Zwift Raises $450 Million Investment in Series C Round

Zwift Raises $450 Million Investment in Series C Round

This morning Zwift announced the results of its series C funding round: a $450 million investment led by KKR, a global investment firm. This is massive news with implications across all facets of Zwift, but for now, we want to simply share the complete text of the press release:


Zwift, the global online fitness platform for cyclists and runners, today announced a $450 million minority investment led by leading global investment firm KKR, accompanied by other new investors Permira, Specialized Bicycle Components’ venture capital fund, Zone 5 Ventures and the Amazon Alexa Fund and existing investors including True, Highland Europe, Novator and Causeway Media. The investment will be used to accelerate the development of Zwift’s core software platform and bring Zwift-designed hardware to market, making Zwift a more immersive and seamless experience for users.

Zwift uses the power of gaming technology to bring the outdoor experience indoors, making at home exercise a fun, engaging and social experience by connecting cyclists and runners in immersive 3D computer-generated worlds. Users of the Zwift platform interact, train and compete together by wirelessly pairing a bike trainer or treadmill to the Zwift app, to power their in-game avatars. This fully immersive experience brings the experience of the outside world into the virtual, simulating the gradients of mountain climbs and the draft of other riders. The platform offers its members the opportunity to explore 240 miles of terrain in 10 virtual worlds where they can also follow structured training plans, enjoy group rides or take part in any one of the hundreds of daily mass participation events. The social aspect of the platform helps deliver the experience of competitive and communal training for users who want to ride or run together and maintain social connections from the comfort of their homes, with the user experience continually improving as the community grows.

Since launching in 2015, Zwift has seen over 2.5 million accounts registered across 190 countries, positioning Zwift as a global leader in the at-home connected fitness market. Zwift’s prominence has increased significantly in 2020 as many turned to the platform to provide not just a fitness solution but also a means to help them maintain their social connections by joining Zwift’s vibrant community who work out together online. Zwift has also led the way in a new category of physically-powered esports, hosting a number of professional events including the first Virtual Tour de France in July, an event broadcast to over 130 countries worldwide that saw the world’s best male and female professional cyclists compete. Later this year, Zwift will be the host platform for the inaugural UCI Cycling Esports World Championships.

Superstar Mathieu van der Poel, featured in the latest Zwift ad

Stephen Shanley, Director at KKR, said: “Zwift is the preeminent digital brand for the global cycling community with a best-in-class product that sits at the intersection of digital health, gaming and at-home fitness. We see tremendous potential ahead as Zwift invests further in its digital and physical products to enhance the experience for its global community of enthusiastic users. This investment fits perfectly with our growth equity strategy of backing leading tech entrepreneurs as they scale globally.” Patrick Devine, Principal at KKR, added: “We are delighted to lead this round, supporting Eric and his team with access to KKR’s global platform and resources.”

Andrew Young, a Principal in Permira’s Menlo Park office, said: “Zwift is a perfect fit with Permira’s DNA, not least because we have a big Zwift fanbase in the firm, but also an extensive track record of investing in consumer technology businesses to deliver global growth. We’re excited to partner with Eric and the team as they seek to turbo charge product investment and to solidify Zwift’s position as the leader of at-home fitness.”

Paul Cocker, Co-Founder of True, said: “As existing investors, we are delighted to have significantly increased our support for Zwift in this round, which reflects the strength of the relationship we have built with Eric and the team, as well as the confidence we have developed in the technology and brand over the last two years. This is our first $100m investment and we are excited about the increased opportunity this transaction now gives Zwift to further transform at-home fitness.”

Eric Min, Zwift CEO and Co-Founder, said: “With this investment, Zwift is primed to operate in a broader fitness market and deliver on our ambition to provide gamified fitness through integrated software and hardware, to anyone who wants to have fun while getting fit at home. We will be accelerating our investment in the core business, improving the overall product experience, and bringing forward new features, more content and Zwift designed hardware, all with the support of KKR and our new outside investors who can help drive our growth. To make this happen, we will be increasing headcount within our core product teams, investing in the very best people. We begin by welcoming Ilkka Paananen to Zwift both as an investor and independent board member.”

Ilkka Paananen, Co-Founder & CEO, Supercell, said: “Zwift is uniquely positioned to lead the way and grow a new global fitness community, combining video gaming and sports, two of my great passions. I have been incredibly impressed by Eric’s vision and ambition, and his commitment to building a world-class product for the community. There are many exciting growth opportunities for Zwift and I’m looking forward to being a part of this journey.”

