Issue No. 150: The Connected Fitness Update

Illustration: Courtney Powell

Since the start of the pandemic, connected fitness has been red hot. But now, there are rumblings that the category is cooling.

Were reports proclaiming the death of gyms greatly exaggerated? Let’s take a look.

To Infinity

When the brick-and-mortar fitness industry was forced to shutter, digital workouts took off.

Gyms
  • 2019: US gym/studio revenue reached a record $35B, with 62M members and 41K facilities.
  • 2020: Industry revenue plummeted 58% to $15B, with 22% of US gyms/studios permanently closing as of July 2021.

Digital

  • 2019: The global virtual fitness market was estimated at $6B, accounting for just 6% of total fitness spending.
  • 2020: Home fitness companies grew an average of 194% YoY, with the digital fitness segment set to reach $59B by 2024.

Hardly a new development, digital workouts were gaining ground prior to the pandemic. According to data analytics company Second Measure, in 2019, gyms averaged 6% monthly sales growth YoY, while home fitness companies saw a 30% increase.

More telling, leading connected equipment brands like Peloton (founded in 2012), Tonal (2015), Tempo (2015), and MIRROR (2016) had been working to unbundle the gym for years.

In a few short weeks, COVID supercharged the category.

A meteoric rise, in 2020, Peloton’s smart bikes sold out, the company turned a profit, and its shares surged more than 400% for the year.

Compelled to act, lululemon shelled out $500M for MIRROR. And connected fitness startups seized the moment, raising record levels of funding.

According to PitchBook data, home exercise startups raised $3B in venture capital globally last year, up from $1.79B in 2019. Showing no signs of slowing down, that trend has continued in 2021.

If you’re keeping score at home, here’s a rundown of connected fitness funding totals since the start of the pandemic: Zwift $450M*, ICON/iFIT $400M, Fiture $300M, Tempo $280M, Tonal $260M, Hydrow $148M, FightCamp $90M, Echelon $65M, Ergatta $35M, Liteboxer $24M, Wattbike $15.7M, CLMBR $13.5M, OxeFit $12.5M, CITY ROW $12M, JAXJOX $10M, Arena $5.2M, and more.

*For now, Zwift doesn’t offer equipment. But, the company raised this capital with the goal of launching hardware. 

The Gympocalyse

As at-home fitness boomed, the future of in-person exercise looked bleak.

Earlier this year, The Wall Street Journal asked, “Are gyms dead?” A step further, around the same time, Fast Company proclaimed, “Gyms aren’t coming back.

Outlining the inevitable gympocalyse, the rationale seemed clear: consumer behavior shifted to home workouts. COVID opened everyone’s eyes to the inconvenience of going to the gym, so they bought expensive equipment, effectively cementing a new habit.

Initially, multiple surveys seemed to back up this thinking.

  • 66% of people who tried home workouts during the pandemic prefer it to in-person.
  • 68% of people who started an online fitness program during the pandemic plan to continue using it long-term.
  • 59% of Americans don’t plan on renewing their gym memberships once the pandemic is over.

But, as gyms stay open and look to rebound, is the tide turning?

Raising eyebrows, Peloton’s most recent earnings report revealed widening losses and waning sales.

  • Net loss of $313.2M
  • $937M in revenue, down 25.8% from $1.3B last quarter
  • Forecasted $800M in sales for fiscal Q1 2022, below analyst estimates of $1.01B.

A bigger issue, Peloton’s gross connected fitness margin hit 11.6%, down from 45.3% YoY.

Essential to its business model, Peloton’s hardware margin was supposed to resemble that of Apple. In fact, when breaking down the company’s S-1 in 2019 we wrote:

“Peloton’s hardware margins are better than Apple’s iPhone. Their content subscription generates SaaS-style recurring revenue. And the company’s obsessive user-base will propel the brand forward.” 

But, while Apple managed to increase its gross margin, Peloton’s margins eroded as the company cut prices, all while costs continued to rise.

Touch and go. With the holiday season approaching, and the Delta variant threatening a migration back to gyms, Peloton will likely see continued growth into 2022. But the growing number of well-funded connected fitness companies are giving chase. Hoping to capture their piece of the home fitness pie, iFIT, Hydrow, Echelon, and Tonal could go public while the market’s still warm.

Back from the Dead

Contrary to the gympocalypse narrative, brick-and-mortar operators are seeing an uptick in visits and membership.

May. Research firm Jefferies reported that US gym visits reached 83% of January 2020 levels.

