These Are Lean Times For Fitness Startups

There are few drawbacks to getting fit. Investing in fitness companies, however, comes with plenty of downside risks.

Over the past four years, as the pandemic boom in home workouts slowly gave way to a return to the gym, investors in fitness companies can attest. Valuations for both public and private companies have declined, investment is down, and fitness-related consumer spending remains tough to forecast.

Changing circumstances are reflected in startup funding. In 2023, global seed through growth-stage funding reported in the Crunchbase fitness category hit the lowest point in years. This year is off to a sluggish start as well, as evidenced in the chart below.

Of course, some deals are still getting done. Last week, for instance, Ultrahuman, a Bangalore-based startup developing a smart ring to track one’s vital signs, picked up a Series B round consisting of $25 million in equity and $10 million in debt financing.

Good-sized rounds also went to companies turning to technology to customize exercise routines. Ladder, an Austin, Texas-based workout plan provider landed a $12 million Series A in December. And Bhout, a Portuguese developer of an AI-enabled, gamified boxing bag, picked up $11 million in a November financing.

Other areas that have attracted investor interest in recent months include supplements and nutrition products marketed for athletes, cognitive fitness tools and digital coaching.

Cooling down

But while spending hasn’t disappeared, we’re not seeing the kinds of ultra-large financings that were pretty common a few years ago.

Startup investors are no longer writing checks in the hundreds of millions. Meanwhile, several companies that raised big rounds in bubbly 2021 have not raised financing, or have done so at much lower valuations.

One in the latter category is Tonal, the maker of smart home gyms, whose valuation fell 64% from $1.6 billion to $600 million in 2023. The San Francisco-based company, which counts LeBron James, Mike Tyson and Serena Williams among its backers, took the cut when it secured $130 million in follow-on funding a year ago.

Others are also scaling back amid a changed environment for investment and consumer spending.

One in this camp is connected rowing machine-maker Hydrow, which has raised $367 million to date, but last closed a round in 2022. The Boston-based company, which counts celebrities like Lizzo and Justin Timberlake among its backers, conducted multiple rounds of layoffs amid cooling demand for new home fitness equipment.

Weight loss platform Noom has also carried out rounds of layoffs. The New York-based company, which has raised more than $650 million to date, last closed a known round in 2021. And Tempo, a home fitness platform that raised $298 million in total funding, last closed a round three years ago.

Public markets also trim valuations

They say private markets take their cue from public markets. For fitness, this isn’t a great thing.

On the public markets, onetime market darling Peloton had a market cap of more than $50 billion at its late-2020 peak. Since then, the connected exercise bike brand’s shares have shed 97% of their value.

Another fitness equipment maker, BowFlex (formerly Nautilus), filed for bankruptcy this month, following a steep contraction in its share price. It recently had a share price of less than 1 cent.

And let’s not forget the well-publicized travails of WW International, operator of Weight Watchers, which saw shares nosedive after Oprah Winfrey stepped down from the board and disclosed she is now taking weight-loss medication.

Ruminations from someone who just ate a donut

As someone who just finished eating a donut, I can’t help but walk away with the sense that expecting startups and technology to make us fit is likely misguided. At the end of the day, one can have the best weight-training equipment, wearables, aerobic workout machines, coaching and local fitness studios, and still ignore them in favor of sofa and donut.

Even so, it’s clear startups are providing major contributions toward making exercise more appealing. By employing gamification into workouts, customizing for our goals and stamina, and delivering sensor-enabled feedback, they’ve put fitness goals more easily in reach. Now, if only they could also help with getting off the couch.