Issue No. 192: Sweat to Save

Illustration: Courtney Powell

As chronic conditions worsen and healthcare spending soars, companies are paying people to live well.

But, will money get us moving? And who picks up the tab? Let’s take a look.

Sick Care

The US healthcare system doesn’t promote well-being; it treats people once they get sick.

With incentives misaligned, costs have spiraled out of control as quality suffers and care becomes inaccessible.

  • US healthcare spending topped $4.1T, accounting for 20% of GDP.
  • Across key measures like access, costs, and outcomes, the US ranks last among comparable nations.

Be well. Prioritizing preventative care is often touted as the common-sense solution.

  • Chronic diseases account for nearly 90% of healthcare spending.
  • Spending on preventative care in the US constituted 2.9% of total health expenditures in 2018.

Combating obesity, diabetes, heart disease, and a host of other ailments, adopting healthy habits—like regular exercise, eating a wholesome diet, and not smoking—can increase lifespan by 11 years.

Pay up. Trouble is, from insurers to employers and even individuals, it’s not clear how best to incentivize healthy habits or who foots the bill.

From a purely economic perspective, preventative medicine doesn’t necessarily reduce spending — one recent study found that “only about 20% of preventative measures both improve health and save money.”

Complicating matters, regulations limit the ability of insurers to reward healthy behavior.

Plus, because most Americans receive insurance through their employer, and people switch jobs frequently, plans that invest in long-term well-being risk paying gains to competitors.

As premiums for employer-sponsored plans increase, companies are investing in wellness programs. Unfortunately, there’s little evidence that they actually improve health outcomes.

Meanwhile, despite knowing better, many people fail to act in their own best interest. Even when money’s on the line, multiple studies have shown that paying people to work out is only a temporary fix — when the money dries up, we revert to our sedentary ways.

Bridging the Gap

Aligning incentives and assembling new business models, a growing list of companies see personal well-being as an asset that could benefit all parties involved.

Charge it. Linking physical and financial health, Paceline parlayed a rewards platform into a wellness credit card with ambitions to reinvent sick care.

Users who exercise 150 minutes/week (tracked by a free Apple Watch) earn perks and cash back. To date, the company has raised more than $34M in funding while doling out rewards worth many millions of dollars.

According to CEO Joel Lieginger, healthy people “buy more, stay longer, and cost less,” representing the ideal consumer for financial and insurance companies. Expanding its userbase while collecting more data, Paceline plans to add life and supplemental health insurance to its offering.

Following a similar blueprint, wellness fintech company Ness recently announced a $15.5M investment. Like Paceline, the company sees rewards and banking as a path to long-term insurance products. A key difference, Ness awards points for wellness-related spending, not physical activity.

Elsewhere, KrowdFit recently partnered with Mastercard to offer cash back on health and fitness purchases while upstarts like Zeus and Neero Health ready their charge cards.

For life. Unlike health plans, life insurers can set rates based on well-being. Best case, according to HBR, this creates a “shared value industry” that both incentivizes healthy behavior and lowers premiums.

Pioneering this effort, South African insurance company Discovery developed the Vitality program over 25 years ago. Reaching 27M members in 37 markets, users now track activity via an Apple Watch, earning rewards and discounts.

Studying the program’s impact, RAND found that Vitality members were physically active for an additional five days each month.

More recently, UK-based life insurer YuLife landed $120M in funding, valuing the company at $800M. Leveraging gamification to boost well-being, users earn YuCoins for walking, cycling, meditating, and more.

Selling to employers, the B2B company plans to enter the US market next year while expanding its life insurance to offer dental and health products as well as financial services.

Move-to-earn. As we detailed in Issue No. 168, web3 x Fitness, startups are using NFTs and crypto to reward physical activity.

Founded in 2016, Sweatcoin launched its new SWEAT token to incentivize exercise. Gaining traction, upstarts STEPN and Genopets have raised funding while amassing engaged followings.

Still nascent, questions related to Ponzinomics and the broader crypto crash have raised red flags. But, pay-for-fitness is pressing on — with Walken and Fitmint recently landing investments.

Looking Ahead

With more consumers prioritizing well-being as health wearables take hold, connecting the dots between behavior, incentives, and outcomes seems inevitable. But, the path forward isn’t without obstacles.

Collecting and sharing more personal data, concerns related to privacy and discrimination must be addressed. Likewise, the ability of these initiatives to increase access beyond the already-fit is still a work in progress.

To that end, while rewards like gift cards or crypto are a nice perk, they’re unlikely to move the needle for individuals without access to green space or those living in food deserts.

Punchline: Nudging people to move more is a good start, but shifting spending from treatment to prevention will be a decades-long effort — one that must solve for social, economic, and environmental factors in order to make an impact.

💪 AI x Athletes

While connected fitness recalibrates, the market for next-gen sports performance is still pumped up.

