When L Catterton led a $75 million growth capital round in Peloton in December 2015, it identified a raft of opportunities to build on the connected fitness company’s potential for digital disruption and its ability to harness fast-growing health and wellness trends.
Peloton sells exercise equipment with access to live-streamed and on-demand classes, adding an immersive and socially connected element to at-home fitness. Drawing on its knowledge of the fitness space, where previous investments included CorePower Yoga and Xponential Fitness, L Catterton set out to help grow Peloton into a full-service fitness and technology company.
This included launching a commercial version of Peloton’s exercise bike for use in gyms, expanding the online content available to subscribers via the portals installed on its bikes, as well as growing its range of home fitness equipment. L Catterton played an instrumental role in the development, sourcing, and positioning of the Peloton tread – a connected treadmill.
L Catterton also employed its operations and supply chain expertise to increase the company’s manufacturing capacity and to achieve manufacturing and supply chain cost efficiencies. Among other initiatives, this included assisting Peloton in developing a last-mile delivery process and a long-term plan to improve the delivery experience for consumers. Improvements to the company’s operational infrastructure facilitated immediate cost savings of 25 percent.
The firm reinvested cost savings into marketing and branding initiatives, helping to transform Peloton into a unique lifestyle brand and develop a community feel among subscribers. It also sought to grow the company’s customer base and expand internationally. The business now ships exercise equipment globally, and during L Catterton’s investment period its subscriber base grew from approximately 20,000 to 563,000 members. The number of Peloton showrooms also increased from 12 to 74 under L Catterton’s ownership, and the company’s revenues increased 30-fold.
In addition, L Catterton supported the company through subsequent financing rounds, and aided Peloton in recruiting for roles across key areas such as finance, marketing and product innovation. By mid-2019, the business employed approximately 2,000 staff compared with just under 200 when L Catterton first invested.
Peloton listed on Nasdaq in September 2019, raising approximately $1.16 billion. L Catterton’s complete exit from the company came after the IPO, in February 2020. The investment generated a gross IRR of 110 percent and a 10x gross money multiple.
The judges praised the “very impressive” transformation of the company, awarding it full marks for growth strategy and scoring it very highly for innovation. “L Catterton contributed a wide range of strategic and operational benefits that has led to the building of a remarkable company,” said one member of the judging panel.