Issue No. 214: Investor Insights, Vol. IV

Illustration: Courtney Powell

Last week, we shared our year-end list of trends impacting fitness and wellness.

Today, we’re exploring key learnings and emerging opportunities with investors in the space.

Who you’ll hear from: Able Partners, CAVU Consumer Partners, Elysian Park Ventures, JAZZ Venture Partners, leAD Sports, NEXT VENTŪRES, Phoenix Capital Ventures, Shorewind Capital, Vibrant Ventures, VMG Partners, and 25madison.

Risk and Resiliency

The shifting macroeconomic environment was top of mind in every investor conversation.

As Jaja Liao of 25madison aptly noted, “markets can turn fast.”

The fallout is transforming how capital allocators operate — dealmaking has slowed, diligence efforts have ratcheted up, and valuations are starting to normalize.

Per the team at NEXT VENTŪRES: “The pace of dealmaking is slower, and we’ve had to think differently about how we manage our fund and portfolio as a result… Investors are likely prioritizing their existing portfolio companies’ needs: extending cash runway, responding quickly to market changes, and rolling up their sleeves as advisors and board members.

Meanwhile, deals are looking different. Justin Driscoll of leAD SportsJAZZ’s Matt Wan, and Shorewind’s Nick Fragnito all mentioned the evolution of funding rounds:

  • Driscoll: Traditional rounds (pre-seed, seed, Series A) are disappearing; there’s an increase of just “capital” rounds.
  • Wan: While more firms are building deal syndicates, founders should be willing to look beyond venture funding to grow.
  • Fragnito: More companies are raising flat or reasonably priced extension rounds, creating new opportunities for investors.

Summing up the situation, McConnell Smith of VMG added: “The operating environment has been really challenging — both debt and labor are harder to get and more expensive. Great businesses are still able to get deals done, but it’s harder and takes longer.

Survival of the Fittest

As investors become more patient and discerning, founders will encounter greater scrutiny when fundraising.

According to Vibrant’s Jarret Christie, “it’s all about survival at this stage.”

In addition to extending runway, managing burn, and prioritizing business fundamentals, investors increasingly value deft execution and stellar leadership.

Able Partners co-founder Amanda Eilian: “The best companies with outstanding metrics and strong competitive advantages will continue to get funded, while marginal businesses will not.

Jared Jacobs of CAVU: “Leadership matters. Exceptional founders and management teams always find a way to improve and make their companies better, even during periods of uncertainty.

On the bright side, as 2021’s funding frenzy cooled, multiple investors pointed out positive developments.

Vibrant’s Jarret Christie believes a heat check was necessary, saying: “Those who persevere through this phase of natural, and much-needed, creative destruction stand to benefit immensely once we re-emerge into a new phase of economic growth.

PCV’s Adam Lewites drew comparisons to the last recession: “Some of the best companies on the planet were built between 2008–2011, so this could be the perfect opportunity to build something special!

What’s Trending

Of course, no year-end review would be complete without exploring the trends investors are tracking heading into 2023.

An expansive category, CAVU’s Jacobs captured the consumer behavior fueling health and wellness:

“People want to feel better about themselves — including what they put in their body (food, beverage, supplements), on their body (personal care), and how they move their body (fitness).”

Looking closer, here are the focus areas that stood out.

Health x wellness. Elysian’s Max Feldstein and leAD’s Driscoll are following the convergence of healthcare and wellness, including personalization, preventative well-being, and tech-enabled care.

Along those lines, NEXT VENTŪRES is seeking out companies that deliver “whole-person health” and better clinical outcomes.

Food and nutrition. Able’s Eilian and 25madison’s Liao pointed to potential in food-as-medicine. More specifically, Eilian and Vibrant’s Christie see gut health taking center stage.

Curbing obesity, Wan and VMG’s Smith noted increased interest in metabolic health and weight management solutions. Elsewhere, Christie and Shorewind’s Fragnito called out the importance of sustainability in foodtech and consumer health.

Hybrid fitness. PCV’s Lewites said demand for digital and in-person experiences is driving innovation in hybrid fitness. Likewise, Feldstein anticipates more companies evolving to a true hybrid model.

A counter example, Smith said brands offering in-person fitness experiences that are difficult to replicate beyond the studio (i.e., Pilates) will continue to thrive.

For more Investor Insights: check out Volumes III, and III.

Building a health and fitness startup? Let us know what you’re working on!

💪 OMORPHO is reinventing the weighted vest for the modern athlete

On the Fitt Insider Podcast: OMORPHO co-founder and CEO Stefan Olander discusses microloaded apparel for improved performance.

We also cover: insights gained from 20 years at Nike and product testing with Olympians and NFLers.

Listen to today’s episode here

🚲 National Cycling League adds $7.5M ahead of 2023 launch

Bringing professional criterium-style, or “crit”, races to four US cities next year, the NCL hopes to create a highly marketable sports spectacle.

Ready to ride. Featuring record prize money, co-ed teams, and equal pay for all riders, the fast-paced cycling series is tapping pro athletes and innovative technology for a boost.

