How much bigger can digital fitness get?


September 17, 2020

PLUS: Who are the (non-alcoholic) beverage billionaires?
September 17, 2020
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Snowflake held its IPO yesterday. Shares more than doubled and, with a market value of $70B+, it was the largest software IPO ever. The data warehousing firm is now worth >5x its last private round.

Some people think Warren Buffett’s seal of approval drove the opening day pop. We think it’s because Snowflake has the best ticker out there: $SNOW just leapfrogged Slack ($WORK), Southwest Airlines ($LUV) and DMC Global ($BOOM) as our fave. (*Not investment advice) 

The Big Idea

How much bigger can digital fitness get?

Digital fitness (AKA workout-from-home) is on a bit of a run right now (get it?):

  • Peloton’s Q4 earnings showed a 172% YoY jump in revenue, and its connected subscribers were up 113% YoY.
  • Apple just announced its virtual fitness product (Fitness Plus), available to the 1B+ Apple devices out there. 
  • Lululemon has already upped its projected revenue for Mirror from $100m to $150m.
  • Zwift, an indoor training app, reached unicorn status yesterday after a $450m funding round.

The pandemic has exploded the market for digital fitness 

There are 62m gym memberships in the US and 183m globally, according to a 2019 report.

But many people shifted to online workouts during the pandemic, and  gyms have been slow to reopen.

Many notable gym brands have filed for bankruptcy in recent months, according to PETITION: Gold’s Gym, 24-Hour Fitness, SNFW Fitness (Steve Nash’s), Town Sports International (New York Sports Club). They posit that high-end Equinox could be next.

Will the changing behavior be for good?

Data from Thinknum shows this might be the case. 

While 46 states have re-opened gyms, Facebook location mentions have “remained utterly stagnant for gyms.”

Thinknum flags one outlier — Planet Fitness, which has tons of locations and is cheap. In a post-COVID world, gym-goers may make in-person gyms a small convenience expense rather than a lifestyle commitment. 

Peloton is bullish on its opportunity

CEO John Foley recently told CNBC that $PTON (not a good ticker) could have 100m subscribers one day.

Today, Peloton has 3.1m total subscribers (connected bike + digital only) and is worth $24B. All things equal, a ~30x increase in its user base would make the firm worth hundreds of billions of dollars.

That’s probably a bit aggressive but Foley lays out his case, including: 

  • The fact that 35m US households have treadmills that are “not used”
  • Geographic expansion, as Peloton is currently only in the US, Canada, the UK, and Germany
  • Cheaper bikes and treadmills as well as rental programs
  • More digital subscription options (not tied to bike ownership)

So, to answer the question, “how much bigger can digital fitness get?”

A lot bigger.

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Snippets
  • Facebook said it’ll roll out its first smart glasses next year. But don’t call it an “AR device.” The eyewear will be more like Snap Spectacles or Amazon Echo Frames.
  • On a semi-related note, the FTC might file an antitrust lawsuit against Facebook before the year is out.
  • FedEx is trying out a Bluetooth tracker that lets you see exactly where your most important shipments are. 
  • The new entrant into the VC game isThe Chainsmokers? Its firm, called Mantis, has already raised $35m.
  • A T-rex skeleton nicknamed Stan is set to break records when it goes up for auction next month, expected to fetch at least $8m+.
Poker Face

Can you build a business around internet pranks?

A new game via the company MSCHF is hitting the internet next month — and it involves a ton of free cash. Dubbed Card v. Card, it works like so:

  1. A bunch of players get free debit cards in the mail that are all linked to the same MSCHF bank account.
  2. MSCHF drops money into the account; players rush to spend it.

The strategy? You want to juice MSCHF for as much as you can. But if you shell out too much and overextend the account, your card gets declined.

What is the point of this? 

MSCHF (pronounced“mischief”) is a Brooklyn-based “ideas factory” focused on whipping up viral-ready products for the internet. Among its past drops:

  • $1.8k “Jesus Shoes” (Nikes filled with holy water)
  • A weed pipe fashioned to look like a rubber chicken
  • A dog collar that morphs barks into swear words

The company — which aims to be something like Banksy for the internet — has reportedly raised $11.5m

How can I play?

