Virtual racing app Strava is planning to expand beyond its core user base of cycling in English-speaking countries using $18.5 million of funding raised in a recent investment round.
Strava CEO Mark Gainey told Re/Code's Lauren Goode that the company plans to use the funding for “growth expansion.”
“We’re now approaching the point where 75 percent of our users exist outside of the U.S.,” he said. “We’re also seeing that people are using Strava across multiple sports, so we’re exploring how to build out the service in an authentic way in all areas of sports.”
Despite Strava's expansion outside the US, Gainey said: “The Bay Area continues to be a bit of a bubble for us.” Most of the service's international users are from English-speaking countries, he added.
Gainey would not say how many users the San Francisco-based company has, or how many pay for its US$59/year premium service. Founded in 2009, Strava now records around three million activities each week.
The service is extremely popular with cyclists, sometimes controversially, with Strava being blamed for reckless rider behaviour and anti-social clubruns. But around 30 percent of its users track their running activity through the app, and 10 to 15 percent of users record activities such as hiking, skiing, weight training, swimming and yoga.
The funding round was led by venture capital company Sequoia Capital and partner Michael Moritz has become an adviser to Strava. Moritz sees Strava's current success as a analogous to social networks such as facebook – it's a "sporting network".
He said: "We think that Strava is cleverly engaged with a sizable audience and is developing the personal sporting network in a way that’s different from many other apps.”
Moritz is a Strava user himself, but cautioned: "Whoever is on Strava should never, ever try to emulate my own athletic performance. It isn’t the path to growth for any individual.”
28 thoughts on “Strava raises $18.5 million in new funding, plans to take over the world”
Love it, hate it, certainly
Love it, hate it, certainly gets lots of people motivated to train harder which in the grand scheme of things is a positive thing.
Like many others I love the
Like many others I love the service, but worry about its future once the VC’s start demanding a return on their investment. We have no real way of knowing, but I just can’t see the freeloader to subscriber ratio being all that great at Strava. Ultimately that’s the number that will dictate if Strava survives, unless they change to a creepy ad-driven model like Facebook et al (always a possibility).
A lot of the premium features just aren’t that compelling, the free account provides such s large subset of Strava’s functionality. Myself, I only use premium because I love the service and want to give something back, not because I value the extras. People should contribute to the services they like, otherwise they disappear, or change in ways that make them worse. It’s always a tough balancing act to offer enough free stuff that you can attract a userbase and therefore VC cash, versus one day balancing that free stuff against having a viable business.
giobox wrote:Like many others
Gut feeling is the reason they are doing the t shirts and jerseys is to monetise the product. Pity the shipping is insane the jersey prices aren’t that bad before shipping! Hopefully they can investigate ways of overcoming that and they might make more money.
mrmo wrote:giobox wrote:Like
Good point, I didn’t consider the challenge jerseys etc. I would not be at all surprised if that turned out to be the money maker in the long run, coupled with charging large fees to companies to sponsor the challenges.
mrmo wrote:giobox wrote:Like
Trust me, Strava are already a *huge* business and certainly don’t need to worry about selling a few teeshirts to pay the rent.
Check out this article __ and bear in mind it is already 18 months out of date;
https://www.pehub.com/2013/03/a-vc-lets-big-bet-ride/
Joeinpoole wrote:
Trust me,
Reading between the lines of this article is that they burned through a lot of cash in those 18 months (“…the company has no plans to raise more than the roughly $16 million it has already assembled from investors…”). Given they only planned to grow from 60 to 110 employees during this period (their biggest expense), my guess is that they are not getting the subscriptions they wanted (their #1 revenue source). The VC claimed a 20% take rate on 1M users (= $12M in revenue) and aiming for 10M users by now (with the same take rate?). Needing to raise $18M indicates they are missing a few subscribers (revenues) and need more runway (IMHO)
I was involved with a startup in the early days of GPS based activity tracking and while we had the same optimistic revenue projections (some of their numbers looked very familiar :-)) the real goal was to build a user base and software/content assets and then sell to a major player (Google, etc.). The problem with this strategy was you needed lots of users (100M’s registered, 10M’s active) and a recognized brand, or unique assets to make it interesting. Strava has the brand but can they get the users before the Google and Apple mapping and fitness applications acquire the lions share of the users (their addressable market). Their technology doesn’t appear to be unique enough (vs say MapMyRide) and the GPS vendors (e.g. Garmin) who have already bought smaller/cheaper companies.
