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ClassPass, the subscription-based fitness marketplace most recently valued at $1 billion, is today announcing that it has been acquired by Mindbody.
Mindbody is a bit like the OpenTable of the fitness world. Its booking software is used by studios, gyms and other experience-based service providers — the company recently signed a global agreement with Blo blowdry bar, for example — for customers and organizations to book their appointments, classes, etc.
ClassPass helps fill classes, while Mindbody provides the software that helps fitness centers run their business.
The terms of the deal were not disclosed, but Mindbody's CEO Josh McCarter said that it was an all-stock deal. Alongside the acquisition, Mindbody is also announcing that it has secured a $500 million investment for the merged entity, led by Sixth Street.
ClassPass launched back in 2012 with a model not unlike Mindbody's current model. Founder and then-CEO Payal Kadakia envisioned a site that would let you book classes à la carte from a variety of studios and gyms. Turns out, people weren't as motivated as she expected.
Through a series of iterations, ClassPass moved to a subscription model, allowing users to pay for a monthly subscription that would let them access a specific number of classes across a spectrum of fitness genres.
Over time, high-usage customers were being subsidized by the lower-usage customers. Meanwhile, studios and gyms with their various classes and instructors were all being treated equally, regardless of whether a class was with a popular instructor or during peak hours.
This led ClassPass to introduce virtual currency and variable pricing. This allowed studios to price their classes based on a handful of factors, and ensured that customers were paying for exactly what they were using.
Once the company found that footing, it was off to the races in terms of growth. A huge international expansion commenced alongside a massive funding round led by Temasek. The biggest obstacle since then has been the pandemic, which hit gyms and fitness studios particularly hard.
But McCarter and ClassPass CEO Fritz Lanman told TechCrunch that all their data points to immense pent-up demand for in-person fitness classes and experiences.
By combining forces, the Mindbody/ClassPass entity has the opportunity for huge growth. ClassPass studios that are not using a booking software — Lanman says it's about one-third of the studios on ClassPass — will now have the chance to sign up with Mindbody.
Mindbody's consumer-facing business will have the chance to double down on their experience by signing up for a ClassPass subscription and get access to those studios. And, of course, gyms and studios that use Mindbody for à la carte bookings could be upsold to ClassPass, as well.
Lanman and McCarter stressed that gyms and studios on the ClassPass network will not be required to use Mindbody, and vice versa.
"That's because we think it's critical that ClassPass maintains its advantage of having as much inventory available in a particular marketplace," said McCarter. "That means they need to work with businesses that are potentially on some of our competitors' software."
In other words, there will be no forced migration for any business from one software platform to the other, and the same goes on the consumer-facing sides of the business.
ClassPass will maintain its brand, and Lanman told TechCrunch that there are no redundancies or layoffs planned.
Lanman likened the deal to the Facebook/Instagram merger from way back when.
"Look at Instagram and Facebook," said Lanman. "Instagram was only a small company when Facebook bought it, and Facebook really turbocharged it using its superior scale and services breath."
The key, according to both Lanman and McCarter, is navigating their way through the end of the pandemic with as many studios, gyms and service providers in tact.
"We're lucky in that most of our customers are vaccinated," said Lanman. "But, certainly people don't want to work out in face masks, and there's still massive mandates in some places. And so, the top complexity of risk to the business and execution is just how many of these small businesses can we keep in business. And how long can they hold on? But we're seeing really encouraging signs of resilience in the industry so far."