The business of fitness and wellness.

Facebook For Fitness

There’s no one way to work out. And, given the growing number of options—from boutique studios and connected equipment to going for a run or hitting the gym—that’s never been truer. But, regardless of how you exercise, when it comes to logging, analyzing, and sharing your sweat session, Strava wants to be “the home of your active life.”

What it is: Strava is a fitness app popular among runners and cyclists. Founded in 2009, the company has raised more than $70M in funding. It’s already the go-to app for endurance enthusiasts. Now, the company wants to become an all-encompassing fitness social network.

Although Strava has 42M accounts and is adding a million new users/month, only a small segment of users pay for its premium “Summit” service.
In addition to focusing on continued growth, the company is also working to monetize its user base.
In its 10-year existence, Strava has yet to turn a profit.

Strava has a part freemium, part subscription business model. With access to the premium subscription (called Strava Summit), users pay annual or monthly fees to unlock features like training plans, workout analytics, and beacon location tracking.

While Strava CEO James Quarles is emphatic that the company is “overwhelmingly a subscriptions business”, they also offer Strava Business and Strava Metro products. The former includes brand sponsorships and licensing by hardware devices. The later is a Foursquare-like play in which Strava sells data about where people run and bike to governments and transportation planners.

The challenge ahead: From a business perspective, Strava needs to grow subscription revenue and/or add new revenue streams, like advertising. On the product front, Strava thinks it can go beyond tracking to offer users a calendar, blog, photo album, message boards, and more.

The catch? They have to navigate those challenges without alienating their core (paying) users who, to this point, have been serious endurance athletes. By the way, they’ll also have to generate a return for their investors. And if that wasn’t enough, they’ll have to contend with a growing number of competitors, each taking their own approach to building a fitness social network.

Zooming out: While many have tried, there’s no one definitive winner in the realm of social fitness networks.

Back in 2015, there was a run on fitness apps. That’s when ASICS scooped up Runkeeper for $85M. It’s the same year Under Armour paid $475M for MyFitnessPal and another $85M for Endomondo. Two years earlier, Under Armour forked over $150M for MapMyFitness. Although these platforms have amassed huge user bases, none have succeeded in creating a truly social experience or centralized fitness hub.

Surveying the current landscape, Fitbit and Nike Run Club dabble in social sharing and competitions, but most users will only tune in to track their activity or a run route, respectively.

If Strava starts feeling the heat, it’ll be coming from two groups.

Their investors have been patient, allowing for the implementation of a super-long-term vision. Sooner or later, though, they’ll come calling. However, Strava co-founder Mark Gainey said he’s not interested in an acquisition and the company doesn’t quite have the trajectory to go public. So profitability it is.
The second group applying pressure is the growing number of connected equipment and on-demand fitness startups. From Peloton and Mirror to Aaptiv and Zwift, the equipment and/or subscription model packs a much higher RPU (revenue per user) than Strava’s freemium hybrid.

In the months ahead, Peloton will go public. Tens of millions of dollars will be invested in digital fitness startups. New competitors, like Future (read more below) will emerge. And a roll-up of health and fitness apps, content providers, and hardware companies is looming.

Meanwhile, Strava will attempt to become the Facebook of fitness. Is that what users want? Can Strava execute? We’ll likely know soon.

Like what you see? Please consider forwarding this email to a colleague or peer. New readers can subscribe here.

Headlines & Happenings

🥕 Where’s the beef?

Consumer demand and competition in the restaurant sector is creating an alternative meat arms race.

Beyond Meat and Impossible Foods are served in almost 20,000 restaurants across the country.
When Burger King tested the Impossible Whopper in St. Louis, the market outperformed the chain’s national foot traffic average by 18.5% in April.
Beyond Meat and Impossible Foods are struggling to keep up with demand.

From Nestle to Tyson and McDonald’s to Starbucks, everyone is looking to capitalize on the fake meat trend. Everyone, that is, besides Arby’s.

Introducing the Megetable: Arby’s unveiled meat-based vegetables as a response to plant-based meats. The “marrot”, a turkey-based pseudo-vegetable, looks and tastes like a real carrot. While others are turning to meat replacements, Arby’s says they’ll never serve anything but the real stuff.

