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The Peloton effect

How much more connected fitness VC activity are we seeing in 2020?

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Image Credits: Nigel Sussman (opens in a new window)

During the most recent quarter, only a few earnings reports stood out from the rest. Zoom’s set of results were one of them, with the video-communications company showing enormous acceleration as the world replaced in-person contact with remote chat.

Another was Peloton’s earnings from the fourth quarter of its fiscal 2020, which it reported September 10th. The company’s revenue and profitability spiked as folks stuck at home turned to the connected fitness company’s wares.


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Shares of Peloton have rallied around 4x since March, roughly the start of when the COVID-19 pandemic began to impact life in the United States, driving demand for the company’s at-home workout equipment. In late June, the leisure company Lululemon bought Mirror, another connected fitness company aimed at the home market for around $500 million.

With Peloton’s 2019 IPO and its growth along with Mirror’s exit in 2020, connected fitness is demonstrably hot, and private-market investors are taking notice. A recent Tweet from fitness tech watcher Joe Vennare detailing a host of recent funding rounds raised by “digital fitness” companies made the point last week, piquing our curiosity at the same time.

Is there really some sort of Peloton effect driving private investment into lots of connected fitness startups? How hot is the more nascent side of connected fitness?

This morning let’s take a look through some recent funding rounds in the space to get a feel for what’s going on. (If you’re a VC who cares about the sector, feel free to email in your own notes, subject line “connected fitness” please.) We’ll then execute the same search for Q3 2019 and see how the data compares.

Hot Wheels

To start with the current market I pulled a Crunchbase query for all Q3 funding rounds for companies tagged as “fitness” and then filtered out the cruft to get a look at the most pertinent funding events.

Here’s what I came up for for Q3 2020, to date:

From there, the numbers get too small to care about.

Vennare’s tweet notes a few more rounds than those that we’re counting, as he’s looking more at the COVID-19 era more than Q3, but I think that the third quarter provides a good set of notes on what the market looks like: Namely, active across stages.

We can see a number of small rounds into larger B, C and D rounds. A lack of Series A deals could be viewed as troubling, but investors are not struggling to come to conviction that the market for Peloton-cognates will be large and lucrative. Or that their companies can cause enough disruption to exit to a major for a good-sized check.

And the total dollars invested are large: Well north of $600 million in this quarter alone, meaning that we’re on pace for private connected fitness startups to raise billions in 2020.

How do those metrics stack up against Q3 2019?

You can see the difference between 2019 and 2020 when it comes to connected fitness products. But don’t give Peloton and Mirror all the credit for the change, they surfed the same wave that their recent success detailed; let’s not conflate a secular shift with its greatest acolytes.

Still, Peloton was early and has excelled. And the market’s movement toward connected fitness has brought with it a host of venture deals and startup activity.

A good question for us today: How big is the digital fitness market, and once it inevitably slows, how many players will be in sound enough financial shape to survive? Or does Peloton just buy the stragglers when they get cheap?

Recall that Peloton just started making money in a quarter that exploded expectations. Everyone else, then, is still bleeding cash.

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