July. Studio franchisors F45 Training and Xponential Fitness went public. In August, both companies reported quarterly earnings, with F45 notching 54% revenue growth as Xponential saw sales surpass pre-pandemic levels.

August. Planet Fitness added 700K members in the most recent quarter. During the pandemic, the company opened more than 100 new gyms without shuttering an existing location.

Bullish on the return of gyms, health club operator Life Time recently filed to go public. Brazilian gym chain SmartFit completed its public offering. Shares of UK-based Gym Group are up 28% this year, recouping most of its COVID-related losses. Meanwhile, UK-based Pure Gym is exploring options for a sale or IPO.

Embracing omnichannel. According to research firm ClubIntel, prior to the pandemic, about 25% of gyms offered on-demand workouts. Now, that number is upwards of 72%. By all accounts, the digital/in-person hybrid will define the future of fitness:

  • A Mindbody survey found that 65% of exercisers intended to complete in-person and at-home workouts in a post-COVID world.
  • Les Mills data shows that 84% of gym members also work out at home, with the majority of exercisers preferring a 60:40 split between gym and home workouts.

Looking ahead: As connected fitness companies battle each other and in-person options, increased competition will cause every expense, strategic decision, and earnings report to be scrutinized. For more than a year, splashy partnerships and mega-funding rounds defined fitness tech, now the results will do the talking. Meanwhile, gyms aren’t out of the woods just yet. To stave off extinction, they’ll have to embrace technology and cater to the consumer like never before.


🏆 Diabetes Tech x Sports Performance

In Issue No. 142, we explored the business of glucose monitoring. And, a topic we return to often, the pursuit of high performance has come to define health beyond sports.

On the Fitt Insider Podcast: Supersapiens founder and CEO Phil Southerland joined us to discuss advancements in continuous glucose monitoring and its implications for energy management in athletics.

We also cover: the company’s recent $13.5M funding round, the release of its wrist-worn glucose tracker, and Phil’s vision to use sports as a platform to transform health more broadly.

Listen to today’s episode here

😴 Sleep Tech

A potential benefit of being home-bound from the pandemic, people seem to be sleeping more.

With commutes axed and social activities paused, Fitbit found that users got an average of 17 minutes more sleep per night than they did before quarantine.

Yet despite more time in our beds, we don’t seem to be sleeping better. The pandemic has severely disrupted the quality of our sleep, in what some are dubbing “coronasomnia.”

  • Four in 10 people report having trouble sleeping during the pandemic.
  • Only 7.7% of survey respondents described their sleep as “very good” (down from 39.4%).

Counting sheep. Now, as consumers shift away from hustle culture and towards high performance, all-nighters are no longer a badge of honor. Consumers are discovering a newfound respect for hitting the hay:

  • Mattress and sleep accessory sales hit record highs during the pandemic.
  • Consumers in the US spent $826M on melatonin supplements in 2020 — a robust 42.6% YoY increase.

With consumer demand budding and a $585B economy ripe for disruption, sleep companies are gearing up.

  • Smart mattress maker Eight Sleep just raised another $86M and has partnered with Barry’s to help enhance users’ training and recovery.
  • In August, Supermoon Capital launched a $36M venture fund to invest in sleep research.
  • Ebb ($37M), Bryte ($24M), and Rise Science ($15.5M) all led strong funding rounds this year.

Big Tech is ramping up as well — Amazon has received FCC approval to develop devices for sleep monitoring, including sleep apnea detection in its Alexa devices, while Google’s Nest Hub launch in March debuted contactless sleep monitoring.

Tossing and turning. It’s not all smooth sailing. Sleep tracking holds many of the same pitfalls as health tracking, and many believe that consumer-grade sleep tech has a long way to go.

Meanwhile, sleep aids like melatonin are under increased scrutiny; studies have found that the amount of melatonin in a pill—in the same bottle—can vary up to 465%.

Takeaway: Even before people knew the word COVID, we as a nation have been suffering from subpar sleep habits—as we detailed in Issue No. 67, a staggering one-third of US adults didn’t get enough sleep before 2020. But now, with the pandemic newly highlighting our poor health habits, companies are catering to consumers who want to rest easy.

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🩺 DTC Men’s Health

Male wellness is on the rise.

  • Ro (parent company of digital men’s health clinic Roman) landed a $500M funding round in March.
  • Men’s healthcare company Manual also secured $30M in March.
  • DTC sperm freezing kit maker Legacy raised $10M shortly after.
  • ED and men’s wellness startup Numan just raised a $40M Series B.

