Over the past four years, the connected fitness space has experienced some of the highest highs and lowest lows in the venture industry. Funding peaked in 2021, as expected, according to Crunchbase numbers. Overall, the fitness category has raised $6.4 billion in 376 rounds.
In May 2021, Peloton announced $400 million in funding for an Ohio-based production facility. This is no big deal. The company's annual revenue was $4.13 billion, an increase of more than 40% compared to 2020.
On Monday, the fitness company said it was looking to refinance its debt. It also closed a five-year, $1 billion loan as it looks to bring in a new CEO following the departure of Barry McCarthy earlier this month after two years.After all, Peloton got high on its own supply, assuming its pandemic profits were the new normal.
Competitor Tonal, which Peloton was reportedly considering acquiring in 2022, laid off more than a third of its employees in 2022. In April 2023, the company announced a new CEO and $130 million in funding at a significantly reduced valuation. Still, Lululemon was willing to offer a trade-in program at the end of the year after discontinuing sales of the mirror device.
The pandemic is certainly having a long-term impact on the economy: For example, while working from home has obviously declined from the COVID-19 peak, a report from earlier this year noted that working from home is still three to four times more common than it was in 2019. The big bet on connected fitness will likely see some setbacks, but they are inevitable and the culture shift will be permanent.
But ultimately, many were eager to “get back to normal,” and the advent of vaccinations and falling infection rates encouraged many to return to the gym. He thoroughly enjoys the experience of working out in person, as opposed to commuting to an artificially lit cube farm five times a week.
But this struggle is not universal. Hydrow, which raised $55 million in 2022, acquired a majority stake in AI-based strength training company Speed Fitness earlier this month. Even though Peloton's answer to this space was completely overshadowed by its very public struggles, the company capitalized on the interest in rowing machines.
Despite some major setbacks and widespread economic headwinds, you can always raise money if you have a sufficiently attractive product. However, ultimately these rounds should be consistently lower than they were in the home fitness salad days. A recent example: Kabata, the maker of “the world’s first AI-powered dumbbells,” announced a $5 million seed round on Tuesday. This follows a $2 million seed round raised in May 2022.
I don't want to be the connected fitness company that raises money in 2024. As my financial advisor recently told me, “The best time to buy a home is last year.” When you're working to bring a product to market, you can't wait until market forces are ideal. We may never see connected fitness like it was in 2021.