Back in January 2020, New York City–based fitness startup ClassPass hit a big milestone when the female-founded startup became the first new unicorn of the decade. At the time, CEO Fritz Lanman said that the “eventual goal for us is to IPO.” Today, ClassPass announced it has been acquired by wellness platform Mindbody—but that’s not the end of its IPO dreams.
ClassPass, which was sold in an all-stock deal for an undisclosed price, will continue to operate its monthly subscription service for fitness and wellness experiences, the company said. But founder Payal Kadakia, who launched ClassPass in 2013, will be departing.
The acquisition will also be accompanied by $500 million in funding from Sixth Street, a global investment firm whose prior investments include Airbnb and Spotify. The strategic investment will be used in conjunction with support from Mindbody’s majority investor and partner, Vista Equity Partners, to “accelerate the company’s growth and build upon the product innovations and investments that have been made over the course of the pandemic,” ClassPass said in a statement. That will include a virtual platform for business owners and enhancements to Mindbody’s marketing automation tools.
The pandemic has been rough for the fitness industry. After COVID-19 shut down fitness studios and gyms, ClassPass cut staff by more than half in April 2020 and lost 95% in revenue as users stayed home and avoided large gatherings. Like many companies, ClassPass was forced to adapt to new restrictions during the pandemic and rely on technology to keep the business running. Over the past two years, it added virtual home workouts to its platform, as well as thousands of spas and beauty salons for users looking to focus on wellness.
But in-person fitness is bouncing back. About 50% of consumers who engaged in virtual workouts are now looking to try them in person, according to Mindbody’s internal research, and ClassPass subscribers are now attending about 110% of the fitness classes that they took pre-COVID, says Lanman, who will now serve as president of ClassPass and Mindbody Marketplace.
“While I would never wish anybody to go through an experience like we did with the pandemic, I think it’s actually made our company stronger, more resilient,” says Lanman. “It’s accelerated the adoption of digital for the fitness and wellness merchant community, and that adds a whole other element for our consumers.”
Mindbody has served as a third-party booking platform for ClassPass services since its inception. Now, through its globally used app and software service it aims to market its booking software to the fitness studios that use ClassPass. The two companies see substantial areas for growth by combining their business-to-business and business-to-consumer practices. Mindbody CEO Josh McCarter is particularly excited to expand internationally and introduce more wellness partners to the platform, while Lanman is looking forward to leveraging machine-learning tools to drive future personalization opportunities for consumers.
“It was really a matter of when, not if, these companies were going to come together,” Kadakia says. “This is what entrepreneurship is all about.”
Lanman also says that the Mindbody acquisition doesn’t mean that a future IPO is off the table.
“That’s still something that we would aspire to do at some point. We don’t see selling to Mindbody as an alternative or replacement path for that,” he says. “We had this opportunity to come together to start figuring out how to grow our scale, and start to access the synergies between the businesses on both sides.”
While Kadakia will be leaving the company to pursue other projects, including writing a book that she hopes to publish early next year, she’s proud of what she has built.
“It’s been the privilege of my life to be able to build this company and reach this moment, and I want other people to know they can do it too,” she says. “And I want other investors to know to bet on the person who doesn’t always look like they fit the mold.”
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