A social media unicorn hidden in plain sight
Let’s go back to fall 2020, the heyday of fundraising for digital fitness apps. From connected rowers to calorie-tracking apps, we’ve seen digital fitness pick up speed from what seemed like a decade in terms of adoption.
One of the biggest winners? Strava social fitness platform. The app preferred by runners, cyclists and swimmers drove the growth of the business throughout the period – it currently has 90 million users.
In November of last year, Strava raised $ 110 million from Series F to a Valuation of $ 1.65 billion. The rating represented a 5-fold increase from the previous app funding cycle in 2017 and a vote of confidence in the future of socialization through fitness and exercise.
Strava’s 2020 year in review was also indicative of great things to come. Some numbers, according to a corporate blog post:
- 2 million athletes join us every month
- 1.1 billion activity downloads
- 172,000 Strava clubs created
- 71 million Strava Challenge joined by athletes
- 386.4 million photos uploaded
While the momentum of the connected and traditional fitness sectors has for the most part shown no signs of slowing down, Strava has faded from public consciousness. There hasn’t been any follow-up round, no growth announcement, or really no attention to the company since its F Series.
Instead, we’ve seen Peloton’s stock price crash, billion dollar valuations for companies like Tonal and Hydrow, and the resurgence of in-person gyms.
So what has Strava been up to in the meantime? Let’s dig.
The business model
Strava’s core product – its app – is a free interface that allows users to track a variety of exercise-related activities (e.g. cycling, running, hiking) while simultaneously interacting with other users. on the platform.
The $ 5 per month premium subscription includes advanced tracking features, group comparison metrics, and other perks, and is the main monetization mechanism for the company.
Unlike other social media platforms, Strava does not allow direct advertising on its platform, but rather generates a portion of its revenue from sponsored challenges within the app.
The company introduced its premium paid model within six months of the product’s initial launch in 2009. By building its subscription model from the ground up, it was never forced to choose between growth and monetization.
Still, $ 60 a year is a hefty price to pay for what has been advertised as a social media app. When looking at the top social media apps by revenue and users, the prevalence of paid apps is rare.
But according to Statista, all top 10 fitness related apps have premium paid feature. As a social fitness app, Strava is, in a sense, necessary to straddle the line, but its paid features are more about performance than socializing.
- With a social fitness network, shared “information” or “assets” (for Instagram, that would be photos) is data – and extracting and contextualizing that data is going to cost you money.
- There is already a precedent for individuals to pay premiums for their fitness data. Membership in Whoop costs $ 30 per month; Oura membership to go with your $ 300 ring is $ 6 per month.
However, as Strava always provides and optimizes social features, they can benefit from extreme network effects like Instagram or Twitter.
When a new user is added to the network, the network becomes stronger. There is more data to create features like route mapping, groups become more robust, challenges get more participation, and flows are improved.
Strava has an organically monetizable flywheel.
Strava’s scalability solution
Strava clearly has a chance to grow quickly thanks to its monetizable social network, but there is another important factor at play in the bull’s thesis for the company.
Over the past few weeks, Peloton has lost $ 10 billion in market capitalization while Planet Fitness recorded the highest net membership growth in its history. Preferences change – that’s why fitness trends come and go so fast.
But Strava is somewhat isolated from these preference changes. Whether you’re running on a Peloton treadmill in the comfort of your home or taking a spin class at a physical gym, Strava will be there for you to share your burnt calories with the rest of your fitness friends.
Rising tides don’t necessarily lift all boats, but modality independent rigs tend to generate inordinate returns because they capture all kinds of tailwinds from the market.
While Strava has lost some of its appeal in the public eye, the infrastructure is in place for the business to take off.
They have conquered a profitable niche that is becoming more and more common. Just look at the news from last week: Alltrails, the developer of an app that provides organized trail maps, has raised $ 150 million to help people figure out where they want to hike.
Strava CEO Michael Horvath said the company believes there are 700 million people around the world who wake up every day wanting to be active. It is fair to assume that a significant number of these people wish to spread the success of this business.
When the 2021 Tour de France kicked off on June 26, the majority of cyclists competing were recording their kilometers on Strava.
It may only be a matter of time before athletes from other disciplines massively embrace the social platform.