Deal of the Month
October 8, 2020

Deal of the Month: KKR, Permira Don the Yellow Jersey in September

Nicolas Cole

When the Tour de France was delayed this summer, an ersatz race popped up on Zwift, an at-home cycling platform with 2.5 million users. It was the first ever Virtual Tour de France, and the best male and female cyclists in the world competed in the event broadcast in 130 countries.

Later this summer before cyclists racing in the real Tour reached the Arc de Triomphe, KKR led a $450 million investment in Zwift, Moonfare’s Deal of the Month for September.

Joining KKR in the round were Permira, the Amazon Alexa Fund and Specialized Bicycle Components’ venture capital fund Zone 5 Ventures — a strong signal that Zwift will expand from its subscription software offering into hardware for its audience, a mix of passionate amateur cyclists, pros and everyone in between. That cross-over from software to hardware will create new revenue models and strengthen Zwift’s competitive moat.

“We see tremendous potential ahead as Zwift invests further in its digital and physical products,” said KKR Director Stephen Shanley.

Drafting on Covid-19

Covid-19 lockdowns provided an enormous boost to the at-home fitness market. Peloton’s stock has been up about 250% year to date.

But the market around at-home fitness will get continuously crowded with substitute goods: Nike and Apple both have at-home fitness coach apps; and startups like Mirror, which has already achieved unicorn status, is innovating with hardware solutions.

Just a week after the Zwift round, Germany’s Freeletics, another coaching app, announced it had raised Series B. This week Icon Health & Fitness, the owner of the NordicTrack brand, raised $200 million from L Catterton and Pamplona.

Breaking Away

Long Beach, California-based Zwift makes an at-home cycling platform for passionate amateurs and pros, who pay around $15 per month to use its service. The company, founded in 2015 and now in 190 countries, is rapidly cementing its place as a Peloton-beater targeting premium customers. It’s geared towards more serious runners, triathletes and cyclists, a segment of customers who are accustomed to spending thousands for bikes and gear.

The investment will allow Zwift to “provide gamified fitness through integrated software and hardware to anyone who wants to have fun while getting fit at home,” said Zwift Chief Executive and co-founder Eric Min.

The platform offers its members the opportunity to explore 240 miles of terrain in 10 virtual worlds and a mix of structured training, group experiences and competitions.

KKR’s investment was made through its Next Generation Technology Growth Fund II, a global fund dedicated to growth equity investments in the technology space. Permira’s investment was made through its Growth Opportunities Fund I, which focuses on minority investments in growth-focused, tech-enabled businesses.

Deal of the Month is a monthly series published by Moonfare to highlight exceptional deals. To learn more about opportunities to invest in private equity, please contact our team or your dedicated relationship manager. Please note that for regulatory reasons, Moonfare is only permitted to share specific investment opportunities with registered users.

Nicolas Cole

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