Conclusion

Early in fall 2015, the ads started showing up in the corridors and cars of the New York City subway, on bus shelters, and via YouTube: “Host a Runner: Meet the World.”

The ads were for Airbnb, reprising its role as the official community hospitality sponsor of the New York marathon, now formally known as the TCS New York City Marathon. Here, in one ad, was running, community, technology, and money, colliding once again, right in front of me.

Since signing on officially—Airbnb hosts were housing runners for several years before that, this just made it more formal—the company and all that it represents has only become more influential. Airbnb epitomized what the pundits in Silicon Valley called unicorns—private tech companies with valuations exceeding a billion dollars. Airbnb, by mid-2015, was worth a reported $25 billion.

Airbnb deepened its relationship with the marathon in 2015, signing up to sponsor—some might say, naturally—the Brooklyn Half Marathon. While based in San Francisco, Millennial-saturated Brooklyn is the company’s spiritual home on the East Coast.

Airbnb is a major player in the so-called sharing economy that marries technology to community in its own right. While not a part of the fitness economy, its presence as a significant marathon sponsor underscores how deeply these activities are entrenched in modern life. The overlap in customers is clear—the Airbnb crowd is young, active, tech-savvy, and relatively affluent.

Once I started looking for evidence of the new economy of mind and body, it was everywhere. New events, ads on trains and in magazines, plotlines in TV shows and movies; Twitter and Facebook feeds filled with humblebrags and pictures.

The challenge of this book wasn’t getting people to talk. It was getting them to shut up. Everyone, it seems, has a story of a race, or a workout, or sometimes a frustration with a partner or spouse who became obsessed with their own fitness to the detriment of relationships with friends and family. It often took little, if any, prompting to get people going.

And they are evangelists preaching with the fervor of the converted. Technology, especially in the form of social media, is a megaphone to spread the gospel and validate their fellow congregants with positive reinforcement splashed across the Internet.

Their persistent enthusiasm, married to consumption of a wide range of goods and services dedicated to fitness, is ultimately what will sustain this new economy. The challenge for the entrepreneurs and investors is figuring out, in one venture capitalist’s phrasing, what’s a cheeseburger and what’s a cupcake.

It’s a funny metaphor, especially when talking about the obsession around fit minds and bodies. Alan Taetle’s an old friend of mine and the dean of the venture capital community in Atlanta. When he’s not investing in tech start-ups, he’s an avid fitness guy and, like many, can’t help but see those activities through his investing lens.

He leaves me a voicemail at one point laying out the theory, in short. A good burger joint, he says, is forever. Despite fad diets and the whims of the consumer, a great cheeseburger will always inspire loyalty. Cupcakes, on the other hand, were the essence of fad. Spurred by the likes of Magnolia Bakery (and thanks to that New York shop’s cameo on Sex and the City), cupcakes were a veritable craze that spawned shops seemingly on every block in major cities. And then many of them closed.

In Taetle’s assessment, running and yoga are solid cheeseburgers—proven activities experiencing steady, long-term growth. But boutique fitness is a landscape littered with cupcakes, with new entrants arriving practically every month and grabbing the attention of the ever-experimenting Millennial crowd. That’s all making it more complicated for the operators looking to expand wisely, and for investors aiming to grab a share of the sweat-driven profits.

In these relatively early days of this new economy, Moelis’s Aarti Kapoor says she looks at a number of overlapping elements to assess a company’s chances. Being able to distinguish a concept in an increasingly crowded marketplace and to transfer that concept to other markets is critical.

Data is critical to the whole endeavor and the technology to collect and analyze information about users is the Holy Grail for companies in the fitness business and beyond. Happily, consumers seem quite willing to hand over a lot of information about their health and wellness, as well as personal information about where they live and what they earn. All of that’s extraordinarily valuable.

All the data make it that much easier to track the members activity (or inactivity), to understand when and how often they show up, which instructors are the most popular, and, in the case of multi-activity gyms, what folks actually use.

