Stationary Bike Startup Peloton Seeks Unicorn Valuation

(Bloomberg) -- Peloton Interactive Inc., the company that sells exercise bikes with tablets that stream live spin classes, is seeking to raise at least $120 million at a valuation of $1.2 billion, two people familiar with the company's fundraising said.

The bikes are $1,995 with a $250 delivery fee. To take the classes, cyclists must purchase a $39 monthly class subscription. The five-year-old company, based in New York, has developed something of a cult following among busy consumers who relish a class atmosphere without having to leave the house.

One of the two people, who asked not to be identified because the negotiations were private, said he planned to pass on an investment, due to the rich valuation and his belief that in an economic downturn customers would seek cheaper exercise options. 

A Peloton spokeswoman declined to comment on fundraising, but said company data suggested their subscriptions would be among the last discretionary items cash-strapped customers would cut.

Paul Swinand, an analyst at Four Hills Advisors, said reactions to the 2008 downturn backed her up. During the recession, many consumers exercised more than before because they had more time, he said, and in the future they might prefer to sacrifice high-priced gyms rather than Peloton subscriptions.

He sees a bigger potential threat in other in-home exercise options such as Zwift, which also delivers spin cycling classes over the Internet, without the expensive bike. Popular studio cycling chains could also start delivering classes online, he said.

Peloton has raised $120 million to date, including $75 million in late 2015 from consumer-oriented private equity firm L Catterton. Other investors include technology venture capital firm True Ventures and Tiger Global.

SoulCycle Inc., the indoor-cycling class chain, filed to go public in 2015. But the company put its initial public offering on hold, citing choppy market conditions, and it's unclear if it will ever go public.

In 2015, John Foley, Peloton's co-founder, expounded on his business ambitions to a Bloomberg Businessweek reporter: “You’re going to think I’m a total douche for saying this... I used to say we want to be the Apple of fitness. I’ve stopped saying that. We are five times better in the category. Apple’s not five times better than its competitors. We want to build the biggest consumer-products brand in the world. We’re going to make Apple look small-time.”

To contact the author of this story: Sarah McBride in San Francisco at smcbride24@bloomberg.net.

To contact the editor responsible for this story: Emily Biuso at ebiuso@bloomberg.net, Mark Milian