Mirror Wanted to Be the Next iPhone. Instead, It’s Selling to Lululemon.
Why would the startup sell for $500 million when sales were booming in the middle of a pandemic?
Last January, when I found myself in the basement of Lululemon’s Fifth Avenue store being offered cans of charcoal-activated matcha tea, boxed water, and a charcuterie spread, I had no idea how much of a relic a gathering like this would soon become. It was approximately two months before Covid-19 shook the world like a snow globe — purging us from our shops and gyms and restaurants and anything else that remotely resembled life in The Before. Here, the basement lights were soft, candles burned dimly, the bookcase held a copy of the first Alison Roman cookbook. I, along with some 40 other women were drawn here for a panel discussion on mindfulness, headlined by Arianna Huffington and Christy Turlington. But the panelist I came to see was Brynn Putnam, the founder and CEO of a hot venture-backed startup that had managed to pull off what retailers and technologists had been fantasizing about for years — a magic mirror.
Putnam’s Mirror, with a capital M, is a $1,495 full-length mirror that doubles as a portal to a gym. The Mirror can read your heart rate, track the calories you’ve burned, and personalize workouts based on whether you have a bad back, or want more defined abs. While it currently offers workouts across 20 different genres — from to pilates, to strength training, to boxing — Putnam, a Harvard-schooled professional ballerina and former barre chain owner has had much larger ambitions for the product. “We always said that we believe we’re building the next iPhone,” she had told Fast Company late last year.
Fitness, in other words, was only the gateway drug for the Mirror to become the content delivery system for anything else virtual. “We’re building the third screen in your life,” she said. The possibilities were endless — telemedicine, fashion, therapy. Putnam had raised $74.8 million from VCs, along with celebrity customers including Alicia Keys, Reese Witherspoon, Gwyneth Paltrow, and Kate Hudson, earning the four-year-old startup a $300 million valuation, and a lot of buzz.
The vision to become the next Apple may have seemed lofty for a startup that had most recently expanded into meditation content (hence, the dimly lit event), but little did any of us realize then just how prescient the Mirror would become — at least as a concept. The pandemic slammed the brakes on Americans’ ability to go anywhere; if there was a product poised to win this moment, it should be the Mirror. With millions of people trapped in their houses and apartments working, socializing, drinking, learning, exercising, crying, sexing, gaming, shopping, telemedicining, dating, therapying, and yes, meditating via their screens, arguably the single most useful tech product to anyone right now should be an interactive mirror through which you can do virtually anything.
As of Monday, however, it became clear that Mirror won’t become the next Apple after all — or perhaps even the next Peloton. The startup announced it was selling itself to, of all companies, an athleisure company. That particular athleisure company, actually: Lululemon, which first made a small $1 million equity investment in Mirror in 2019. The $500 million all-cash sale is the first acquisition ever made by the 22-year-old retailer. Putnam will remain as CEO, reporting to Lululemon CEO Calvin McDonald, who told the New York Times that transforming consumer habits spurred by the pandemic opened his eyes to what’s next for his business. “It definitely has helped us learn and see quicker into the future now,” McDonald said. “Guests have accelerated their behavior and accelerated the adoption of in-home sweat.”
Back at the end of March, when Putnam told Marker that “sales have more than doubled since the advent of Covid-19,” the startup was clearly benefiting from the decimation to the retail fitness sector. Gyms are now considered one of the most dangerous breeding grounds for contagion, leaving hot chains like Equinox and SoulCycle (owned by Equinox) closed indefinitely in much of the country. Until there’s a vaccine, gyms and boutique fitness studios — where people are naturally in close proximity, sweating and breathing heavily — are among the least desirable places to be. According to the trade group International Health, Racquet & Sportsclub Association, about 28% of U.S. gym-goers are expected to cancel their memberships this year. The group says that between March 26 and May 1, the U.S. fitness club industry lost $3.5 billion in revenue.
So consumers are now taking the long view with their exercise hardware, investing thousands of dollars in home gym equipment they otherwise would not have. Peloton, along with a handful of new competitors, has been the primary beneficiary of this phenomenon. As recently as last year, the indoor-cycling company with a $16.2 billion market cap was derided for being a bougie, out-of-touch indulgence for the elite. (Remember Peloton Wife?) Now, a $2,245 bike packaged with a $39 per monthly virtual spinning class subscription is a justifiable lifeline for almost anyone trying to stay fit. In the face of the pandemic, Peloton says its customer base has even been democratized; according to Fortune, the company’s fastest-growing customer demographic earns less than $75,000 per household. Analysts say all of this has “the potential to fuel multiple quarters of holiday-like demand.”
