Tonal's Latest Funding Round Foreshadows an IPO

After a funding round worth millions, Tonal looks to be shaping up for its own public offering. What can investors expect?

Rachel Curry - Author

Apr. 6 2021, Updated 12:34 p.m. ET

It's a hot time for at-home anything, and Tonal—a home workout tech company—knows this good and well. After a recent institutional funding round worth $250 million, Tonal has achieved a $1.6 billion valuation. CEO Aly Orady says that an IPO is on the table.

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The question remains—Is Tonal's speedy growth enough to sustain its fitness for the public market? 

Where Tonal stands in the consumer market

After raising a total of $450 million in institutional funding, Tonal executives feel ready to tackle a public offering. The latest round, a Series E, was led by Dragoneer Investment Group. Other investors included Cobalt Capital and Sapphire Ventures. Amazon also backs the company.

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However, venture interest isn't enough to sustain a company. Consumers have to want in, too.

Despite the fact that Tonal charges nearly $3,000 for the wall-mounted screen and workout equipment, its sales are doing particularly well. This is especially true as gyms closed (some even permanently) due to COVID-19 pandemic restrictions. While there isn't a registration statement to refer to, Tonal reported YoY sales growth of more than 800 percent for 2020.

Tonal's partnerships are reminiscent of its peers

One of Tonal's biggest competitors is Peloton, a company that offers at-home stationary cycling and running gear and programs. Peloton partners with big names like Chase and up-and-coming brands like Verzuz to help promote its products and content. Tonal also has a firm grasp on corporate partnerships. In March 2020, the company joined forces with Nordstrom to place Tonal devices in 40 different department stores.

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Then there are celebrity investors, like tennis legend Serena Williams and basketball star Stephen Curry.

Why high growth doesn't necessarily equate to a prosperous IPO.

Tonal is soaking up its recent growth by optimizing and expanding its executive team. A former Johnson & Johnson executive, Shannon Crespin, is joining the team as the COO. A Google and Apple alumni, Bryan James, is joining as chief technology officer. These types of maneuvers are extremely strategic—Tonal is getting all of its ducks in a row before embarking on the IPO roadshow.

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All this growth is exciting, but it isn't without concern. A recent string of high-growth companies have gone public or announced that they're going public. Recently, real estate tech company Compass announced its own registration statement with the SEC. Compass has also thrived during the COVID-19 pandemic as more people move out of urban areas and into single-family homes. The company amended its S-1 to showcase a more modest projection for how much it hopes to raise in the offering.

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For example, Deliveroo, a food delivery app in the same vein as GrubHub, tanked in its London Stock Exchange debut by as much as 31 percent. Concerns about gig economy regulation overshadowed major pandemic-era growth.

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Tonal risks a similar fate if it isn't careful. If anything, it shows that high growth doesn't equate to high IPO potential. Investors can see through facades in ways corporations might be too blind to see. 

Tonal's IPO date

While Orady has solidified that there will, in fact, be a Tonal IPO, he hasn't said when. The company is keeping the details on the hush for now. Instead, the company is focusing on inciting interest from a vague, one-off comment. Many companies that make it to a Series E funding round go on to IPO, so this move isn't exactly a surprise for many seasoned investors. 


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