enabled medication and care management platform for the home. 

Needed, a nutritional supplement company, secured $2.15M in seed funding from Sekhmet Ventures, Able Partners, and Finn Capital Partners.

Cipher Skin, creators of a patented sensor technology for the collection of human movement data, raised $1.2M in seed funding.

Goodiebox, a Copenhagen, Denmark-based beauty tech startup, closed a €5.7M Series A funding round.

bioClarity, makers of plant-based skin care products, announced a $13M first close of a new investment round led by Prolog Ventures. 

YFood Labs, a Munich, Germany-based maker of nutrient-rich and convenient meal replacements, raised €4.2m in Series A funding.

Cityblock, a healthcare company improving care to low-income neighborhoods, closed a $65M Series B led by Redpoint Ventures

Infarm, the Berlin-based maker of vertical farming tech for grocery stores and restaurants, announced $100M in Series B funding led by Atomico. The deal is a mix of equity and debt financing.

Joyance Partners, a $20M venture capital firm, plans to invest in early-stage health and wellness startups in Europe. More on TechCrunch.


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