On the Fitt Insider Podcast: Rab Shanableh, CEO of OxeFit, joins us to discuss AI-powered strength training for both pro and at-home athletes.

We also cover: connected fitness in the commercial sector and raising $35M from Cowboys quarterback Dak Prescott and others.

Listen to today’s episode here

📲 Connected Wellness

Oura and Strava are partnering to enhance comprehensive activity tracking.

Teaming up. Oura’s 1M ring bearers will join Strava’s 100M social athletes, sharing data between platforms with the click of a button.

Oura users have the option to share their ring’s activity data on their Strava feeds, and every logged Strava workout will reflect Oura’s daily Readiness and Activity Scores.

On the other side, the sharing will also ensure Strava-tracked workouts sync with the Oura dashboard, even if they’re not wearing the ring during an activity like swimming.

What it means: Appearing on the Fitt Insider Podcast, Strava CEO Michael Horvath said the company aspires to be a connected wellness hub, aggregating insights from a wide range of health wearables.

Beyond exercise modality or miles logged, as metrics like stress, sleep, and period tracking become widely available, Strava can integrate more data to “help athletes make sense of their health.”

Tapping into its community, Horvath also said device makers serve to benefit from Strava’s highly engaged network. Likewise, enlisting Oura, Strava users have yet another reason to open the app — and even more data to share on their feed.

Looking ahead: Strava’s “Athlete HealthKit” is taking shape, paving the way for “social wearables.” As more companies explore greater interoperability, our biometrics will mingle with our music choices, shared media, crypto wallets, and more.

✂️ Bulking and Cutting

Tonal is laying off 35% of its workforce.

How we got here: Spurred by 800% sales growth during the pandemic, the company banked $250M in funding, notching a $1.6B valuation. Scaling rapidly, Tonal upped its headcount from 110 pre-COVID to 750 this July.

The latest: Amid a connected fitness correction and economic downturn, the smart strength company is cutting costs — and about 260 jobs. According to CEO Aly Orady, it’s time to batten down the hatches:

“As we head into a recession… it’s really important that we become a business that’s here for the long term. What we’re doing is effectively going from a hypergrowth business … to more of a sustained-growth business.”

To date, the company hasn’t been profitable — a red flag for both its IPO ambitions and financial viability. With the job cuts—and reduced advertising budget—Orady insists the company will start making money “in a matter of months.”

Full circle. Drinking their own Kool-Aid, many at-home fitness brands let pandemic demand dictate their decision-making. Now, it’s time to restructure after overreaching.

  • Starting last year, iFIT enacted layoffs, replaced its CEO, and saw its valuation trimmed by 60%.
  • In February, Peloton cut 2,800 jobs and restructured under new CEO Barry McCarthy.
  • In March, both Beachbody and Tempo laid off 10% of their respective workforces.
  • In May, Zwift slashed 150 jobs and scrapped its long-awaited at-home bike.

TBD. Despite membership gains for gyms, consumers aren’t giving up on home workouts. But, as growth fades, connected fitness is still reeling from the end of the workout-from-home gold rush.

📰 News & Notes

  • “The US obesity epidemic is not slowing down.”
  • Fitt Jobs: top health & fitness companies are hiring!
  • 93% of people say music can make or break a fitness class.
  • Tour de France broadcast pits Strava users against pro cyclists.
  • We teamed up with Eight Sleep, beam, and others for an epic giveaway.
  • Startup Q&A: Wave Neuroscience CEO Fred Walke on personalized braincare.
  • Celebrity trainer Tracy Anderson sues Megan Roup’s Sculpt Society over copyrighted choreography.

💰 Money Moves

  • NutriSense, a metabolic health company, closed $25M in a Series A round led by 1315 Capital.

    More from Fitt Insider: The Metabolic Health Report

  • Walla, makers of boutique fitness studio management software, landed $8M in a Series A round led by Industry Ventures.
  • Vimazi, a DTC running company customizing shoes to runners’ pace, secured $1M in seed 3 funding.
  • AI therapy chatbot Wysa secured $20M in Series B funding and will expand in the US, UK, and India.
  • Kindly, a hormonal health startup for men and women, added $3.25M in a seed round from Y CombinatorOlive Tree, and others.
  • Prenatal and postnatal vitamin company Perelel secured $4.7M in a seed round led by Unilever Ventures.
  • Hiiker, an Ireland-based platform for planning long-distance hikes, raised €500K ($503.9K) from Fuel VenturesEnterprise Ireland, and others.
  • French digital cycling coach Sorius raised €500K ($512.2K) in a funding round.
  • Keto pizza crust maker ZeroCarb LYFE raised $1.5M in an oversubscribed seed round.
  • Flowers Foods, owner of better-for-you baked good brands, acquired paleo bread maker Base Culture.
  • UK-based Endurance Zone, an agency for endurance sports athletes and brands, closed a $750K seed round.

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

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