I recently got a call from Eric Janszen, co-founder of one of my favorite First Stage Investor portfolio companies, VirZOOM.
The company has come a long way since we recommended it back in April 2017. At the time, it was selling the first version of its virtual reality (VR)-outfitted stationary bike. Eric said he’s now sold 2,000 of them – nothing to sneeze at.
Eric said those sales proved the product worked… and meant VirZOOM collected loads of telemetry from users to refine and improve the product and experience.
The company’s product and growth strategy has evolved since then. VirZOOM is now shipping its VZfit product, an add-on that outfits any stationary bike for VR use in five minutes. It’s more advanced (based on new technology from Intel and Advanced Micro Devices called the NUC Hades Canyon) than its second-generation product and is now being sold to gyms and fitness centers in the U.S. and around the world.
In 2018, Fast Company voted VirZOOM as one of the Top 10 Most Innovative Companies (in the Wellness category with Peloton, Under Armour and others). Well-deserved!
But that’s not even the most exciting part of VirZOOM’s progress to date…
Two Powerful Partners on Board
VirZOOM has partnered with Life Fitness, the world’s largest commercial fitness equipment manufacturer. Life Fitness, which had $1 billion of sales in 2017, has the market reach to bring VZfit into more than 20,000 health clubs and commercial fitness centers throughout the world.
Securing a partnership with a company as powerful as Life Fitness doesn’t happen overnight. VirZOOM began courting Life Fitness way back in January 2017 when it initiated a pilot program with it. Eric’s strategy was to prove that his VR-equipped bike not only worked but also excited users and got them to exercise more. He describes his strategy this way…
You have to prove that this new concept of motivating people to move in virtual reality works. You go to Amazon and read the reviews, and you can see how consumers responded to the consumer version of our product. You take all this evidence, bring it to Life Fitness and tell them, “This product works. We’d like to create a commercial version of this and sell it, and have a partnership with you.”
His strategy paid off. Life Fitness evaluated and tested VirZOOM’s product for roughly six months before entering into a co-sale and revenue share agreement with it in October 2017.
Life Fitness has barely begun its sales efforts, but so far it’s already sold 50 VZfit bikes to several YMCAs, high-end sports clubs in China and Turkey, college recreation centers (including MIT), and more. (Eric is very excited about the college recreation center market because the demographics and purchase trends are favorable to scaling.)
VirZOOM’s other powerful partner for its commercial VR product is Acer, which is developing a brand-new headset for the VZfit.
The VZfit bike is packaged as a complete turnkey system for $2,995. VirZOOM also charges a $995 annual fee for online remote maintenance, online remote monitoring and regular automatic updates, including new content. The cost of goods sold (essentially how much it costs to make the product) is $1,500. That’s expected to decrease to $1,000 or less as volume discounts applied to parts purchases begin to add up.
All the pieces are in place to begin scaling now that VirZOOM has…
- A great product that is self-contained, easy to install and loved by users
- Motivated gyms as customers that are looking for ways to keep their monthly members coming back
- Two powerful partners in Life Fitness and Acer.
VirZOOM is moving into the next stage in its evolution. The company plans to launch a new product for the consumer market called VZfit Home in Q1 2019. With an extremely reasonable $99 price tag, Eric expects this new product to sell well.
VZfit Home is made possible by two new Oculus all-in-one VR headset products: the Oculus Go ($199) and the more advanced Oculus Quest ($399). Oculus says it shipped 1.8 million Oculus Go units in 2018 and expects to make 1 million Oculus Quest shipments starting this spring.
Stationary bikes suitable for VZfit Home retail on Amazon for as little as $129.
To help fund this next stage, VirZOOM is raising up to $1 million in a Series A campaign via a SAFE (with an $8 million cap and 20% discount). You can find more details about the raise on the Wefunder site right here.
Good investing,
Andy Gordon
Co-Founder, First Stage Investor