At first blush, Peloton’s spinning classes appear little different from those at better-known outfits like SoulCycle: enthusiastic exercise buffs pedaling under pounding loud music and energetic instructor exhortations. But a session last Friday revealed something different: video cameras recording the instructor, Marion Roaman, for the benefit of customers following along at home on their Peloton bikes.
The two-year-old start-up is betting that the key to success lies not in creating a sprawling empire of studios, but in persuading customers to spend nearly $2,000 for a cycle plus pay $39 a month to pedal along to live-streamed or recorded classes from one’s home.
The cost for consumers may seem high, but a few prominent investors are betting that the business model can shake up the fitness industry.
The class and the Chelsea studio where it was held â€" made possible by a new $10.5 million fund-raising round that Peloton plans to announce on Thursday â€" represent the latest milestones by the start-up in its quest to become the next big exercise lifestyle brand.
Though it has the trappings of a SoulCycle or Flywheel, Peloton wants to be in its customers’ homes, using its fancy new facility to film workout classes throughout the day, as well as offer live classes. The studio has held classes this week, but plans to officially open for business on May 1.
“This has never been done in the fitness world before,†John Foley, the company’s co-founder, said. “In fitness, people don’t think about content.â€
The company was born two years ago when Mr. Foley, a former head of e-commerce at Barnes & Noble, pondered how to create an exercise brand for the modern age. Instead of trying to create an empire of studios, he instead hit on the idea of creating a high-end bike paired with a tablet, connected via the Internet to a broadcast-quality production studio.
As an added benefit, the instructors would also interact with users spinning at home, calling them out during live classes. And bike owners could compete with their friends over social media.
Mr. Foley hired the man who designed SoulCycle’s signature bright-yellow bikes to conjure up something similar. Peloton’s units are sleek black affairs, using quiet belts instead of chains for the pedal mechanism and magnets as brake pads for the metal flywheels. The cycles come with high-end headphones and can plug into heart-rate monitors.
Its displays are customized, waterproof Android tablets that let users video chat with friends and compete on Facebook. The next software update, the latest in a regular series, will stream in Netflix.
“It’s an Apple-esque product,†he said. “We needed to control every piece of what we do.â€
For the content side of the business, Mr. Foley brought on as a co-founder Ms. Roaman, a veteran of the spinning industry who has sold studios to Flywheel. They began to recruit top instructors with an intriguing pitch: Teaching Peloton classes, which would be broadcast in multiple countries, could make them fitness celebrities. So far, they have hired a dozen.
Getting investors on board was tougher, Mr. Foley said. Many institutional investors were hesitant to commit. He instead turned to an array of angel investors, including Greg Blatt, a former colleague at IAC who is now the media conglomerate’s chief executive; Michael E. Novogratz, a principal of the investment firm Fortress Investment Group; and Amar Lalvani, the managing partner of the Standard International boutique hotel chain.
Then a little over two months ago, Mr. Foley met with Lee Fixel, a partner at the investment firm Tiger Global Management and an enthusiastic backer of growing consumer brands like the glasses retailer Warby Parker and the shaving company Harry’s. After asking just six or seven questions, Mr. Fixel committed to leading the new fund-raising effort.
In a statement, Mr. Fixel praised Peloton for shaking up the indoor-fitness industry, one he said hadn’t innovated in decades.
The key to the business lies in its focus on subscriptions, content and technology. The bikes are sold at cost (albeit at $1,995 each) and shipped free, with the company banking on the steady fees from customers who, for various reasons, want instead to exercise from home. Mr. Foley pointed to his wife, who doesn’t have to get a babysitter for their two young children when she wants to work out, while Ms. Roaman noted the frequent battles just to get into often-filled spinning classes at gyms.
Even the new studio, which has a plush lounge and a coffee bar staffed by the boutique Jack’s Stir Brew, is meant to be a sideline to the home-based clientele. The start-up expects the establishment, whose on-site classes will cost $30 each, to not only be profitable, but cover content production costs. The studio’s front houses a store, with Peloton-branded sportswear and, of course, bikes. And bike owners automatically become V.I.P.s, with their choice of in-studio bikes and concierge services.
Peloton unashamedly aspires to draw high-end customers. Its handful of stores are in upscale locations like the Mall at Short Hills in New Jersey and, soon, a former Tiffany’s storefront in East Hampton. (Mr. Foley boasted that the company outbid Apple and J. Crew for the location.)
Peloton has sold more than 1,000 bikes and has purchases on back-order until June.
Peloton has set its eyes on bigger goals, however, including expansion both here and abroad. One of its instructors will conduct her classes in Spanish, while Ms. Roaman said the company planned to hire another who speaks Mandarin. Mr. Foley also recently went on a scouting trip to South Korea.
And the company hopes to eventually produce as much as 12 hours of content a day.
“We can be like a cable platform,†Mr. Foley said.
A version of this article appears in print on 04/24/2014, on page B3 of the NewYork edition with the headline: Investors Bet on Live-Streamed Spinning Classes in the Home .