Hele Fitness is offering direct equity in a priced round at a $14.9 million valuation. Overall, this is a decently favorable price for investors; Hele generated roughly $3.3 million in revenue in 2020, so a valuation of $14.9 million represents a roughly 4.5x revenue multiple. That’s a reasonable multiplier for a blended products/technology business, and it’s a lot fairer than similar deals we see on crowdfunding platforms. Thus, Hele Fitness’ price rating is moderately high. 

The at-home fitness market has witnessed significant growth and innovation over the last decade. Improvements in technology and increased comfort with working out from home (accelerated by COVID-19 lockdowns) have opened more and more fitness enthusiasts up to the idea that they can work up a sweat in their living room, backyard, or basement. The global at-home fitness equipment market is relatively small now (estimated at $9.49 billion in 2020), but it has been growing explosively at a CAGR of 40.4% since 2019. 

This seems like a huge market opportunity for Hele Fitness. However, a major factor significantly scales back market expectations for this company. Hele Fitness sells a very specialized type of gym equipment: hard-core weight racks and sets that are suited for intense fitness enthusiasts, not the casual consumer who squeezes in a workout a couple of times per week. Much of the growth in the home fitness equipment market is driven by brands like Peloton, Mirror, and Tonal, who appeal to a wide audience by promising that anyone can shed a few calories in 30 minutes or less. Hele Fitness’ equipment is much more intimidating for the average person; the market for this type of equipment is significantly smaller, and is growing less rapidly. While Hele positions itself as a player in a huge market, it is actually playing to a very narrow niche; therefore, the company’s market rating is very low. 

Hele Fitness was founded by three former athletes and coaches with deep expertise in fitness. Co-founder and CEO Gus Mello holds a degree in physiology and physical education; he’s spent the last 12+ years managing and owning fitness studios across the country. Co-founder and COO Marcus Souza is also a long-time coach, with multiple fitness certifications and experience owning gyms. Brook Emmanuel, the company’s third co-founder, is also an avid athlete and coach; he lends deep business and entrepreneurial experience, with over a decade of experience in finance and several past roles as a co-founder or advisor to startup companies. Emmanuel doesn’t seem to be involved in Hele’s day-to-day operations (he’s also the founder of a venture capital firm), but he offers strategic advisory as the company scales. Lastly, the Hele Fitness team includes Dara Tawarahara, VP of Sales and Marketing; Tawarahara is also an experienced athlete, with over a decade of experience in sports science. Prior to Hele, Tawarahara also owned a CrossFit gym. 

Hele Fitness has a very strong founding team. Each founder has spent most of their professional lives in the fitness industry, and all have run their own businesses (mostly CrossFit gyms). The team also benefits from co-founder Brook Emmanuel’s deep experience scaling startups. Therefore, Hele’s team rating is one of its highest. 

As with many companies, lack of differentiation is one of Hele Fitness’ biggest challenges. While the company has a strong brand and a clear point of view on how fitness can improve lives, ultimately its products are fairly indistinguishable from the many other types of weight racks, barbell sets, and fitness accessories on the market. Hele doesn’t have a particular “secret sauce” that makes its products an obvious choice when compared to competitors; that also means its products would be easily replicated by any other company looking to offer high-end weightlifting equipment. The Hele mobile app isn’t any better; there are hundreds of fitness apps on the market today, and all offer only minor variations. 

In addition, Hele faces significant competition in this space. Companies like Peloton, Mirror, and Tonal are household names, already selling expensive workout equipment. While these brands’ audiences probably aren’t even interested in heavy-duty weightlifting equipment (also a negative signal for Hele Fitness), any could easily add Hele’s products to existing offerings and quickly outcompete Hele in price. Unfortunately, Hele Fitness just doesn’t offer a unique value proposition in the fitness equipment market; therefore, the company’s differentiation rating is very low. 

Hele Fitness has performed very well since its founding in 2016. The company generated over $322,000 in 2018, and scaled to $536,000 in revenue for 2019, which was already solid growth. Then the company absolutely took off in 2020; Hele generated over $3.3 million last year as demand for at-home fitness equipment exploded during the pandemic. Moreover, the company is operating efficiently; Hele turned a profit in both 2018 and 2019, with a net income of $22,000 and $47,000 respectively. (Full 2020 financials aren’t available, so it’s not clear what the company’s net income was last year). 

