Mindbody Acquires ClassPass: $500M Investment Secured

ClassPass Acquired by Mindbody in All-Stock Deal

ClassPass, a fitness marketplace recently assessed at a $1 billion valuation, has been acquired by Mindbody. This acquisition marks a significant development in the fitness technology sector.

Mindbody's Role in the Fitness Ecosystem

Mindbody functions similarly to OpenTable within the wellness industry. Its software solutions are utilized by fitness studios, gyms, and other service-based businesses to manage appointments, class schedules, and customer bookings.

ClassPass focuses on filling available class slots, while Mindbody provides the essential software infrastructure for fitness businesses to operate efficiently.

Financial Details and Investment

While the specific financial terms of the acquisition remain undisclosed, Mindbody CEO Josh McCarter confirmed it was structured as an all-stock transaction. Furthermore, the combined entity has secured a $500 million investment, spearheaded by Sixth Street.

ClassPass's Evolution

Founded in 2012, ClassPass initially mirrored Mindbody’s current model, offering à la carte class bookings. However, initial user engagement proved lower than anticipated.

The company subsequently transitioned to a subscription-based system, granting users access to a predetermined number of classes each month across diverse fitness disciplines.

Addressing Pricing and Usage Imbalances

Early iterations revealed that frequent users were effectively subsidizing those with lower usage rates. Additionally, all classes and instructors were treated equally, irrespective of popularity or peak demand.

To rectify this, ClassPass implemented a virtual currency and variable pricing structure. This allowed studios to adjust class prices based on factors like instructor demand and time of day, ensuring users paid accurately for their chosen services.

Growth and Pandemic Challenges

This refined model fueled substantial growth, including international expansion and a significant funding round led by Temasek. However, the COVID-19 pandemic presented a major challenge to gyms and fitness studios.

Despite these hurdles, both McCarter and ClassPass CEO Fritz Lanman report strong indicators of pent-up demand for in-person fitness experiences.

Synergies and Growth Opportunities

The merger creates opportunities for significant growth. Approximately one-third of studios currently listed on ClassPass do not utilize booking software and can now adopt Mindbody’s solutions.

Conversely, Mindbody’s consumer base can enhance their experience by subscribing to ClassPass, gaining access to a wider range of studios.

Existing Mindbody users who book classes individually could also be offered ClassPass subscriptions.

Maintaining Independence and Choice

Lanman and McCarter emphasized that neither Mindbody nor ClassPass will mandate usage of the other’s platform for existing businesses.

McCarter stated that maintaining a broad inventory on ClassPass requires collaboration with businesses potentially using competing software.

There will be no forced platform migrations for businesses or consumers.

Brand Preservation and Future Outlook

ClassPass will retain its brand identity, and no redundancies or layoffs are currently planned.

Lanman drew a parallel to the Facebook-Instagram merger, suggesting Mindbody’s scale and resources will accelerate ClassPass’s growth.

Navigating the Post-Pandemic Landscape

The primary focus, according to both CEOs, is supporting studios, gyms, and service providers through the ongoing pandemic recovery.

Lanman noted that a high percentage of their customers are vaccinated, but challenges remain with mask mandates and maintaining business viability.

Early indicators suggest resilience within the fitness industry, offering encouraging signs for the future.