Sir Mo Farah, featured in a recent Zwift ad

Specialized’s investment represents the beginning of a strategic partnership between the global cycling brand and Zwift. Both brands share the belief that cycling, whether indoor or outdoor, has the power to improve lives. Chris Yu, Leader of Product and Innovation at Specialized, stated “our goal is to pedal the planet forward by getting more riders riding, and we are beyond excited at the opportunity to partner with Zwift to break down the barriers to riding indoors on the world’s most engaging platform.”

KKR’s investment was made through its Next Generation Technology Growth Fund II, a global fund dedicated to growth equity investments in the technology space. KKR has established a strong track record of supporting technology-focused growth companies, having invested over $2.7 billion in related investments since 2014. Permira’s investment was made through its Growth Opportunities Fund I, which focuses on minority investments in growth-focused, tech-enabled businesses. Specialized’s investment was made through its venture fund, Zone 5 Ventures, which focuses primarily on minority investments at the intersection of sports, media, technology and health and wellness. In connection with the financing, some investors will purchase shares from certain existing shareholders. J.P. Morgan Securities LLC acted as Sole Placement Agent on the financing.


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About The Author

Eric Schlange

Eric runs Zwift Insider in his spare time when he isn't on the bike or managing various business interests. He lives in Northern California with his beautiful wife, two kids and dog. Follow on Strava

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eric
eric
2 months ago

I hope they know what they are doing. Getting into bed with venture capital people can sometimes be like doing a deal with the devil.

Mario
Mario
2 months ago
Reply to  eric

They’ve had VC funding for years

Will
Will
2 months ago

That makes Star Citizen’s funding look like chump change.

Martian
Martian
2 months ago
Reply to  Will

I thought Star Citizen was just a tech demo?

Bobby Mac
Bobby Mac
2 months ago

I’m certain a generous portion of this funding will be allocated for advertising and getting New Customers who are not avid cyclists. Prepare for a huge influx of Z-Power riders w/ no HR monitors coming to a Zwift Race near you!! They’re sure to drawer plenty of couch potatoes who are suddenly pushing out 300+ watts on Z-Power $200 dumb trainers and winning races left and right! They’ll rave about Zwift to all their other couch potatoe friends and their wins on social media to entice more Z-power no HR friends to join in the fun! Good stuff. p.s. NONE… Read more »

MKD
MKD (@ridefree_77)
2 months ago
Reply to  Bobby Mac

We had that huge influx during the height of lockdown. Thankfully its died down a bit but who knows what will happen with winter looming…

Mario
Mario
2 months ago
Reply to  Bobby Mac

Knowing the team I think they will take the platform to the next level. This is a team that wants to be the best.

JOHNATHAN FRETER
JOHNATHAN FRETER
2 months ago

All these folks are going to love their profits when this goes public in zoon™.

Anthony
Anthony
2 months ago

Perhaps they will now have sufficient resources to get that UI update out, and the sandbagger fix promised by Eric “this stops in the next update” Min.

Eddy Raptor
Eddy Raptor
2 months ago
Reply to  Anthony

Venture capitalists are going to direct those resources based on what gives them the highest return on their investment- not based on customer feedback. And these folks rarely have a vision beyond be the Netflix of (fill in the blank) or the next Peloton.

Zwift has sold its soul to essentially prepare for an IPO.

Philip Barnes
Philip Barnes
2 months ago

in the last year they’ve accepted about $1/2 Bn dollars of investment. this will come at a price

Anthony
Anthony
2 months ago
Reply to  Philip Barnes

I’m sure the price elasticity data obtained in that recent poorly done survey was used to help justify this valuation.

Greg Smith
Greg Smith
2 months ago

I hope for the best. In the 5 years I have been on Zwift I have gone from impressed at the platform to dismayed at the lack of execution. I am hopeful that with the investment comes execution help. The unfortunate truth is they are limited by being based on an outdated legacy graphics platform that makes modernization difficult. While they have released updates, they have been long on gimmicks (burrito powerups for example), and short on meaningful items such as a modern UI, rowing, etc. The promises are there, but the impatience of the core user base on lack… Read more »

Paul
Paul
2 months ago
Reply to  Greg Smith

Agreed. Zwift starts a project, never seems to complete it. The big one that comes to mind is the anti sandbag feature. Nothing has changed in months.

mike
mike
2 months ago
Reply to  Paul

Racing has a ways to go I agree. FOr me personally, I feel like the BIGGEST miss zwift has is by creating new worlds. Imagine how amazing it would be if there was one world, watopia and you could bike to any of the other worlds form watopia. you could do nearly 200 miles without even going across the same road twice if done right.

SHort version: One world, with everything connecting to watopia.

Eddy Raptor
Eddy Raptor
2 months ago

So now instead of Zwift ignoring customer voices in pursuit of Eric Min’s latest whims, the company will be guided by the agendas of venture capitalists. We’ll likely see a Zwift bike before an interface with such revolutionary features such as saving a ride without having to exit the application.

