Hydrow, maker of a $2,500 connected rowing machine, said Thursday it has secured an additional $55 million in funding to fuel its growth as the home fitness industry undergoes a shakeout as consumers return to gyms after two years of Covid-related lockdowns and restrictions.
The Series D round brings total funding to date to more than $255 million, the company said.
The new funding for Hydrow comes as Peloton, arguably the most recognized affiliate fitness maker in the world, is cutting thousands of jobs and cutting costs across the company after growing too fast during the height of the Covid-19 pandemic. Under new Chief Executive Barry McCarthy, Peloton is looking to reset to align its operations with the slower growth it will see as consumers leave their homes and go back to gyms.
Peloton shares are down nearly 80% in the past 12 months, trading below their IPO price of $29, which has cast a cloud over the rest of the industry, especially players like Hydrow in the private market looking to go public. to go.
However, according to Hydrow founder and CEO Bruce Smith, there is still tremendous room for growth despite the headwinds facing Peloton and the industry. He said overall connected fitness penetration relative to the total addressable market remains below 10% today.
“The work we’ve done on overall market penetration — it’s just super clear that the pandemic has accelerated penetration a little bit, but we don’t see a change in the long-term trends,” Smith said in a recent phone call. interview. “Actually, the pandemic will continue to accelerate demand because no one goes back to the office five days a week. The same goes for fitness.”
“People are definitely going back to the gym,” Smith said. “We support that, and we’ll be at your gym in your apartment building. And your home. And that hybrid experience is the new standard for the future.”
Last June, Bloomberg reported that Hydrow was exploring an IPO, or merging with a special-purpose company, at a valuation of more than $1 billion. By comparison, Peloton’s market cap has fallen to just over $7.9 billion, from a high of about $50 billion in early 2021.
Hydrow declined to comment on its current valuation or its plans to list the company. However, Smith said reaching the public markets is still in the works.
“An important part of preparing to become a publicly traded company is that ability to predict… that’s really what rewards your valuation, and that’s what we’re focused on,” he said. “Every time someone learns about rowing, they choose Hydrow.”
Peloton would be working on its own rowing machine as it develops new products to increase sales, which could take away any future demand from Hydrow. Other rowing machine manufacturers include the NordicTrack division of iFit Health and Fitness, CityRow and Ergatta.
Hydrow is not releasing its financial details as it is not a publicly traded company, but it said its 2021 revenue was three times the 2020 level. It also said it has more than 200,000 users today.
People who already own a Hydrow rowing machine can pay an additional $38 per month to access the company’s live and on-demand classes. Hydrow also offers a digital membership for $19.99 per month.
Data shows how much more cardio equipment consumers picked up during the pandemic compared to pre-Covid levels, as many sought to create some sort of gym experience at home.
Sales of cardio equipment — including treadmills, stationary bikes, rowing machines, steppers, and cross-trainers — were $1.5 billion in the United States in 2021, up 95% from 2019 but down 4% from the 2020 level, according to data maintained by The NPD Group. However, treadmill sales grew 5% in 2021 compared to 2020, NPD said.
Hydrow said it will use the new funding to help with marketing costs and greater brand building, as well as product innovation.
The Series D round was led by Massachusetts-based private equity firm Constitution Capital, along with investments from L Catterton, RX3 Ventures, Liberty Street, Activant Capital and Sandbridge Capital.
“The fact that Hydrow’s growth continued to accelerate as consumers returned to the gym and fitness studios underscores the tailwind associated with fitness in general, and Hydrow in particular,” said Michael Farello, managing partner at L Catterton.
This post Hydrow raises millions as home fitness industry faces post-Covid settlements
was original published at “https://www.cnbc.com/2022/03/17/hydrow-raises-millions-peloton-fitness-industry-post-covid-reckoning.html”