VirZoom is a company playing in the $32b+ North American health club market, which has been growing about 3% annually for the last ten years. According to the IHRSA, 67% of 52.9 million gym memberships went unused in 2014. This sentiment seems to have stayed the same as gyms have done very little to incentivize their members to return. For this reason, gyms should be more likely to buy into the VirZoom concept since with higher member retention comes better brand recognition and economies of scale.

Over the past three years, VirZoom claims to have proven that VR-equipped bikes motivate riders to return to the gym. Despite failing to successfully scale while selling B2C, the company has legitimate data from the 2000 sales they made to claim that people ride 38 minutes and 3.25 days a week with VirZoom as opposed to riding only 21 minutes and 1.25 days a week without it.The obesity epidemic in America is only getting worse and consumers know this, which is why many millennials are opting to live healthier lifestyles from an early age by investing in Peloton, getting into CrossFit, and trying other forms of equipment-less workouts. Although there seems to be a trend towards gym-less health and fitness, we don’t believe this is a trend foreshadowing the end of gyms.

According to VirZoom founder, “Commercial fitness equipment makers need a scalable, commercial product that will get consumers back on their equipment in their gym customer sites and they need it now. Only VirZOOM has it.”

ESports Tailwinds: Not only is the growth of this company fueled by the landscape described above, but it is also touching on the eSports industry, which will soon be a one billion dollar business growing at an 18% CAGR. The rise of gaming and VR gaming is VirZoom’s main selling point. We see this as an opportunity for the company to leverage in the future if VirZoom can develop a competitive game on their platform.

Traction: VirZoom has partnered with Life Fitness, the largest commercial fitness equipment company to sell directly to gyms. This is a huge step in the right direction for VirZoom to sell to commercial bike manufacturers. This major partnership should also help to spur more corporate and technology partners, which the team has suggested as well.

Power of the Crowd: This is VirZoom’s third crowdfunding campaign and the company’s third time raising over 100% of their goal. VirZoom has hundreds of individual investors supporting them and vouching for their brand. VirZoom is the first company to offer a legitimate alternative to working out in the traditional sense.

Management Team: Eric Janszen and Eric Malafeew are the two founders of VirZoom. The CEO Janszen is an experienced executive, product manager, and multi-time founder. The CTO Malafeew has a masters in mechanical engineering at MIT and over 20 years in the video games industry.

The two founders are also supported by other engineers, a designer, and a product VP. The only thing the team needs now is salespeople to maintain and create relationships with more equipment manufacturers.

VirZoom is a Deal To Watch. The immersive exercise space has obviously seen significant growth in the past fe w years with companies like Peloton now valued at $4.4B and ZWift, which raised over$120M at the end of 2018 to reinvent the way we exercise on stationary bikes.

VirZoom has found its niche, focused more on the VR and gamification element as it’s differentiator. The landscape for a product like VirZoom’s is looming, but somewhat lacking VR adoption may prevent it from being mainstream in the near future.

The success of the company relies heavily on the mainstream adoption of VR. However, if it does continue to gather further traction, this could be an attractive acquisition candidate for the Peloton’s of the world that are well capitalized and looking to grow rapidly.

Another risk of investing in VirZoom is the uncertainty with its business model. Only time will tell how their deal with Lifetime Fitness will work out and how VZFit for personal use with play out. If the VZFit technology is up to standards and COGS can be minimized to under $1000 then it is likely that the company will be able to scale to the likes of ZWift.

Regardless, the team will need to show more execution before feeling confident that this team can see it through to an attractive exit opportunity. For these reasons, VirZoom is a Deal To Watch at the current $8M valuation!