Over the past four years, the connected fitness space has experienced some of the highest highs and lowest lows in the venture world. According to Crunchbase data, funding — predictably — peaked in 2021. In total, the fitness category accounted for $6.4 billion raised over 376 rounds.
In May 2021, Peloton announced that it would finance an Ohio-based manufacturing facility to the tune of $400 million. That was a drop in the bucket: The company generated $4.13 billion in revenue for the year, up more than 40% from 2020.
On Monday, the fitness company announced that it was seeks to refinance its debt. It also took out a five-year, $1 billion loan as it tries to attract a new CEO after Barry McCarthy left earlier this month after two years with the company. Ultimately, Peloton bid high, assuming pandemic-fueled profits were the new normal.
Rival Tonal (which Peloton had reportedly considered acquiring in 2022), laid off more than a third of its staff in 2022. In April 2023, it announced a new CEO and a $130 million round at a significantly reduced valuation. However, he was more than happy to offer an exchange program at the end of the year after Lululemon stopped selling Mirror his devices.
The pandemic certainly had long-term effects on the economy. For example, while working from home has apparently declined since the height of COVID, a report earlier this year notes that it is still in the region of three to four times more common than it was in 2019. Connected fitness’s big bet was that while some setback was inevitable, the cultural shift would be permanent.
Eventually, however, many were eager for a “return to normalcy,” and the arrival of vaccines, combined with lower infection rates, encouraged many to return to the gym. Unlike commuting to an artificially lit cube farm five times a week, many people actually enjoy the experience of self-representation.
However, the struggle is not universal. Hydrow, which raised $55 million in 2022, bought a majority stake in AI-powered strength training company Speede Fitness earlier this month. The company did a good job of capitalizing on the interest around rowing machines, even though Peloton’s response to the category was completely overshadowed by its own public races.
Despite some major setbacks and wider financial problems, there’s always money to be raised if you have a compelling enough product. Ultimately, though, those rounds should be consistently lower than they were in the home gym salad days. For a recent example, Kabata, the maker of “the world’s first dumbbells powered by artificial intelligence,” announced a $5 million round on Tuesday. This follows a $2 million seed round raised in May 2022.
I wouldn’t want to be a fitness affiliate growing up in 2024. As my financial advisor recently told me, “the best time to buy a house is last year.” When you’re working to bring a product to market, you can’t always wait until market forces are perfect. It looks like we may not see 2021 again for connected fitness.
