ClassPass works up $85 million Series D funding

ClassPass today announced the close of an $85 million Series D financing round led by Temasek, the same firm that led the startup’s Series C financing. L Catterton, a private equity firm that has also invested in the likes of Peloton, Equinox, and Pure Barre, also participated in the round.

As part of the deal, L Catterton’s Michael Farello will join the ClassPass board.

It’s also worth noting that CEO Fritz Lanman confirmed that the share price dropped as part of the $70 million Series C round, but that the valuation didn’t. Both share price and valuation went up during this latest round. That said, Lanman stayed mum on any actual numbers around valuation.

This latest round brings ClassPass’s total funding to $255 million.

ClassPass first launched in 2012 out of TechStars. Back then, it was called Classtivity, and it operated under a very different business model. Users could search for a la carte classes from dance and fitness studios, book an appointment and complete the transaction all from their website. 

Turns out, gym memberships exist for a reason. Without a monthly up front investment, most people don’t have the motivation to go workout.

After a number of iterations, ClassPass rebranded and switched up the business model to become the subscription studio fitness plan we have come to know today.

But that didn’t mean the startup was done adapting.

In 2016, ClassPass ditched its unlimited tier and raised prices to produce healthier margins. Before this, some casual ClassPass users were subsidizing the unlimited users who were going to classes four or five times a week. Though it caused a bit of an uproar, and ultimately lost ClassPass around 10 percent of its userbase, the move gave the company much stronger unit economics to allow for further expansion.

Another switch came in the fall of 2017 when ClassPass moved to a credit-based payment system, allowing the company to offer variable pricing to its studio partners to account for peak times and high-quality classes.

It took a hell of a lot of tweaking, but ClassPass CEO Fritz Lanman believes that the company is finally in a place where it can worry first, second, and last about expansion.

“[Founder and Chairman Payal Kadakia] and I are most excited about this round because it validates what we did months ago,” said Lanman. “We went through a huge business model evolution and a number of iterations, but this round was led by the same firm who led our Series C and includes one of the most prominent private equity firms in the studio fitness and consumer space.”

In May, ClassPass announced its intention to launch in nine international cities by the end of this year, with a focus on Southeast Asia. The company already has a strong foothold in the U.S., with operations in Canada, Australia, and a strong and growing market in the UK.

“It feels like we can take over the world,” said founder and Chairman of the board Payal Kadakia. “We’ve seen people compete and replicate our model, but we own our category, and we have the ammunition and the right model to tackle the world. Now, our focus is to make sure ClassPass works everywhere. Once we get the behavior working for customers in other markets, we earn the right to offer new categories.

The first category on the list? Wellness. But first, the company is focused on owning every market where studio fitness is already present.

As far as the funding is concerned, it will be used to continue adding to the team — ClassPass currently has 335 employees, and plans to add over 100 in the coming months — as well as fuel international expansion. The funding will also be used, in part, to start marketing ClassPass Live, a live at-home video workout akin to Peloton’s product. ClassPass Live was first launched in March, but the company has spent the time since then working out the bugs and making small iterations to ensure the service is ready for primetime.