The founder of Peloton had a hard time raising VC—and now his company’s worth $4.1B

Kate Clark August 03, 2018 https://pitchbook.com/news/articles/the-founder-of-peloton-had-a-hard-time-raising-vcand-now-his-companys-worth-4b

VCs have invested $555 million in fitness companies in the US so far this year, not including Peloton’s monstrous round, according to the PitchBook Platform. That’s just under last year’s total of $661 million, which included a $70 million funding for ClassPass and a $15 million round for social fitness app Strava. Peloton is the only venture-backed fitness tech company to garner a unicorn valuation to date, per PitchBook data.

Reshaping fitness

Despite challenges securing capital, the latest round brings the company’s total VC raised to just under $1 billion. TCV led the round, with participation from existing investors Tiger Global, True Ventures, Wellington Management, Fidelity, NBCUniversal, Kleiner Perkins Caufield & Byers and Balyasny, as well as new backers Felix Capital and Winslow Capital.

“Part of the appeal here is that it’s a different company,” TCV co-founder Jay Hoag told PitchBook. “The analogy that I would use is, is Apple a hardware or software company? It’s an integrated experience.”

As part of the financing, Hoag is joining Peloton’s board. Peloton is Hoag’s first investment in the fitness tech space, though Peloton is more than a fitness company; it sits at the intersection of fitness, hardware and media. That’s why, Hoag says, it’s such a worthy investment.

Many people, including its CEO, have dubbed Peloton the “Netflix of fitness.” And who better to substantiate that claim than Hoag, a longtime Netflix board member whose firm first backed the streaming giant in 1999.

“At a higher level, Netflix delivers streaming entertainment for a fixed monthly fee in the convenience of your home, and Peloton is delivering a studio quality fitness experience in the comfort of your home also for a fixed monthly fee,” Hoag said. “Point two is that they both focus on delighting their customers and that is great. There are super high levels of engagement, customer satisfaction, NPS scores, et cetera and that results in higher retention. Obviously, Netflix has been around a lot longer, but both have very large market opportunities. I’m super excited about the ability for Peloton to reshape fitness.”

Foley, for his part, says the key difference between his company and Netflix is hardware.

“The hardware makes it harder but … even more special. We are truly the first interactive media company because you are part of the experience.”

In addition to its bikes, Peloton will begin shipping its new $4,000 internet-connected treadmill later this year. It also provides an app, which connects users to its portfolio of digital fitness classes, brick-and-mortar stores that sell branded fitness gear, and studios where subscribers can attend in-person fitness classes.

With the fresh injection of capital, Peloton will double down on those offerings, opening at least 20 new storefronts in the US, UK and Canada, as well as a 25,000 square foot “member support hub” in Plano, TX. It will also begin selling its flagship exercise bikes in the UK and Canada this fall, marking its first foray outside the US.

Posted on August 6, 2018

The founder of Peloton had a hard time raising VC—and now his company’s worth $4.1B

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