It will be interesting to watch this space though.
Joeinpoole wrote:mrmo
Trust me, Strava are already a *huge* business and certainly don’t need to worry about selling a few teeshirts to pay the rent.
Check out this article __ and bear in mind it is already 18 months out of date;
https://www.pehub.com/2013/03/a-vc-lets-big-bet-ride/— giobox
That article is a pretty laughable and highly speculative puff piece. I agree entirely with Massspike’s assessment of it. If Strava was hugely profitable there would be no need for further rounds of VC funding.
Virtually no social startup is profitable at this stage of development, costs are high and income low when you try to ramp up user count to attract more investment for growth, which is clearly the strategy they are going for, and many other startups before them have done. And they all eventually either have to get creepy to make money to pay the VC’s back (Facebook, Twitter…) or grow big enough fast enough to threaten an established player, forcing them to buy them at a large valuation (Instagram, Whatsapp…).
I like the premium service
I like the premium service because I’m not very good and it lets me see that I’m the 4th fastest fatty or 9th fastest old grey bloke. With a bit more flexibility they might let me see if I’m the fastest fat wrinkly – which I would take as a victory!
So we might finally get
So we might finally get Custom Unit Preferences (Miles, Kg, Celsius) 8>
bohrhead wrote:So we might
Why the hell would you want a mixture of imperial and metric?
andyp wrote:bohrhead wrote:So
Because I suspect most people in the UK use both?
What do you weigh, stone or kg?
What is the temperature, f or c?
What far? miles or km?
how do you buy petrol?
and how do you measure petrol consumption?
etc
etc
The UK is odd in that it can’t make up its mind what measures to use, if it is imperial or metric, so uses both.
andyp wrote:bohrhead wrote:So
Little englanders thats why!
The sooner we go all metric properly the better.
To be honest, with €18.5m of
To be honest, with €18.5m of funding, their focus will probably be on using that to vastly increase membership for now – profitability will likely be a focus in a few years but now it will be all about growth. Once they’ve got the audience, my guess is that they’ll do ad-funded free membership or premium without ads.
What’s the likelyhood that
What’s the likelyhood that the free service will actually become a lower cost subscription service, such a small fee that few people mind paying it, but when added up over enough users still a sizeable amount of money.
step-hent wrote:To be honest,
That’s stating the obvious, and is standard practice for any service like this in the early years. My point is, the blank checks don’t flow forever. Eventually investors will expect that growth in user base will turn to profits down the line, which is when the character of the company might have to change substantially to actually make money.
I can’t see this happening. No user content driven site has really ever worked at Strava scale without free tiers and ads, especially social ones. You usually have to get creepy with your customer data to actually make money, and continue to get creepier to deliver profit growth.
giobox wrote:step-hent
That’s stating the obvious, and is standard practice for any service like this in the early years. My point is, the blank checks don’t flow forever. Eventually investors will expect that growth in user base will turn to profits down the line, which is when the character of the company might have to change substantially to actually make money.
I can’t see this happening. No user content driven site has really ever worked at Strava scale without free tiers and ads, especially social ones. You usually have to get creepy with your customer data to actually make money, and continue to get creepier to deliver profit growth.— step-hent
And given the wealth of data that Strava gather, there may well be scope for some serious creepiness… I hope it manages to run a non-creepy business model effectively. It might involve stripping a few features away from the free mode (I’m not sure), but it’d be better than another Facebook, I think.
I’m not sure what this
I’m not sure what this satrava milarky is, but I do like that T shirt in the picture!
