Research Memo: Quell
Quell seeks to find the overlap between two massive markets — gaming and fitness. Their product, a resistance-based controller with a procedurally-generated fighting game, has attracted over 10,000 pre-orders ahead of its first product drop in March 2024.
By Michael Roberson, Jenna Zhao, and Ho Jin Jang. Edited by Kevin Xu.
Thesis
Demand for home fitness products spiked during the COVID-19 period. Though the market has cooled somewhat since then, companies are still striving to develop products that make fitness more convenient, effective, and enjoyable for consumers. Quell is one such startup tackling all three challenges in its fitness gaming platform, which combines both hardware and software for immersive, high-intensity workouts.
Quell’s team boasts top-tier credentials and has built a unique product featuring procedurally generated fitness content and resistance-based training. Despite risks of fierce competition and potential traction loss post-pandemic Quell has attracted over 10,000 pre-orders ahead of its first product drop in March 2024.
Founding Story
Quell was founded in February 2020 by four co-founders in the UK. In June of that year, Quell was accepted into Y Combinator, and they began a Kickstarter campaign soon after. The campaign far exceeded its initial £25K target by raising over £500K. While the initial plan was to deliver products by 2021, the company has continued to undergo product development and fundraising leading up to its anticipated product drop this March.
Team
Quell’s founders are experts in material science, design engineering, and entrepreneurship. They have had previous experience in management consulting, product design, and marketing, giving them a complementary set of skills for operating their business.
Their key investors include Heartcore Capital partner Max Niederhofer and AngelList co-founder Naval Ravikant, further strengthening the company’s network and institutional reach.
The company has also seen several noteworthy departures from key early team members, including co-founder Doug Stidolph (who currently holds an investor position) and Stieg Hedlund, a renowned game designer at Blizzard and Ubisoft (who left the company after three months as VP of Design). Nevertheless, the team has since expanded to over 40 people, with an emphasis on game design, data science, and marketing hires.
Product
Quell’s all-in-one home fitness solution comes in two parts: their Hardware offering (Quell Impact) and their software offering (Shardfall).
Quell Impact boasts a heart-rate monitor, calorie-tracking capabilities, high-precision controller haptics, and customizable weighted resistance bands. Motion tracking technology like this has been in the market for a while, most notably in the virtual reality industry. By looking at the hardware balance sheet of the Oculus Rift CV1 (which has similar tracking technology to the Quell Impact), as well as resistance equipment prices on factory/wholesale websites like Alibaba, we estimate that the cost per unit of the Quell Impact is somewhere around $100. Quell’s current early-bird sale price is $329 for the unit, the normal price will be raised to $469. In other words, once the discount expires, Quell will sell each of their units at an estimated 78% margin (*if shipping, packaging, etc. are not factored into the estimate).
Shardfall, their first software offering, is a procedurally-generated fantasy fighting game that provides the user with a variety of enemies for unlimited exercise content. Their subscription-based pricing model allows them to make frequent updates and add new games to their Impact device. Future features in development include a personal physical trainer, a lifetime warranty, and compatibility with fitness apps (Strava and Nike).
Market
Quell seeks to find the overlap between two massive markets — gaming and fitness. According to Grand View Research, the global virtual fitness market size is set to expand at a compound annual growth rate of 26.72% and reach $106.4B by 2030. This indicates a growing demand for virtual fitness products such as Quell’s and a high potential for customer acquisition and future returns.
However, such growth trajectories were also heavily influenced by the rise in virtual activities during COVID-19. As in-person fitness options become available once more, the demand for at-home solutions to exercising may decrease. Peloton’s recent earnings exemplify this loss, with the company stock hitting all-time lows since its 2019 founding.
Competition
The at-home fitness space is fierce, and it is unclear whether Quell has a substantial competitive moat. The original at-home fitness gaming movement started over a decade ago with the Nintendo Wii. Nintendo’s spiritual successor to that product has been the successful Ring Fit Adventure game and hardware ring accessory. An adjacent market that Quell is competing with happens to be the VR/XR industry. Solutions in that industry include low-cost and high-intensity workouts provided by apps like FITXR and Supernatural. Quell’s moat against this industry however is twofold: 1. VR has a lack of resistance bands (for now) 2. VR’s head-mounted displays are uncomfortable (especially for fitness). Quell’s indirect competitors include Peloton and Tonal. While they don’t gamify fitness with procedurally generated action content, they fulfill the same at-home fitness need for the customer, albeit at much higher prices. Below are figures showing Quells’ feature set (figure 1) and competition matrix (figure 2).
Business Model
Quell is a B2C company that incorporates a well-tested model in the gaming industry of hardware sales along with software subscriptions. The device itself is priced at a range from $249 to $469, consisting of different perks and benefits. However, to access the latest games, downloadable content, personal training sessions, and analytics through 3rd-party apps (Nike and Strava), Quell offers three pricing tiers for their software subscription ($14.99/month, $99.99/year, or $299.99 lifetime fee).
Traction
Although Quell has not officially launched, they have already sold 10,000 pre-orders. Much of this resulted from the company’s origins as a Kickstarter project, which was funded by 2,900 individuals. Quell’s initial estimate for their first product drop was in November 2023 but has since been delayed until March 2024 due to battery issues.
Valuation
In February of 2023, Quell completed a Series A round of $10M led by Tencent with follow-on investment from Khosla Ventures, Heartcore Capital, Social Impact Capital, and entrepreneur Naval Ravikant. Their Seed round in 2020 attracted investors including. Emmett Shear and Kevin Lin, the co-founders of Twitch, To date, Quell has raised $15.6M.
Summary
Quell has many notable characteristics that give it the potential to grow into a successful fitness gaming company. Its unique combination of an immersive gaming experience and an effective, resistance-based workout allows it to differentiate itself in both markets. Despite an impressive 10,000 pre-orders, the question remains on whether Quell will be able to sell in a post-COVID market, develop an attractive subscription model with updated gaming content, and fend off potential competitors in the fitness or console industries.