Tyler
Tyler
2 months ago

I really hope that some of this money goes to improving the UI. Something that is absolutely nuts is that you can’t see your badges before choosing a route. You also can’t switch routes without exiting the whole application. For anyone who has any experience playing games, this is insane. And it’s been this way for FIVE YEARS. Improve the product. Please.

Fran
Fran
1 month ago
Reply to  Tyler

They are too busy funding blm.

Psychic Cyclist
Psychic Cyclist
2 months ago

Get ready for a price increase and a number of other strategies to increase revenue from current subscribers. That’s what “growth opportunities” will start with.

Tony
Tony
2 months ago

I’ve seen the terms sheet of the 400. They are allocating $12 and a work experience lad to fix the bugs and roll out the UI update and the rest will be spend on marketing.

Martian
Martian
2 months ago

I’ve been using Zwift for years, it is an incredible platform and one I thoroughly enjoy. I’ve raced on it and used it for general training.

What I hope for is that someone takes the Microsoft Flight Simulator 2020 model, takes satellite imagery data and then turns it into 3D (as best as possible) and allows you to race / train / run on it.

With what Microsoft have done with the FS2020 tech, the possibilities and potential is endless. Imagine a cycling app built on that.

Andrew Dunwoody
Andrew Dunwoody
2 months ago
Reply to  Martian

I agree with the idea as MSFS is incredible, but I don’t want to have to ditch my £149 ATV in favour of buying a gaming rig at 10 times the price!!

John Ehinger
John Ehinger
2 months ago

There’s actually a lot to glean from the announcements: 1. A minority investment of $450mm means that the investors valued Zwift at more than $900mm. (Peloton’s market cap is $23.8B). 2. They probably used Peloton’s revenue multiple as an input into that valuation. If they used 13x revenue (the same as Peloton) that implies $69mm annual revenue run rate for Zwift. At $15/mo that suggests the equivalent of around 385,000 year round Zwift subscribers. 3. KKR’s quote mentioned “physical products”, Eric’s quote mentioned “integrated hardware” and “Zwift designed hardware” and the main body of the PR emphasized hardware as well.… Read more »

Darren
Darren
2 months ago

So… I assume we’ll see a Zwift bike, steering, braking, rowing, walking, pogo stick races, more gimmicky powerups, hundreds of millions on marketing, no new maps, and the graphics and UI will remain at the level of a Beta product from 2005.

ddussin
ddussin (@ddussin)
2 months ago

Interesting announcement, and it could lead to a number of potential changes and developments, which we could all argue about.

But one thing we can’t argue about, is that this means there is a price increase coming soon. We can argue about the timing and amount of the increase, I suppose. What’s the over/under? $5 per month increase starting Jan. 1, 2021?

Eddy Raptor
Eddy Raptor
2 months ago
Reply to  ddussin

I predict Zwift will introduce a tiered membership model similar to that of Netflix so they can claim they didn’t raise subscription fees for the ‘classic’ Zwift. The venture capitalists will want Zwift to have multiple recurring revenue streams so I wouldn’t be surprised to see fees for everything from certain bike/kit unlocks to race entry fees. One of the new investors is big on micro-payments in games so I expect that comes to Zwift no matter how annoying must consumers find this model. Eric Min is an investment banker at heart who just happens to enjoy cycling. He didn’t… Read more »

Jaja
Jaja
2 months ago
Reply to  Eddy Raptor

Eddy sounds like a failed competitor. Why else be so jealous of Zwift’s success? Eric Min ran a company before Zwift. Do we know that he wasn’t already rich, when he started Zwift?

Jeff Bloom
Jeff Bloom
2 months ago

The one the that will help improve Zwift the most is competition, which is some areas is ahead of Zwift. Sufferfest has 4dp based workouts (i.e. workouts based on 20m, 5m, 1m, and 5s power). RGT has magic roads which create a roads from GPX data. Biking in GT5 looks pretty fantastic, plus you can shoot people. Peloton’s latest bike can automatically change resistance; there is no reason they can’t buy RGT or some other competitor and add Zwift like functionality to Peloton.

Bill
Bill
2 months ago

There was an interview in Barrons with hedge fund Jim Osman. “Have you ever Zwift? I’ve been using it for a long time. This thing has grown tremendously. People should watch out for it. It’s [probably] going to IPO. It will drop Peloton for dead.” Right now we’re doing a huge amount of virtual cycling, and since there will be no hard end to the pandemic this could continue for a long while, shifting people’s workout habits permanently. I know I’m still not going to the gym much or other group indoor workouts so Zwift is still a bigger part… Read more »

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