Investors should note one caveat when evaluating Hele Fitness’ performance; the company reports slightly higher revenue on its raise page than what is captured in Form C filing, a gap of $100,000-$200,000 for 2018 and 2019. This might be due to accounting inconsistencies in reporting those two figures (cash versus accrual basis), but it’s still unusual to see different figures on the Form C than the raise page. This difference adds some doubt about Hele Fitness’ 2020 revenues, which haven’t been formally reported yet; hopefully, audited financials would prove that Hele did indeed generate over $3.3 million last year. 

Overall, though, Hele Fitness has grown rapidly in just a few years, and was operating profitably through at least 2019. As a result, the company’s performance rating is its highest. 

Overall, we don’t judge Hele Fitness to be a particularly risky investment. However, there are a few areas of risk that investors might want to consider. First, the company has not raised prior capital, so there isn’t yet proof that Hele devotes capital toward growth in a way that generates returns for investors. In addition, investment terms are pretty favorable, but not perfect; Hele’s valuation is a tad high, particularly pending confirmation of the company’s 2020 revenues (which itself is a source of financial risk). Lastly, while Hele’s team is solid, the founder with arguably the most relevant experience isn’t devoted full-time to the company, so there’s a chance that the leadership team struggles to continue operating profitably as the company scales. 

Hele Fitness seems to be catering to a loyal customer base of fitness enthusiasts, at least in Hawaii (where the company is located). However, it’s too soon to say whether Hele’s products are attractive enough to a broader group of consumers. For the average person interested in working out a few times a week, a $2,000 purchase of heavy-duty weight racks and barbells that require a lot of space probably isn’t realistic. Hele also caters to commercial gyms, but ironically, the same trend that the company theoretically benefits from (a rise in at-home fitness) simultaneously hurts its prospects in that market. 

Overall, Hele Fitness has done an admirable job making a name for itself among Hawaiian athletes and gym owners, and has generated meaningful revenue to boot. It’s just not clear that the company is differentiated enough, or playing in a large enough market, to achieve mainstream success. 

There are two strong signals that Hele Fitness can be a successful investment that generates a return. First, the company was founded by a large team of deeply experienced fitness enthusiasts, one of which also has a strong background in finance and entrepreneurship. These co-founders seem to have a great read on their target market, both for individual athletes and for commercial gym owners (most of them have owned multiple gyms in the past). Second, the company has grown rapidly in the last year. While 2019 revenues of over $500,000 were already impressive for an early-stage business, 2020 revenues of over $3.3 million mean that Hele Fitness is growing above and beyond the rate of most startups.  

Of course, it’s difficult to say whether Hele Fitness’ performance in 2020 can be sustained over coming years; it was an unusual period, with more people than ever working out from home, and potential investors can’t predict whether Hele’s revenues will decline, stay the same, or continue to increase as the world begins to return to normal in 2021 and beyond. However, potential investors can confidently say that Hele’s founding team has run the business efficiently (turning a profit) thus far, and have the backgrounds to continue growing the company toward a potential exit and strong returns. 

Hele Fitness is a fitness equipment and app company selling high-end weightlifting racks and tailored fitness content to individual fitness enthusiasts and commercial gyms. The company had an explosive year in 2020, generating over $3.3 million in revenue when 2019 revenues were only $500,000; in addition, Hele’s founding team is strong, and the company has built a loyal customer base in its home state of Hawaii. 

On the other hand, Hele Fitness’ potential market is niche; very few consumers are willing to spend $2,000 on a heavy-duty weightlifting rack that takes up space and is intimidating to use. Even within this niche, Hele Fitness products aren’t particularly differentiated, and could easily be replicated by much larger fitness companies with mainstream brand names. It’s also unclear why revenues don’t exactly match up between the company’s raise page and Form C filing. Therefore, Hele Fitness has been rated a Neutral Deal. 

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