📱 The Future is Now

A few weeks back, Future—a workout app that connects users to real trainers—closed $8.5M in Series A funding led by Kleiner Perkins.

For $150/month, you get connected to a human trainer who sends you personalized workouts and messages throughout the day.
The program also comes with an Apple Watch for tracking your workouts and activity (no cheating!).

Here's where things get interesting: In beta testing, 85% of Future’s users kept training for six months. And get this: Future comes with a 30-day money-back guarantee.

That’s significant because getting people to stick with their exercise habit is really the holy grail of any fitness regimen or app. Typically, when trying to establish an exercise habit, most people quit after six or eight weeks.

A dirty little secret: When it comes to exercise, adherence and behavior modification are key. The trouble is, whether you’re going to the gym, using an app, or tracking your steps, nothing has succeeded in making long-lasting change. Plus, most gyms and apps collect a membership fee whether or not you show up or log in.

It’s a tough nut to crack. A few years back, former Twitter CEO Dick Costolo raised $8M for Chorus, a fitness startup looking to solve adherence. But Costolo pulled the plug on the company shortly after its debut when it became clear that their solution couldn't keep people moving.

Takeaway: If Future can help people establish and maintain an exercise habit, it will be a breakthrough company.

👀 ICYMI

In last week’s newsletter, we revisited the 2019 Fitt Insider Outlook published at the beginning of the year. Building on the key takeaways from our initial report, we pointed out some areas we overlooked and made some predictions about what’s next.

Read Issue 34 for more on the trends we’re tracking.

📰 WHAT WE'RE READING

Xponential Fitness is expanding into Saudi Arabia.
lululemon is closing its men’s stores but continuing to double down on men’s apparel.
Fresh Bowl’s salad-in-a-Mason-jar vending machines launch in NYC.
Plant-based meats are still processed foods.

💰 Money Moves

cure.fit, an India-based health and fitness company, raised $120M in Series D funding. Read more in Issue No. 24 >> "From gyms to healthy food and meditation to primary care clinics, all packaged into one “super app”, cure.fit aspired to build the health equivalent of Apple."

Meditation app Calm added $27M led by Lightspeed Venture Partners in a Series B extension at a $1B valuation. The investment will help launch more sleep-focused features. Read more in Issue No. 10 >> “Mindfulness has crossed over into the mainstream… With billions on the line, two frontrunners—Calm and Headspace—are going head-to-head.’

Quadrant Private Equity, the owner of the Fitness & Lifestyle Group, is shopping the fitness giant for upwards of $1.5B.

Private-equity firm TPG is acquiring Crunch Fitness through its growth-equity unit.

Venture capitalists are pouring millions into marijuana startups. Through mid-June 2019, the sector attracted $1.3B, compared to $1B for all of 2018 and $370M for 2017.

Surterra Wellness, a cannabis health startup, closed $100M in Series D funding. More from Fitt Insider >> Weed Goes All-in On Wellness

Livongo, a digital health company for chronic conditions and diabetes management, has filed to go public.

Omada Health, a digital chronic disease management company, landed $73M in funding.

DotLab, a personalized medicine company for women's health, secured $10M in Series A funding.

DayTwo, a microbiome human discovery platform, closed $31M in Series B financing.

Gali Health, a health tech company, raised over $2M in seed funding led by Felicis Ventures.

Oska Wellness, a provider of technology-driven wellness solutions, raised $5.5M in first funding.

Squire, a provider of small business management software for the men’s grooming market, raised $8M in Series A funding.

Kombucha maker Better Booch raised $2.5M a funding round led by Crush Ventures.

Magic Spoon, a direct-to-consumer high protein/low carb cereal startup, is in talks with Lightspeed Venture Partners to lead an investment at a $25M valuation, per Axios.

Spread the Word

If you find value in what we put together, please consider forwarding this email to a colleague or peer.

Get in Touch

Want to get in touch? Just reply to this email with tips or feedback. You can also reach me at anthony@fitt.co.