Comrade wrote:I’m not sure
There’s a t-shirt in the picture? What colour is it? =P~
…and I just noticed that
…and I just noticed that Under Armor acquired MapMyFitness last year (but just, literally today, got around to updating the user agreement).
They paid $150M for 20M users (and 100 employees) which seems like a lot for a company the size of UA but heck $100M was borrowed thanks to ZIRP.
This will help Strava’s valuation since one less acquisition target is available…the question is who is left to buy them?
I was curious about the high
I was curious about the high valuation for MMF/MMR and found this interesting analysis of the acquisition (and space) http://www.dcrainmaker.com/2013/11/acquisition-mapmyfitness-industry.html as well as the implications for Strava.
I didn’t realize (probably because I only own/use an iPhone) that they provide the software platform to so many hardware vendors (e.g. Tom Tom and Polar). This business model gives them better revenue streams — less dependent on fickle subscribers. Although they do like to push the ads to us “freeloaders”
‘What do you weigh, stone or
‘What do you weigh, stone or kg?
What is the temperature, f or c?
What far? miles or km?
how do you buy petrol?
and how do you measure petrol consumption?’
Kg
C
KM
L
Km/L
SI. Because it’s not the 1960s any more.
*’What far’ had me puzzled for a bit 😉
As some have speculated, I
As some have speculated, I don’t think there’s any way Strava will completely eliminate no-fee users. On a social media platform, monetization in any form comes from user volume. They have already moved some previously free features to the subscription service, but I’m not sure how many more features they can take from the free service (maybe some of the beta features currently open to all). If they kill the free service, they will lose a ton of user volume.
I forsee Strava’s activity and thus valuation to increase when they incorporate more social features. More users and more activity means more options for monetising, whether that means more paid user fees or money from advertisers which only significantly accumulates when you have lots of users.
I mainly use Strava as a fun and interesting way to track training, but I also use TrainingPeaks to seriously analyse power data. I’m not going to pay monthly or yearly for Strava power analysis when TP is already a sunk one-time expense (or pay to see my name at the top of age group leader boards). For users like me, the only monetization options Strava have is selling power analysis (which I already have on TP) or picking up a fraction of a cent through advertising every time I log on. Get me on the site more and get more advertisers and they may work up to a few cents a day.
Best thing Strava could do is
Best thing Strava could do is to make all those segments and KoMs available to premium only. That way you don’t have to have all that nonsense foisted upon you if you just want a quick way to log your training and compare with your friends.
If they do that the other
If they do that the other apps will quickly pick up the slack, meaning that their segments will quickly become populated and the ‘de facto’.
I don’t think Strava can win pursuing that strategy.
I often thought about a very simple segment and leaderboard ‘service’ that could be kept ‘open’, but to be honest, as long as Strava offer it for free (and their dataset is surely waaaaaay larger than any of the other players) then theres no incentive for anyone to use it.
LarryDavidJr wrote:If they do
The openness or otherwise is irrelevant; the question is who pays to keep your alternative service running? To fix bugs on an API that has to serve tens of thousands of requests a minute? Nothing about that would ever be simple. As you get more users this cost only gets higher, and this isn’t really a problem that can be solved via de-centralisation like bitcoin, you need a central leader board. This is like the arguments around building an open Twitter competitor – the challenges of keeping the lights on means raising revenues, and to compete you have to fight an already free service who are prepared to do the creepy stuff you won’t to make money.
Alternatively you make it subscriber only, and still fail to raise enough money to keep the lights on (app.net’s failed attempt to provide a new home for disgruntled twitter users is a great example). Good luck with that.
LarryDavidJr wrote:If they do
Probably not, but it’d make me more likely to use it.
It would be fascinating to
It would be fascinating to know what the ratio of free users to subscribers is.
My guess is that there are no way near enough subscribers to expand the data set and provide adequate volume of ‘competitors’ so strava has to rely on free users to appear as well populated as it does.
Personally I think they’ve given away too much for free already so the incentive to subscribe is just not big enough.
I like the picture of the
I like the picture of the girl in the orange t shirt…..