Fitness startups pumping to change your at-home workouts

In-home fitness conjures images of broken-down BowFlex machines, long-abandoned NordicTrack rowers and embarrassing Zumba videos.

But a growing number of startups are jumping on the opportunity to revolutionize the at-home workout, and in the process make the local gym a thing of the past.

Peloton started the trend several years back with its high-tech indoor bike, which enables users to stream live, interactive spinning classes from the comfort of their homes.

Since it launched in 2012, the company has developed a cult-like following and raised just under $1 billion in total venture funding. After its latest funding round, a $550 million round in August that was led by TCV, the company is now valued at $4 billion.

At first Peloton, found it hard to convince venture investors that its $2,000 stationary bike outfitted with a giant video screen would appeal to consumers.

But six years later, the company is generating about $700 million in annual revenue and plans to go public in 2019, according to the New York Times.

That kind of success is attracting venture investors eager to fund the next big winner.

Investors are also attracted to the space because of its sheer muscle mass. The fitness industry cranks out $83 billion in revenue globally each year, according to the International Health, Racquet & Sportsclub Association, with 162 million consumers visiting 200,000 gyms and fitness centers worldwide.

So any startup that can capture even a small piece of the fitness market will be in a very strong position.

One new player generating significant buzz is Mirror, which has raised $40.8 million from Spark Capital, Lerer Hippeau Ventures, First Round Capital, and others.

Mirror is, well, a full-length mirror on steroids. Turned off, it’s just a mirror. Switched on, it’s a boutique fitness studio in your home.

The $1,500 smart mirror is tricked out with an LCD display, surround-sound speakers, camera, and microphone for two-way interactions during live classes. It enables users to stream live studio content from top instructors anywhere in the home.

“Peloton’s popularity in the spinning world proves that the timing is right for platforms that bring the studio experience in home,” Ben Sun, general partner at Primary Ventures and an investor in Mirror, said in a blog post.

VCJ Venture Fitness Startups Sector Analysis
Ben Sun, general partner, Primary Ventures. Photo sourced from website.

But he sees an even bigger opportunity for Mirror.

He notes that Peloton is only for spinning, which makes up just 11 percent of the total boutique-fitness market. Mirror’s streaming content, by contrast, covers the vast majority of floor workouts that can be done at home, including yoga, Pilates, kickboxing, barre, and more.

Graham Brown, a partner at Lerer Hippeau, which also invested in Mirror, says venture investors have traditionally been wary of the fitness market.

“There has always been this ephemerality around fitness trends that have made the category scary to invest in from a venture standpoint,” he says.

“It can be very fad-driven. You can invest in one thing and it looks like it’s taking off, and then six months later no one cares about it anymore.”

He makes a good point. After all, it’s hard to find Tae Bo enthusiasts anymore.

“That’s probably why investors saw Peloton’s very first pitch and thought it would never work,” says Brown. “But Peloton has totally changed the industry from a hardware perspective.

“Companies like Peloton and Mirror are showing what it possible when you pair a cool device with great content and community. Investors are no longer skeptical because the market has been proven out in an incredible way.”

Dissenting opinions

But not everyone is convinced that expensive hardware devices like Pelton and Mirror represent the future of in-home fitness.

“I think Peloton and Mirror are niche products,” says Harley Miller, a principal at Insight Venture Partners. “They will do well with a more affluent, coastal audience, but they are not mass-market plays. It’s not something that will traverse socioeconomic boundaries.”

VCJ Venture Fitness Startups Sector Analysis
Harley Miller, principal, Insight Venture Partners. Photo courtesy of the firm.

After all, how many households can afford to pay $2,000 for a spinning bike?

He adds that if Peloton wants to address several million households, rather than several hundred thousand, it would have to slash its price in half. But that would essentially kill the economics of the business.

“As an investor, I think hard about cottage-industry opportunities versus those with mass-market potential,” Miller says.

“We didn’t want to invest in something faddish, like the next tech-enabled smart spinning bike. We wanted something with low friction to use and doesn’t require any hardware to do it. Something that was really asset light and was a high-margin business, so you don’t need to raise infinite amounts of capital to keep growing.”

That kind of thinking led Miller to Aaptiv, which has raised $52 million from the likes of Millennium Technology Value Partners and Amazon’s Alexa Fund, among others.

Aaptiv focuses purely on audio, giving users a personal training in their ear.

The Aaptiv app offers on-demand access to over 2,500 audio-guided workouts and structured programs across every type of exercise and a wide variety of activities, including running, strength-training, yoga, and more.

Each workout or program is created by one of Aaptiv’s certified trainers.

To date, the company has built a community of nearly 200,000 members who take an average 30,000 of Aaptiv’s classes each day.

“For an end user, the Aaptiv experience is really easy,” says Miller. “It’s a product that tens of millions of people can and will use, as opposed to a less mass-market piece of hardware like a Peloton bike.”

He notes that market appeal is a function of price point, and at about $100 per year Aaptiv can be used by anyone, even if they are just scraping by economically.

“The market here could be absolutely massive,” says Miller. “Just look at the total number of gym memberships. We could certainly have tens of millions of users paying $100 per year, so you are looking at a multi-billion-dollar revenue opportunity.

“The challenge is just making sure that users stay engaged and that we are creating the right content.”

Another fitness workout and personal trainer app with venture backing is Vancouver, Canada-based Fitplan, which recently raised $4.7 million from Lerer Hippeau, Bullpen, Advanceit and Imaginary VC.

Fitplan bills itself as the only digital resource connecting fitness enthusiasts with the actual workout plans and methods of their favorite social influencers and athletes.

“There are fitness influencers who have built these massive followings online, but there is no good way right now to monetize and engage with that community,” says Brown of Lerer Hippeau.

“So Fitplan helps them create customized fitness plans that they can share with their audience. They get to be a mini-franchise as a part of Fitplan, and they get to engage with a passionate community that wants to improve their lives.”

Of course, the ultimate measure of health for any startup is whether it can achieve an exit.

Given the size of the fitness market, Miller of Insight Venture Partners says it’s more than reasonable to expect the best at-home-fitness companies to eventually go public.

“I could also see one of the big brands like Nike, Adidas or Under Armour scooping up one of these business as they seek to establish a direct dialog with their customer base,” he says.

Ultimately, investors are betting that at-home-fitness startups will pump up their portfolios and lead to many happy and healthy returns.

To download in Excel a list of select home fitness deals, click here: Select U.S.-based fitness deals (2018)