“An investor’s dream is having a profitable, replicable, and transferable prototype developed,” Kapoor says. Brand loyalty, while important, only goes so far. Finally, investors want to see a plan to scale the business, and proof that it works, especially in a variety of scenarios.

Frank Sinatra’s axiom notwithstanding, making it in New York or Los Angeles doesn’t mean a fitness concept will work anywhere. “The best margins you’ll ever get are in New York City,” Kapoor says. “You can charge high prices and get high volumes,” owing to the concentration of money and fitness fanatics. Finally, there’s talent. Balancing the power of personality and the ability to broaden the reach beyond that person’s class or product is critical.

Kapoor and her banking compatriots, perhaps in their enlightened self-interest, see an overcrowded market ripe for consolidation. What that will look like is unclear. The larger gym businesses may look to bolt on boutiques as Equinox did with SoulCycle and Pure Yoga, but there aren’t a lot of Equinoxes out there, especially with its combination of reach, brand, and real estate.

Raj Kapoor, having gone through a consolidation of his own, sees a future of bigger companies, as well as lots of small businesses. “The industry went from Walmart (e.g., big box gyms) to corner stores (e.g., boutique studios),” he says. “Are we going back to Walmart, with everyone consolidating under major national brands like Orangetheory, SoulCycle, and Barry’s? I don’t think so. Small businesses with passionate owners that deliver differentiated fitness experiences will continue to flourish.”

While the debate over cheeseburgers and cupcakes will persist, the overall trend toward wellness—and fitness as a means of achieving it—is solid. The megatrend is intact. It’s hard to imagine a scenario in which we collectively decide that smoking cigarettes and being morbidly obese is awesome after all. For a growing segment of the population, fitness has become a defining lifestyle element, a measure of who we are, not just something we do. It’s accelerated over the generations, with Millennials pursuing a fitness-driven lifestyle passionately.

“Past generations viewed fitness as a means to an end,” says Equinox CEO Harvey Spevak. “It was just about sustaining life. For Millennials, it’s more culturally social and about community. They are fitness-focused, making it a fundamental priority, not an option. It’s about eating right and staying active for long-term happiness.”

Technology enables constant sharing and monitoring, of ourselves and each other. And the need to occasionally escape that deluge sends us to studios and running trails to reconnect with ourselves.

That’s good news for the growing list of bankers, venture capitalists, and private equity managers, and the capital-hungry entrepreneurs with big ideas. Rick Stollmeyer at Mind Body, Harvey Spevak at Equinox, and Barry Jay at his namesake boutique all have to figure out how to defend their turf. Chip Wilson is working to find his next, post-Lulu angle. The boom’s a boon for Mary Wittenberg, who’s got a billionaire’s platform to build a new fitness empire. And Robert Wolfe, who can use all this to help people think about diverting some time and money to worthwhile causes.

The work of those true believers, and their ilk, is everywhere. On a quick morning run through the London neighborhoods of Islington and Shoreditch during a work trip, I encountered two yoga studios, two fitness chains, and a bike and running shop, all within a mile of each other. I nodded to several fellow runners and was nearly run over by three separate giant packs of commuting cyclists (that was on me—I looked the wrong way like a typical American).

Back in the United States, I dropped in to see Rick Higgins at the expo for the New York City Marathon. Since I ran the marathon six years earlier, the field and the associated festivities had grown, necessitating a move into a convention hall several times larger than before. Skechers Performance had taken a big space in the middle of the floor, in part to tout its new partnership with the L.A. marathon. Higgins showed me the line of apparel they designed especially for New York, a sleek black-and-white series, a version that Meb wore in the race.

Since I wasn’t running, I resisted the temptation to buy anything, more out of superstition than lack of desire for new running gear. But I saw my tribe, filing into the Javits Center with the haunted, hungry look of racers on the eve of their moment, eager to shell out whatever cash was necessary to remind themselves, and anyone who saw them, that they were among the self-chosen fit.

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