The connected fitness industry has experienced significant highs and lows over the past four years. In 2021, funding for the fitness category reached its peak, with a total of $6.4 billion raised over 376 rounds, according to Crunchbase data. Peloton, a major player in the space, generated $4.13 billion in revenue that year, marking a 40% increase from 2020. The company even announced plans to fund a production facility in Ohio with $400 million.
However, the tide began to turn for Peloton as it sought to refinance its debt and secure a $1 billion loan in order to bring on a new CEO. The company’s assumption that the pandemic-fueled gains would continue proved to be misguided. This change in fortune can be seen in Peloton’s competitor, Tonal, which had considered being acquired by Peloton in 2022 but instead had to lay off more than one-third of its staff in the same year. Although Tonal rebounded with a new CEO and a $130 million funding round in April 2023, it faced challenges when Lululemon stopped selling its Mirror devices.
The impact of the pandemic on the economy has been long-lasting. While work from home has decreased from its peak during the COVID-19 pandemic, it is still three to four times more common than it was in 2019. Connected fitness companies believed that the cultural shift towards at-home fitness would be permanent. However, as vaccinations became more widespread and infection rates decreased, many people were eager to return to the gym and enjoy the experience of working out in person.
Not all connected fitness companies faced the same struggles. Hydrow, for example, capitalized on the growing interest in rowing machines by acquiring a majority stake in Speede Fitness, an AI-based strength training firm. Meanwhile, Peloton’s attempt to enter the rowing machine category was overshadowed by its well-publicized difficulties.
Despite the challenges faced by the industry and the broader economic headwinds, there is still potential for connected fitness companies to raise funds if they have a compelling product. However, these funding rounds are expected to be consistently lower than they were during the peak of the at-home fitness trend. For example, Kabata, the maker of “the World’s First AI Powered Dumbbells,” recently announced a $5 million seed round, following a $2 million seed round in May 2022.
Looking ahead, it may be challenging for connected fitness firms to raise funds in 2024. As the saying goes, the best time to buy a house is last year, and the same principle applies to bringing a product to market. Companies can’t always wait for ideal market conditions. It seems unlikely that the connected fitness industry will see a repeat of the success it experienced in 2021.