ClassPass has today announced the close of a $285 million Series E funding round led by L Catterton and Apax Digital, with participation from existing investor Temasek. This latest round brings ClassPass's valuation to $1 billion.
We had heard this round was in the works and today it's been confirmed.
ClassPass launched in 2013 to give users an easier way to work out. The company partners with boutique fitness studios, letting users search through that inventory and book a class all from their smartphone. Since launch, ClassPass has implemented several different business models, trying to find the right unit economics.
In 2017, the company announced it would be introducing a credit system via virtual currency. Combined with its data around the popularity of classes, this allowed ClassPass to introduce variable pricing. Instead of users paying a monthly fee for three, five or 10 classes per month, users could use their virtual ClassPass currency to sign up for classes and pay based on the demand around those classes.
With the revenue model in place and working, ClassPass has focused on growth over this past year. International growth has been a top priority, with the company now operating in 28 countries, partnering with more than 30,000 partners, including boutique studios, gyms and wellness providers.
The second area of growth has been on the business front. ClassPass introduced a corporate program that allows organizations to subsidize the employees using the product. CEO Fritz Lanman says this differs from other corporate programs that ask the employer to subsidize each individual employee, whether they use the product or not.
Thus far, ClassPass has more than 1,000 employers using the platform, including Morgan Stanley, Goldman Sachs, Google and Facebook.
Finally, ClassPass is expanding its offering with the introduction of wellness providers. Since the inception of the company, co-founder Payal Kadakia has always envisioned ClassPass as a portal through which users can find and enjoy new experiences. The plan has always been to go beyond fitness, and wellness is the next link in the chain for ClassPass.
Kadakia said that most of the users who sign up for meditation on ClassPass (the company's most popular wellness option) are trying it for the first time.
Here's what she had to say in a prepared statement:
We are motivated by the impact weâ€™ve had on members and partners, including 100 million hours of workouts that have already been booked. This investment is a significant milestone that will further our mission to help people stay active and spend their time meaningfully.
ClassPass has come a long way since 2013, iterating its business model several times. But Lanman believes that ClassPass's ability to adapt is one of its greatest strengths.
When it first launched, a ClassPass membership offered unlimited classes each month to users. Eventually, that was re-priced and a cap was introduced on the number of monthly classes users could take. This all led to the launch of virtual currency and variable pricing, which seems to be the piece that fits the puzzle.
"Change can be good," said Lanman. "I'm not ashamed of the business model iterations we went through. It's unclear if we would have even gotten to this credit system had we not had business models that worked at a smaller scale."
He went on to say that some businesses won't have a model that is perfect and will work forever, and that there are a lot of benefits to going through the process of business model iteration.
This brings ClassPass's total funding to nearly $550 million. Future plans for the company include more geographic expansion and growing the corporate business.