Connected fitness is adrift after the pandemic

Over the past four years, the connected fitness space has experienced some of the highest highs and lowest lows in the business world. According to figures from Crunchbase, funding unsurprisingly peaked in 2021. Collectively, the fitness category accounted for $6.4 billion raised across 376 rounds.

In May of that year, Peloton announced it would fund an Ohio-based production facility to the tune of $400 million. That was a drop in the bucket: the company generated $4.13 billion in revenue during the year, an increase of more than 40% from 2020.

On Monday, the exercise bike maker announced it was looking to refinance its debt. It also signed a five-year, $1 billion loan as it looks to hire a new CEO following the departure of Barry McCarthy earlier this month after two years at the company. In the end, Peloton got high on its own supply, assuming pandemic-driven profits were the new normal.

Competitor Tonal (which Peloton had reportedly considered acquiring in 2022), laid off more than a third of its staff in 2022. In April 2023, it announced a new CEO and a $130 million round with a significantly reduced valuation. Still, he was more than happy to offer a trade-in program at the end of the year, after Lululemon stopped selling its Mirror devices.

The pandemic has undoubtedly had long-term impacts on the economy. For example, while working from home has obviously declined from its COVID levels, a report from earlier this year notes that it is still three to four times more common than in 2019. Connected Fitness’s big bet was that, if Well, some regression occurred. It was inevitable, the cultural change was going to be permanent.

Ultimately, however, many were eager to “get back to normal” and the arrival of vaccines, along with declining infection rates, encouraged many to return to the gym. Unlike commuting five times a week to an artificially lit cubic farm, many people actually enjoy the experience of working out in person.

However, the struggle is not universal. Hyrdow, which raised $55 million in 2022, bought a majority stake in AI-based strength training company Speede Fitness earlier this month. The company has done a good job capitalizing on the interest around rowing machines, even as Peloton’s response to the category was completely overshadowed by its public struggles.

Despite some major setbacks and broader economic headwinds, you can always raise money if you have a compelling enough product. Ultimately, though, those rounds should be consistently lower than on home fitness salad days. As 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 wouldn’t want to be a connected fitness company in 2024. As my financial advisor recently told me, “the best time to buy a house is last year.” When working to bring a product to market, you can’t always wait until market forces are ideal. It looks like we may never see anything like 2021 for connected fitness again.

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