Card v. Card is expected to run off and on for several months. 

The company isn’t publicizing how much money it’s giving away, but its growth head Daniel Greenberg told The Hustle that it’s in the “deep 5 figures.”

Intrigued? You can join the waitlist here.

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SPONSORED

The “Netflix of wine” just hit $232M in lifetime revenue

Want in on the first data-driven winery? For a limited time, you can Invest in Winc right here.

On the back of the recent quarantine boom, the e-comm alcohol sales industry is set to hit $13.4B by 2024 — with wine leading the way.

At-home delivery and data-based personalization are two of the new norms… both of which Winc, the first-ever data-driven winery, has mastered. 

Just take a look at the cold, hard numbers 📈

  • +23%: How much investments in Winc have appreciated since their last fundraising round.
  • $232 million: Lifetime revenue at the close of Q2.
  • 137,745: New customers acquired from March to June alone.
  • 4.1 million: Number of wine ratings, allowing personalization through data that maximizes customer engagement and retention.

(In fact, they’re doing so good, they even up and launched a new clean wine company for healthy living — and it’s already profitable.)

Just like Netflix stock, Winc is on it’s way up. All that’s left to do is invest:

Invest in Winc →
Stonks

Are Nikola’s electric semi trucks bullshit?

The financial forensics firm Hindenburg Research recently released a scathing 67-page report (and follow up) accusing the electric semi-truck unicorn Nikola Motor Company of being an “intricate fraud built on dozens of lies.”

Here are a few of the greatest hits from the report, along with our verdict:

Strike #1: Nikola is super dependent on GM.

  • Explanation: Per a deal between the companies, GM will handle all engineering, validation, and manufacturing of Nikola’s Badger truck and fuel cells. In return, Nikola will pay GM a cool $700m, plus an 11% stake in the company.
  • Verdict: If a partner bailing means you can no longer create your product, did you ~really~ ever have a product? If so, we have a bridge in Brooklyn to sell you.

Strike #2: Its truck isn’t quite fully functional.

  • Explanation: In 2018, Nikola released a video supposedly showing a fully operational truck in motion. Turns out, it was just rolling down a hill.
  • Verdict: OK, so the car company… made a vehicle… that can’t actually move on its own? Sounds even less sophisticated than our soapbox derby car (funding: zero dollars).

Strike #3: The SEC and DOJ are on the company’s tail.

  • Explanation: Both government agencies are now said to be investigating Nikola for having “misled investors about its tech.”
  • Verdict: Getting accused of fraud online = your friends singing “oooh, you’re in trooouble.” Getting investigated by the SEC and DOJ in real life = your parents telling you to sit your ass down on the couch and start explaining.

Final Verdict: Book ‘em, Danno.

(To be thorough, Nikola’s shares actually rallied today after a JPMorgan analyst defended the EV firm).

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Three Comma Club

Who are the (non-alcoholic) beverage billionaires?

A Chinese water company (Nongfu Springs) went public last week in Hong Kong and — after a strong IPO — its founder was momentarily China’s richest person. 

Zhong Shanshan owns more than 80% of Nongfu Springs and, as of yesterday, was worth $52B (No. 2 in China, No. 21 in the world). Either way, #SoManyCommas. 

China’s bottled water market is growing rapidly 

According to The Economist, China has seen average annual consumption of bottled water increase from 41 liters in 2014 to 59 liters in 2019. 

This still lags America (141 liters) and — as most tap water in China is undrinkable — means the market could be bigger.

Rising incomes also boost the thirst for bottled water. Nongfu currently has access to China’s top 10 fresh water spots and supplies 29% of the market.

Shanshan isn’t the only Chinese beverage billionaire

When you filter Forbes billionaire list for “beverages,” here are the names minting serious moolah from non-alcoholic drinks: 

We can’t speak for the Chinese drinks. But fair warning to anyone with the plums to combine Red Bull and Arizona Tall Boy Ice Tea Cans: don’t do it.

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