  • NFLers Jalen Ramsey and Derwin James joined NBA star ​Bradley Beal among other athlete-investors backing the league.
  • The NCL’s tech platform will display athletes’ real-time biometric and performance data, letting fans follow along and compete virtually with riders.

Pedal power. In addition to courting cycling enthusiasts, the NCL wants to reach new, younger fans. Not alone, the American Criterium Cup announced a 10-city tour earlier this year. A related development, the Professional Triathletes Organisation secured new funding this spring.

Alt leagues. A growing trend, new professional leagues are taking shape at the intersection of sports, media, and entertainment.

  • Bengals QB Joe Burrow recently invested in the Pro Volleyball Federation, while League One Volleyball added $16.75M in September.
  • Overtime landed $100M this fall to scale its media platform and basketball league.
  • Pickleball’s two leading leagues merged, as billionaires like Mark Cuban and athletes from LeBron to Naomi Osaka to Tom Brady bought into teams.
  • Premier Lacrosse League closed new funding this summer from The Chernin Group, WWE, and Kevin Durant’s Thirty Five Ventures.

Punchline: A lucrative asset and cultural flex, pro athletes and investors are seeking ownership in sports teams. A step further, backing emerging leagues while helping define an entire sport’s future—for athletes and fans alike—is proving to be an attractive proposition.

🤖 ElliQ pitches wellness robot as the future of eldercare

The interactive robot maker unveiled its latest “care companion” aimed at curbing loneliness and promoting independence among seniors.

How it works: The company’s hardware, including a smart tablet, camera, and moving/talking robot, pairs with an app for family members and caregivers.

Proactive and conversational, the device offers activities for cognitive performance and physical activity, plus health tracking, pain assessments, and more.

All alone. Living longer and increasingly isolated, the US is ill-prepared to care for its rapidly aging population.

  • The number of Americans over 65 is set to double by 2060.
  • 88% of adults 65+ prefer to “age in place” at home vs. a care facility.
  • The US will face a shortage of 151K elder caregivers by 2030 and 355K by 2040.

Hoping to fill the void, ElliQ’s robot has been shown to reduce loneliness for 80% of users and helped 82% stay mentally active. Elsewhere, therapeutic robot PARO can reduce loneliness and blood pressure in older adults, while “robot nurse” RIBA can lift humans up to 134lbs.

But… Privacy, safety, and ethical concerns remain. As recently as 2017, nearly 60% of Americans rejected the idea of robot caregivers, while 60% of Europeans supported a complete ban on robotic/AI care for children and elders.

Zooming out: Despite the skepticism, wellness robots are on the rise.

  • Somnox created a robotic companion to reduce anxiety, stress, and sleeplessness.
  • Children were more likely to confide in Nao, a toy-like robot, than a parent or therapist.
  • Aescape just raised $30M to scale its AI massage experience for athletes and sports teams.

Punchline: Faced with a growing number of health crises, we’ll be forced to weigh the pros and cons of convenient and scalable wellness bots.

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📰 News & Notes

  • Peloton hit by explicit spam accounts.
  • Oura signs on with soccer club Real Madrid.
  • Netflix readies behind-the-scenes tennis series.
  • Ergatta enters Germany, Austria, and Switzerland.
  • Xbox, Calm partner on Halo-themed meditative soundscapes.
  • Fitt Jobs: Curated openings from the health & fitness industry.
  • Startup Q&A: YouFit CEO Brian Vahaly on evolving the in-gym experience.
  • DEA: Digital pharmacy Truepill illegally prescribed Adderall. [Reread: Quality Control]

💰 Money Moves

  • Heyday, a franchise of skincare clinics, raised $12M in a Series B extension round led by Level 5 Capital Partners.
  • Preventative health and longevity company Fountain Life landed $15M in a funding round.
  • National Cycling League (NCL) closed a $7.5M seed round led by Will Ventures.
  • UK-based run coaching app Runna secured £1.9M ($2.3M) in a funding round led by Eka Ventures.
  • Salon and spa booking platform Mangomint secured $13M in a Series A round led by OpenView Venture Partners.
    More from Fitt Insider: Wellness Booking Tech
  • Commons Clinic, a hybrid care provider for MSK conditions, raised $11M in a seed round.
    More from Fitt Insider: The Business of Movement Health
  • Multinational food company Mars acquired Trü Frü, maker of chocolate-covered whole-fruit snacks.
  • Psychedelic medicine developer Gilgamesh Pharmaceuticals raised $39M in a Series B round.
  • Intelligent Foods, owner of healthy meal kit service Sunbasketacquired premium meal delivery service Gobble for an undisclosed sum.
  • Spike, creators of an API connecting wearables data with digital health platforms, raised $700K in a pre-seed round.
  • Prima, manufacturer of hemp-derived wellness products, acquired organic CBD company Prospect Farms.
  • Fitness franchisor JEM Wellness Brands acquired six corporate-owned Crunch Fitness gyms in the Sacramento area.
  • TSG Consumer Partners acquired Radiance Holdings, operator of Sola Salons and Woodhouse Spas.

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

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