Sweat Equity. Jason Kelly

chain of gyms. On the banking side, wellness deals were mostly focused on nutrition, healthy food, and natural products, a harbinger of the broader move to healthy living.

      Now at Imperial, he says the past two years have seen his work shift hard to the fitness space, where competition is fierce and there’s a lot of business to be had. He and his colleagues make a practice of attending a class of the company in question the morning of the meeting, because understanding how it works is critical given that need for differentiation. And the consumer is voracious, and ever changing, in her appetite for these services. “You need to make sure you have the flexibility to move with the consumer,” Wood says.

      Even outside of work, Wood’s not just poring over spreadsheets and balance sheets. He’s signing up for races and classes – when we talked for the first time, he was about to participate in a 24-hour relay race run by Ragnar – to understand the texture of this new economy. There was also a social component; his team comprised a dozen fellow parents from his neighborhood, aged 35 to 55, banding together to complete the 200-mile relay. Even with the personal interest, Wood and Kapoor’s respective bosses aren’t just indulging them so they can be fit and healthy. Investment banks exist only when there’s money moving, an ecosystem of investors – private and public pools of money – and companies for them to buy and sell.

      The private pools have become especially important during the past two decades, and a critical accelerant for the fitness economy. Kapoor in her deck identified no less than 45 financial firms who’d already somehow participated in the fitness and wellness sector. The list comprises specialty firms, as well as brand-name investment shops like KKR, Apollo, Warburg Pincus, and TPG.

      A note on private equity is relevant here, especially since it was a catalyst for me to undertake this project. I wrote a book in 2012 called The New Tycoons: Inside the Trillion Dollar Private Equity Industry that Owns Everything, the product of five years leading Bloomberg’s coverage in that area. The genesis of that book was the realization of private equity firms’ entrenchment in the global economy that was largely unnoticed but massive in its scope.

      Kapoor’s work validated the anecdotal evidence I gathered, namely that private equity money was increasingly interested in this area from various angles – from the underlying technology, to apparel, to studios, to races. In some cases the investors’ pursuits are personal, just like for Kapoor and Wood – and me. Another catalyst for this project was consistently running across private equity executives I got to know in the course of my work who were spending early mornings and lunch hours training, and weekends racing.

      This thread ties into another element – the overlap between high-achieving executives and participation in endurance sports. Bankers and investors have increasingly traded their fancy Rolexes for Timex Ironman and Garmin watches, in part as a not-so-subtle indicator that they spend their free time working out and staying fit. It’s only natural then that many of the men and women making deals would seek out companies in businesses they’re personally fond of, and in which they believe.

      The evolution of the fitness industry has tracked the growth and expansion of private equity, which now accounts for more than $3 trillion in assets around the world, after existing as an industry for less than 30 years. Private equity firms in their early incarnation were known as leveraged buyout (LBO) firms, a nod to their reliance on debt, or leverage. Early profits came mostly from financial engineering – buying cheap, with lots of borrowed money, and selling quickly, without a lot of work on the company itself. Clever and lucrative, yes, but with little lasting impact.

      The past decade has seen an evolution of private equity firms, who wisely shifted to that gentler nomenclature over the course of the 1990s and early 2000s. (Even private equity now feels outdated, given that KKR and Blackstone, to name just two, are publicly listed on the New York Stock Exchange). Buyout firms spent the first decade of this century chasing, and catching, ever-bigger targets. Fueled by available and inexpensive debt, firms by 2007 were spending $15 to $20 billion or more on the biggest deals, buying the likes of Hilton and Dunkin Donuts.

      The financial crisis that began in 2008 chastened dealmakers and checked private equity ambitions. Purchase prices became more reasonable. More important, investors and companies became more demanding of their private equity partners, pressing for more details about their plans and strategy for targets. A still-competitive market, with a lot more firms chasing deals, also made it much more difficult to buy low and sell high, with little actual action in between. Firms started talking lots more about growth and operational improvement.

      Doing that demands a higher level of expertise, well beyond analyzing balance sheets and income statements. The successful firms, especially those smaller than the giants like Blackstone, KKR, and Carlyle, began to tout specialties. A history of winning chemical, manufacturing, health care, or technology deals became much more attractive to both investors and targets.

      That was good news for the handful of firms that quietly grew up focused on health and wellness, especially as those types of companies became more and more successful, and began looking for additional capital. These firms were by definition smaller, because the companies they’d bought stakes in weren’t very large, especially through the late 1990s and into the early 2000s. Most targets had well under $200 million in annual revenue, putting them outside the screens of big-cap PE firms.

      Investing in wellness and fitness seems obvious now, but two decades ago – even around the turn of the century – it felt niche, probably too niche to make any real money. But the guys who were living it every day, outside the office, saw a huge opportunity. That’s what happened to Jesse Du Bey.

      Du Bey grew up in Seattle watching his father run, and it came naturally to him, too. “I remember being able to run faster and further than other kids,” he says. “And I remember liking the suffering.”

      At age 12, he ran a 5:30 mile, which placed him among the fastest in the nation, as measured by the Presidential Fitness Test. He voiced a sentiment I’d often heard, and felt – that running provided a chance to excel where other athletics didn’t. “I liked the feeling of it. I was unremarkable at the ‘main sports’ like basketball and football.”

      Du Bey didn’t run track or cross country in college at the University of Washington, but did continue to work out and became more muscular. He arrived in New York in 1999 to work on Wall Street, putting in the 100 hours a week that’s common for a young analyst. He began his career advising companies and investing money for the late Bruce Wasserstein, a legendary dealmaker.

      In 2005, a friend of his in the investment business, Fernando Vigil of Bain Capital Ventures, introduced Du Bey to an entrepreneur named Chris Hessler, who was already an accomplished triathlete. Hessler convinced the two investors to enter a triathlon. They rented mountain bikes and, Du Bey says, “swam for the first time since I was 8.” