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The cycling brand’s efforts to compete with a rival left it vulnerable when the pandemic hit.
When Flywheel Sports filed for bankruptcy in the fall of 2020, many attributed its downfall to the Covid-19 pandemic. The beloved cycling brand—which once served as a formidable SoulCycle and Barry’s Bootcamp competitor— temporarily laid most of its staff off in March 2020 due to nationwide lockdowns, after all. But according to one former Flywheel employee, there’s more to the story.
Founded in 2010 by Ruth Zukerman, who co-founded SoulCycle four years prior, as well as Jay Galluzzo, and David Seldin, Flywheel was the first to gamify the indoor cycling class experience. It tracked performance by monitoring each bike, allowing participants to compete with each other in real time.
Before long, Peloton shook up the fitness industry by selling stationary bikes to consumers along with a subscription-based platform that offered workout classes they could participate in from home. By 2017, the company notched a $1.25 billion valuation.
Flywheel took notice, launching its own at-home bike and subscription product, Fly Anywhere, in November 2017. That’s where it went wrong, according to Bobby McMullen, known as Bobby Westside online, who served as a top instructor at Flywheel from 2018 to 2020. He has since started his own business, a personal training platform called Adonis.
“We spent a lot of money we didn’t end up having to compete with Peloton, and we went out of business,” McMullen said in a recent TikTok video. “There were other issues, but the studio business was a proven success. It made a ton of cash. We just found ways to spend it.”
According to him, when Flywheel failed to raise money from outside investors to fund the Fly Anywhere project, it used “money from the studio business,” meaning its in-person classes, instead.
“We added a ton of corporate payroll,” McMullen says, “because I don’t know if you know this, but to run an at-home streaming business, you need a full production team. You need a brand new studio, that we built in the basement of our Lincoln Square studio. You need to pay your talent on-screen rates. You need to get approvals and sign-offs from [multiple parties for every song you use.] Like, it’s a lot of work.”
In total, McMullen estimates that Flywheel invested $15-20 million in Fly Anywhere.
Then, Peloton sued Flywheel, accusing the company of willful patent infringement. Flywheel fought the lawsuit for about a year and a half before settling in February 2020, admitting that it “copied elements of the Peloton bike in developing its Fly Anywhere bike” and shutting down that side of its business.
In his video, McMullen calls the settlement “ironic,” because “Peloton stole proprietary tech from our bike to make theirs”—likely referencing a portion of the legal battle in which Flywheel accused Peloton of stealing ideas from its own documents created in 2011. (The company’s legal team provided these documents to support the claim, but wasn’t able to prove they were created in 2011, per Vice.)
Either way, the business lesson is clear: don’t overspend in an attempt to compete with others, or you might just find yourself facing down an unprecedented event like a global pandemic with little to no cash in the bank.
When Flywheel filed for Chapter 7 bankruptcy in 2020, it had $10-50 million in estimated liabilities and no more than $50,000 in estimated assets, according to Business Insider.
This post originally appeared at inc.com.
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