Low libido. Stress, poor diet, and daily exposure to microplastics and pollutants have caused alarming drops in male fertility factors.

  • Across Western countries, sperm counts have plummeted over 50%.
  • For decades, testosterone levels have been on a steady, substantial decline.
  • An emerging trend, men who contract COVID-19 may be 6x more likely to develop brief or long-term ED.

These factors affect health beyond virility, causing hair loss, reduced bone mass, difficulty sleeping, and poor mental health.

Ducking doctors. Cultural stigma around male health has led to a growing problem — over 40% of men avoid the doctor until a symptom becomes unbearable. But recently, the pandemic boosted adoption of digital healthcare and DTC services that many prefer to in-person meetings.

With less stigma, more privacy, and greater access, the fertility market—which has traditionally focused on women—is turning its attention to the other half of the population.

  • Sperm solutions. Legacy, Dadi, and ExSeed Health provide at-home semen analysis kits, as well as the option for sperm to be frozen and preserved for the future.
  • T therapy. Testosterone replacement therapy (TRT) aims to help men replenish low T levels. Major players include Vault Health and Trūman Rx.

Looking ahead: Some voice concerns over the reliability of mail-in kits and the alarmist takes on decline in male fertility. And as consumer interest continues to balloon (TRT use has jumped 4x), writers like Nat Eliason are calling for caution:

“TRT is an incredible life-changing therapy for men who truly need it. But you’re playing with fire if you get on it in your 20s, 30s, 40s. Prescribing it should  be an absolute last resort.”

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📰 News & Notes

  • Health club operator Life Time files to go public.
  • MIRROR founder & CEO Brynn Putnam departs lululemon.
  • Tampa Bay Bucs QB Tom Brady to launch men’s apparel brand.
  • obé introduces Rideadding cycling content to its platform.
  • Fitt Jobs: 900+ job openings at top health and fitness companies.
  • Hyperice, WHOOP, Supersapiens get creative with marketing integrations.
  • Startup Q&A: Rewire Fitness CEO Sun Sachs on cognitive resilience for athletes.
  • Apple Fitness+ teams with UnitedHealthcare, offering free workouts for one year.

💰 Money Moves

  • HumanCo, a holding company for healthy food and wellness brands, raised $35M in new funding and acquired Against the Grain, a Vermont-based grain-free production bakery.
    On the Pod: Our interview with HumanCo CEO Jason Karp
  • Motion entertainment startup NEX, creators of AI-assisted, gamified exercise experiences, secured $25M in a Series B round led by Blue Pool Capital and Samsung Ventures.
    More from Fitt Insider: The Metaverse of Fitness
  • Pea-based milk alternative maker Ripple Foods landed $65M in new capital from Goldman Sachs.
    More from Fitt Insider: The Quest for Cow-Free Milk
  • Playpulse, creators of a gamified exercise bike, raised $2M in a funding round from Courtside VenturesInitial Capital, and others. 
  • Cultured protein company New Age Meats secured $25M in Series A funding to launch its lab-grown pork sausage.
  • Mojo, a digital subscription service for men’s health issues, landed £3.25M ($4.44M) in a seed round co-led by Kindred Capital and Octopus Ventures.
    More from Fitt Insider: What’s Next for Men’s Wellness
  • Women’s telehealth clinic Alpha Medical closed a $24M oversubscribed Series B round with participation from Samsung NextSpringRock Ventures, and more.
  • Walgreens Boots Alliance acquired a majority stake in specialty pharmacy Shields Health Solutions for $970M.
  • French health insurance startup Alan acquired Jour, a guided journaling platform, for $20M.
  • Loyal, a canine pharmaceutical company focusing on longevity, raised $27M in a Series A round led by Khosla Ventures.
  • Digital mental health startup Meru Health, provider of treatments for burnout and anxiety, added $38M in Series B funding led by Industry Ventures, with participation by J.P. Morgan.
    More from Fitt Insider: Peak Burnout
  • Fittr, an India-based fitness platform, secured $11.5M in Series A funding co-led by Dream Capital and Elysian Park Ventures, the investment arm of the LA Dodgers.
  • UK health startup Sanome, creators of an at-home diagnostics test for early detection of disease, secured £2M ($2.7M) in a round led by Heal Capital.
  • Noops, a plant-based pudding startup, raised $2M in a funding round led by Lerer Hippeau.

Today’s newsletter was brought to you by Anthony and Joe Vennare, Melody Song, and Ryan Deer.