When I spoke to Putnam in March, she said Mirror is “engineering towards” being cash-flow positive and profitable by next year. “A lot of the work that we do this year is certainly the grunt work for that financial health and independence,” she told me. “We’ve been really excited to perform over two times our plan this past year, which has been super exciting, but obviously the business is scaling also, to support much higher demand than we even expected.”
The unexpected Lululemon exit is certainly a boon for Putnam and investors in her young company. But if the conditions were so suited for Mirror to be on a path towards hypergrowth, with ambitions to become a transformational tech product beyond the confines of fitness, why sell now?
At its core, Mirror is a hardware company — yet from the start, Putnam had little interest in the actual hardware itself. She had trained her entire life in competitive spaces: the School of American Ballet by age seven, the New York City Ballet by 16, Harvard undergrad. She grew a small chain of barre studios, Refine Method, in Manhattan’s Upper East Side by 26. To arrive at the concept for that first business, Putnam traveled the country for a year talking to athletic trainers, physiologists, and sports coaches, following the hypothesis, she says, “that you kind of follow the money in any field to get to the smartest people, and sports was the place where there were the smartest people in fitness.” By the time she decided she wanted to get out of the boutique gym business and instead build a fitness-oriented tech company, she had already had a front-row seat to one very successful entrepreneurial journey. Her husband, incidentally, the great-grandson of the man who started Putnam Investments, was a co-founder of fintech startup Quovo (it sold for hundreds of millions of dollars last year).
When Putnam started pitching Mirror to investors in 2016, she was seven months pregnant, armed with a pitch deck, and a nonfunctioning prototype — basically a tricked-out, off-the-shelf mirror. “I faked the technology — used an animated video behind glass in a super janky hardware contraption with store-bought pieces to just validate to investors that I could build the brand and experience, knowing full well that we’d have to throw out all the tech and start again,” she says. Andrea Hippeau of early-stage fund Lerer Hippeau decided to invest in Putnam’s seed round, unbothered by the fact that the entrepreneur didn’t have a technical background or a working product. “You can just tell from even having a short conversation with her she’ll move the moon to get what she wants,” says Hippeau. “It was 90% her, because she had a little bit of tech in the prototype, but there really wasn’t very much there yet when we invested.”
When it came time to actually build a functioning prototype, Putnam took an unconventional route for a tech company: She outsourced the Mirror’s entire design. First, she found a software engineer and a hardware engineer who assisted with storyboarding. “The whole thing had to feel immersive and magical,” Putnam says. “It had to feel interactive.”
She had also heard horror stories of startups perfecting a design, only then unable to find a manufacturer who could execute it. Instead, “we went to manufacturers with a napkin sketch and said, ‘how would you build something that looks like this?’ And then worked backwards to land on a design,” says Putnam, who prioritized the Mirror’s functionality over its sleekness. “People in hardware-land were very obsessed with materials and weight. Early on I said, this is going to be white glove delivery and install — it could be 400 pounds, and it doesn’t matter. We’re not going to optimize for those things.”
Once she landed $3 million in seed funding and $10 million in Series A, she worked with engineers to make a less bulky product with a functioning motion sensor. When the Mirror finally became commercially available in 2018, it looked like, well, a mirror. At 70 pounds, it’s still a bit bulkier than an analog mirror, but until you turn it on to take a HIIT class, you can still use it for checking for food in your teeth or taking a mirror selfie.
One might assume the Mirror has a touchscreen like an iPhone, but Putnam says the company didn’t think its users would want to smudge their Mirrors with sweaty fingertips. Instead, its phone app functions like a remote control to pick a live or on-demand class. (Pre-Covid, instructors would record classes or broadcast them live in front of a green screen from the company’s Herald Square office.) Mirror’s current class roster is pretty vast — any at-home, equipment-free workout you’ve ever done, you can do with Mirror, including boxing, strength training, yoga, barre, and Pilates.
The pitch for purchasing a Mirror is personalization. After you connect your Mirror to your Bluetooth heart rate monitor — which tracks your heart rate throughout your workout — it allows your Mirror to send words of encouragement or nudges you to step it up. And if you rolled your ankle and don’t want to put pressure on it, you can input that too and you’ll get workouts better tailored to your needs. Your instructor can see this information while you’re taking the class, on a screen only viewable to them. Aspects of the Mirror mimic an in-person session at Barry’s or SoulCycle; if you’re livestreaming the class, you might get a shout-out from the instructor at the end. The Mirror’s camera stays off during class, and only turns on when the user opts into a one-on-one training sessions.
