Mindbody, the leading wellness experience technology platform has acquired ClassPass, a monthly subscription service providing access to the world’s most extensive network of fitness and wellness experiences. Founded by Payal Kadakia in 2013, ClassPass was the original fitness aggregator and the first to recognize consumers’ increasing desire to add variety, such as that provided by independent boutique studios, into their regular fitness regimens. This deal will bring two of the wellness industry’s most prominent leaders together, creating a one-stop-shop for both business owners and consumers. While the valuation amount wasn’t revealed, Mindbody was valued at $1.9 billion in 2018 and in 2020 ClassPass passed the $1 billion mark, making the value of this acquisition just shy of $3 billion.
When Kadakia first started ClassPass she had the opportunity to actually meet the founder of Mindbody, Rick Stollmeyer, to share what she was building. At the time ClassPass had only four employees and hadn’t even launched but Kadakia recalls him saying, “Payal, go and build this, and maybe one day we’ll work more closely together.” A decade later the acquisition will be an all-stock deal at a non-disclosed price and will integrate both teams—with ClassPass continuing to operate its app and website meaning all ClassPass users will keep their credits as is. “Since the founding of ClassPass, our north star has always been how we can help people discover and seamlessly book soul-nurturing experiences,” said Kadakia. “This acquisition will be a massive milestone for a female-founded company and I am confident in the leadership of Josh McCarter and my long-time business partner Fritz Lanman to propel the business forward and continue delivering a best-in-class experience for consumers and business owners alike.”
Upon closing of the deal, Fritz Lanman will serve as President of ClassPass and Mindbody Marketplace, working alongside McCarter and Mindbody’s executive team. The business models and operations are highly complementary and don’t overlap significantly. A majority of Mindbody’s employee headcount is focused on B2B offerings, whereas almost all of ClassPass’ team is focused on its consumer offering.“The ClassPass network includes many businesses already working with Mindbody. By combining our respective operations, we will create more seamless integrations and unlock new revenue opportunities for business owners using both services, while continuing to support all fitness, salon and spa businesses who choose to work with Mindbody or ClassPass,” said Fritz Lanman, ClassPass CEO. “For consumers using our marketplace and professionals enrolled in the ClassPass Corporate Program, our goal is to create greater choice and flexibility in the experiences they can book.”
With this acquisition, Kadakia will be leaving ClassPass in the hands of the ClassPass and Mindbody leadership while moving forward to pursue other passions. “It has been the absolute privilege of my life to work on this mission for so many years. I started this company as someone who didn’t fit the traditional mold of an entrepreneur. As a female and child of immigrants, I am so incredibly proud of this moment. It’s important for young women to see other women succeeding and investors to see female-founded businesses reaching these milestones,” she shared.
Best known for its SaaS platform that powers tens of thousands of wellness businesses around the globe combined with Mindbody’s existing consumer marketplace and the reach of ClassPass’s network will create the most extensive and integrated platform in the industry. “This acquisition comes at a pivotal time for the wellness industry as it continues to rebound from COVID-19 related closures—and local and authentic experiences are more important to people than ever,” said Josh McCarter, CEO of Mindbody. “Our companies share a singular focus on bringing wellness experiences to more people, in more places. By leveraging the best of both companies’ technology and expertise, we are more committed than ever to providing studios with best-in-class tools to help them grow and thrive, while also driving more consumers to their businesses.”
The acquisition comes on the heels of recent research and data from both companies that prove consumers are getting back to in-person wellness experiences as studios reopen with nearly 80% of consumers feeling that wellness is more important than ever. Additionally, several markets that have fully reopened are seeing bookings on the Mindbody platform rebounding to pre-COVID levels and ClassPass consumer usage is at 110% percent of pre-COVID usage for subscribers who have gone back to class.
For business owners, ClassPass offers data-driven, machine learning-based SmartTools that help studios to manage excess inventory and market unsold spots at a revenue-maximizing price. Studios on ClassPass typically experience a 30% increase in reservation volume and a 15% to 20% increase in revenue when they utilize SmartTools. Additionally, 50% of ClassPass members are new to boutique fitness upon joining, and 80% visit a new studio for the first time using the platform.
In conjunction with the acquisition, Mindbody has secured a strategic investment of $500 million from a group led by Sixth Street, a leading global investment firm. The investment, together with the continued support of Mindbody’s majority investor and partner, Vista Equity Partners, will help further accelerate the company’s growth and build upon the product innovations and investments that have been made over the course of the pandemic. Major milestones have included the creation of a fully integrated virtual platform that set business owners up for success in a hybrid world, enhancements to Mindbody’s marketing automation tools to improve client acquisition and retention, and the introduction of Mindbody Capital, a product that will give small business owners access to financing to help them invest in and grow their business.
Anjula Acharia, CEO and founder of A-Series Investments and Management, was Kadakia’s first investor in ClassPass. Acharia saw Kadakia was willing to bet on herself, and so she was also willing to bet on her. She saw her as a woman that could change and influence lives as she knows what people needed and especially what would be a great service for other women. “I always believed in Payal, I was her first investor, more than I was the first investor in ClassPass. I knew she would go on to build something that would disrupt the fitness industry. Her passion combined with her logical execution was going to win, that I was sure of. The funny thing is, from the days of inception Payal and I talked about Mindbody, and ClassPass being big enough one day to partner with them!” exclaimed Acharia. “I wasn’t sure we would see this day, that it would result in an acquisition, but I’ve learned that anything is possible when great minds come together!”
David Tisch, partner at BoxGroup, is another early investor that knew Kadakia would reach this milestone, “From the day I met Payal, she stood out. A person who has had passion and charisma that is just obviously unique. And she is obsessed with the problems she spends her times focused on. Her resilience and ability to cultivate an incredible team around her has led to this milestone today.”
As Kadakia celebrates her first exit, she reflects on how important this milestone is for women. “It’s important for young women to see other women succeeding and for investors to see female-founded businesses reach these milestones. I hope the rise of Classpass shows that women know what women need. It has been a privilege to build a company that has served so many women across the globe. This moment is definitely bittersweet for me. I feel like my child is getting married.”