The at-home fitness industry faces a post-lockdown reckoning as Hydrow raises $55 million.

• Hydrow, a rowing-machine manufacturer, has secured $55 million in funding to drive its expansion during a period of upheaval in the at-home fitness market.
• More than $255 million in funding has been raised by Hydrow during the Series D round, bringing their total funding to date.
• Peloton, a renowned connected fitness brand, is cutting thousands of jobs and reducing costs despite receiving fresh financing.

Hydrow, the company behind the $2,500 connected rowing machine, announced on Thursday that it has secured another $55 million in funding to support its growth. This comes as the at-home fitness industry experiences a shakeout, with consumers returning to gyms after two years of Covid-related lockdowns and restrictions.

The company announced that its Series D round has raised more than $255 million, bringing its total funding to date.

Hydrow receives new funding as Peloton, a well-known connected fitness brand, cuts jobs and costs after experiencing rapid growth during the pandemic. Under new CEO Barry McCarthy, Peloton aims to adjust its operations to match the slower growth it anticipates as consumers return to gyms.

Nearly 80% of Peloton shares have dropped in value over the past 12 months, causing concern among investors and casting a shadow over the industry, particularly on companies like Hydrow that were considering going public.

Despite the challenges faced by Peloton and the industry, Hydrow founder and CEO Bruce Smith believes there is significant potential for growth, as the overall penetration in connected fitness is still less than 10% of the total addressable market.

Smith stated in a recent phone interview that the pandemic temporarily accelerated total market penetration, but there are no long-term trends. However, the pandemic is expected to continue to increase demand as people are unlikely to return to the office five days a week, which is also applicable to fitness.

Smith stated that people are definitely returning to the gym. We endorse this and will be present in your gym, apartment building, and home. The hybrid experience is now the standard moving forward.

In June 2021, Bloomberg reported that Hydrow was considering either an initial public offering or a merger with a special purpose acquisition company at a valuation of over $1 billion. In contrast, Peloton's market cap has decreased to approximately $7.9 billion, down from a high of around $50 billion in early 2021.

Hydrow declined to discuss its current valuation or its plans for going public, but Smith stated that going public is still a possibility.

Being a public company requires the ability to forecast, which is what drives valuation, and we are concentrating on this," he stated. "People always choose Hydrow when they learn about rowing.

Peloton is reportedly developing its own rowing machine to increase sales and potentially draw some future demand away from Hydrow. Other rowing machine manufacturers include iFit Health and Fitness' NordicTrack division, CityRow, and Ergatta.

Hydrow does not reveal its financials as it is not a publicly traded company, but it stated that its revenue tripled in 2021 compared to 2020 levels. Additionally, the company has over 200,000 users today.

Hydrow provides an additional $38 monthly fee for live and on-demand classes to those who already own their rowing machine. Additionally, a digital-only membership is available for $19.99 per month.

During the pandemic, the demand for cardio equipment increased significantly as people aimed to replicate the gym experience at home.

In 2021, the US market for cardio equipment, including treadmills, stationary bikes, rowing machines, steppers, and ellipticals, reached $1.5 billion, up 95% from 2019 but down 4% from 2020. According to The NPD Group, treadmill sales grew by 5% in 2021 compared to the previous year.

Hydrow will utilize the new funding for marketing costs, brand expansion, and product development.

The Series D round was led by Constitution Capital, along with investments from L Catterton, RX3 Growth Partners, Liberty Street, Activant Capital, and Sandbridge Capital.

As consumers resumed visiting gyms and fitness studios, Hydrow's growth accelerated, highlighting the positive impact of connected fitness on the industry, particularly Hydrow.