The company says it currently has “tens of thousands” of subscribers, and I can see why: When I tested the device, the prerecorded 15-minute cardio class and the longer pilates class I took made my full-screen YouTube Yoga With Adriene videos look sad by comparison (sorry, Adriene). Though many users rave about the instructors and content, even some of Mirror’s most devoted daily fans understand why there’s skepticism about the actual value-add of the product. That maybe it’s little more than an overpriced, juiced up giant monitor.
“The visual display is significantly better than a laptop or tablet but is probably only slightly better than a TV,” one regular Mirror user, Evan, told me. Evan and his wife bought a Mirror this spring; his wife had been sick with Covid-19 early, in March, and after she recovered there still weren’t guidelines in place for how to safely exercise outside. “We sat there unsure of how long we’d be stuck indoors, with the fear that there would be no outlet to relieve stress as we busily worked from home,” he told me. Evan does weights and cardio; his wife does yoga. They saw the Mirror as a compromise workout product for both of them, and he fully credits quarantine as the reason for the purchase. “I don’t think we would have made the purchase had we not been stuck indoors.”
Another relatively new Mirror user, Brittany, ponied up and bought the Mirror in April. “I chose it over Peloton because I didn’t want to limit myself to cycling,” she told me. “It’s definitely an improvement over doing my trainer’s Saturday morning Instagram Live workouts on my phone in terms of visual quality, but I’d say it’s basically the same visual experience as working out with a TV screen. It’s a nice screen, but it’s just another big screen.”
Once described by a Barclays analyst as a “public relations nightmare,” Chip Wilson spent two decades working in the surf, ski and skatewear industries before founding Lululemon in Vancouver in 1998. In addition to the invention of its trademarked Luon fabric, what immediately set the company apart was its ability to enmesh itself with the yoga community. Under Wilson, Lululemon became an early pioneer in a version of the influencer model: It would spend up to a year sniffing out the most beloved yoga and exercise instructors in a new market, then convert them into company ambassadors (in fact, earlier in her career, Putnam had been one). Lululemon became a breakout success — both in creating the athleisure category, and in designing a new type of incredibly lucrative, community-centric retail concept. At its height, it had nearly 500 stores globally.
In 2005, Wilson sold 48% of Lululemon to two private equity groups; two years later, the company went public. In 2014, Wilson stepped down from his position as chairman of the board after that famous on-air see-through leggings snafu (“Quite frankly, some women’s bodies just don’t work for it,” he told BloombergTV). The company’s next CEO, Laurent Potdevin, resigned in 2018 for having a relationship with a female designer at the company. Later that year, former Sephora executive and Ironman athlete Calvin McDonald took the helm.
When the pandemic hit, Lululemon was able to cash in on the quarantine-induced leisurewear boom. In March, its stock hit an all-time high, despite stores being closed. When it announced earnings in June, its revenue fell 17%, noting that in April, its online sales soared 125%. Still, management doesn’t expect to return to earnings growth until Q4, even as Lululemon begins to reopen some of its retail locations.
While the relationship between Lululemon and Mirror has formally been in place since last year, it’s unclear when exactly the conversation about a sale began (both companies declined to talk to Marker about the deal). For the retailer, there are no shortage of incentives. Built on the premise of community, Lululemon can now assemble that community virtually — perhaps emulating Nike’s success with its Nike Training Club app, which has bolstered the brand’s online sales. Presumably they can now own the entire user experience — from virtually trying on a sports bra to taking yoga class — while becoming a data-collecting machine. Finally, it vaults the public company into the sexier realm of “tech company,” now selling a high-tech product for a customer base that overlaps with a demographic willing to pay over $90 for yoga pants.
As for Putnam, the deal is more of a financial coup than a visionary win. Mirror always risked living in Peloton’s shadow. In our conversations, Putnam wouldn’t even acknowledge the two companies were competitors. “In terms of opportunity, we really think of ourselves as really going after the smartphone market more so than the fitness market,” she told me back in March. “We fundamentally have brought investors onto our team and onto our board who believe in the value of great content and believe that we will be able to create great content, and if you look at our board and you talk to them, they are 100% supportive in our building of the next great media company.”
Right now, Peloton’s revenue dwarfs Mirror’s, expecting to land somewhere around $1.74 billion this year, with 89% year-over-year growth. By Mirror hitching its wagon to an athleisure retailer, it gets the backing of a healthy corporation to scale and compete, but trades in its potential for being that transformational tech product Putnam was gunning for. For a taste of what Mirror’s soon to be new owner has in mind, Lululemon’s McDonald has already hinted at his ambitions: Mirror instructors clad in Lululemon gear.
Update: An earlier version of this piece misidentified Alicia Keys, Reese Witherspoon, Gwyneth Paltrow, and Kate Hudson as Mirror investors. They are customers.
