Profits > Promises
As long as we’re talking about concerns with the ROI of venture investments, it’s important to note that this sentiment is not isolated to the digital health space. On the heels of Walker & Company
’s underwhelming exit to P&G
, reality is setting in across the DTC space. According to CB Insights, $3B in venture funding has flowed to DTC brands since 2012, with more than $1B coming in 2018 alone. Not too long ago, VCs vying for a Dollar Shave Club
-like outcome backed entrepreneurs with little more than a pitch deck and a dream. Now, the purse strings are tightening and profitability (or at least a path to the promised land) is becoming central to the vetting process.
While investors aren’t expected to bail on DTC brands altogether, the number of monster funding rounds is likely to shrink. As JB Osborne
, co-founder of the agency Red Antler told Digiday
, “Unless you’re a serial founder, you’re having a much harder time raising money.” Osborne went on to say, “you have to have the right team, the right priorities and a plan for viable growth in place.” In the end, Osborne concluded, “It’s a good thing — it feels more like reality.”
Closing out the conversation on VC for this week (well, besides the investment news in Money Moves), the internet has been abuzz with hot takes stemming from an article on venture capital
in the NYT
. If you follow VC Twitter
, the conversation was unavoidable. But if you missed it, here’s the punchline: raising venture capital isn’t for everyone. And, as Founder Collective
points out, it may even be dangerous
. More importantly, it isn’t the only path to or a prerequisite for success. Rather than sharing an unsolicited opinion, we’ll simply file the article under “a worthy read” for entrepreneurs (and investors) evaluating their options.
Back in Issue No. 9
, one of our headlines, No Fly Zone
, hit on the turmoil confronting Flywheel Sports. That entry prompted some sidebar conversations with subscribers, so I posted a blurb about Flywheel
on LinkedIn. I’m including it here for two reasons: 1.) the discussion that developed in the comments
—including insights from former Flywheel employees and folks who currently work in the boutique cycling space—is worth a read. And 2.) it’s starting to look like Flywheel’s woes could be indicative of another cycling shoe yet to drop.
As Vox points out
, the battle shaping up among indoor cycling studios, from locally owned to franchised to high-end, is being magnified by at-home options like the Peloton of “X”
and on-demand workouts
. While high-end options like SoulCycle
and Flywheel raised the bar on studio cycling, they also backed themselves into a corner — they’re largely relegated to the coasts and intentionally geared toward an elite crowd. Meanwhile, CycleBar
has taken a decidedly different approach, expanding to 200 locations by targeting untapped and overlooked markets from Fresno, CA to Fargo, ND to Providence, RI.
While some are inclined to call it a bubble, the current state of indoor cycling seems closer to recalibration as brands are forced to figure out how to engage current riders, reach new ones, and provide more value in order to differentiate themselves in an increasingly crowded cycling (and fitness) landscape.