The connected fitness space continues to heat up, as Peloton’s competitors (or future competitors) raise money from investors to increase their marketing, product development, and ability to get their products in the hands of customers.
Zwift, who make a gamified cycling training platform, announced yesterday they had raised $450 million. Including yesterday’s round, they have now raised more than $620 million, and have a valuation of over $1 billion. Investors in this round include “KKR, Permira, the Amazon Alexa Fund, and Specialized Bicycle’s venture capital fund, Zone 5 Ventures.”
With all the new money, Zwift plans to expand from being just a software platform, to offering both software and hardware – making them more direct competitors to Peloton. Rumors and job postings for Zwift have made this plan known for a while now, and this round is the next step to make it possible. Techcrunch today also reported:
Now, Zwift is jumping headfirst into the hardware business itself. Though a spokesman for the company said it can’t discuss any particulars — “It takes time to develop hardware properly, and COVID has placed increased pressure on production” — it is hoping to bring its first product to market “as soon as possible.”
He added that the hardware will make Zwift a “more immersive and seamless experience for users.”
For those not familiar with Zwift, they do not offer traditional classes like Peloton. Zwift instead provides virtual training courses & routes, where cyclists (and runners!) are able to train and race each other on the course, and organize group workouts and races. At this time, Zwift does not plan to modify that approach and begin offering structured classes. Again according to remarks a spokesman made to TechCrunch:
In the meantime, the company tells us not to expect the kind of classes that have proven so successful for Peloton, tempting as it may be to draw parallels.
While Zwift prides itself on users’ ability to organize group rides and runs and workouts, classes, says its spokesman, are “not in the offing.”
For the majority of users, most prefer one or the other of Zwift or Peloton – although there is a growing number of members who try to split their time between the two offerings. With Zwift expanding into hardware and having more money to invest in their platform, it will be interesting to see if any of their future plans or offerings make them more appealing to the Peloton userbase.
Tonal, who make what many currently consider to be the current leader in the connected strength category, announced today that they have raised $110 million from investors. In addition to traditional investors like La Catterton and the Amazon Alexa Fund, they also raised money from some big sports stars. Stephen Curry (NBA), Paul George (NBA), Bobby Wagner (NFL) and Michelle Wie (golf) all participated in this round, and previous rounds included names like Serena Williams (tennis), Klay Thompson (NBA) and Tony Gonzalez (NFL). Including previous rounds, Tonal has raised more than $200 million.
“As the first mover in connected strength training, it has been incredible to see the momentum we’ve had in the two years since introducing Tonal to the world,” said Orady. “Month over month, we’ve consistently seen record-breaking sales and member engagement fueling one of the most passionate fitness communities ever.”
During Peloton’s earnings call last week, Peloton CEO John Foley specifically brought up the strength category – and indicated it’s the next area Peloton will be focusing on:
“We’re clearly going to win cardio. And so strength is an important vertical for us to put a flag down on. Clearly, if you’re going to move all of your fitness programming into the home, strength is another compliment to your cardio we need to win”
“With respect to other products in the marketplace, we haven’t seen anything…personally that I’m that excited about. I like to workout with free weights, and bands, and body weight, and we’re going to offer that in such volume that we think we’re going to be able to win with our current approach”
While John Foley seems to be trying to downplay the importance of a ‘smart device’ for strength training, this might be misdirection on his part. We know that Peloton approached Tempo, a connected strength device, earlier this year about a possible acquisition. In addiiton, Peloton was hiring for a “VP of Product Marketing for Peloton Strength” in August, and Peloton’s current SVP of Hardware, Sam Bowen, was hired away from Tonal in November of 2019. Peloton has also stated they continue to invest in their R&D efforts on new products.
Yahoo reports that Tonal stated their sales were up 12x in 2020, compared to the year before, so clearly there are a number of consumers who are looking for devices, not just weights and bands.
Mirror / Lululemon
Mirror, who were acquired by Lululemon for $500 million this summer, also plans to grow in the upcoming quarters.
CNBC reports that on Lululemon’s latest earnings call, they stated they plan to start showcasing Mirror at some of Lululemon’s locations:
Planning for the all-important holiday season, CEO McDonald said Tuesday that Mirror’s mirror will be available for sale in 10 to 15 of the company’s stores by early in the fourth quarter, and Lululemon is also beginning to market it online and on social media channels. The company expects Mirror to do more than $150 million in revenue this fiscal year, up from initial expectations of over $100 million.
“We’ll set the stage for next year, and we expect to be more aggressively leveraging the power of the Lululemon ecosystem to grow the Mirror business,” McDonald said Tuesday during a conference call with analysts.
Mirror offers both cardio and strength workouts their connected display, so as Peloton focuses more on that space, will become more of a direct Peloton competitor.
All of this money flowing into connected fitness devices show that investors believe there is lots of room for potential growth in the area. Apple’s new Fitness+ offering is further confirmation of that. Hopefully all of this new, or potential future competition, will push Peloton to continue to innovate and improve their offerings, resulting in a net win for the Peloton community.
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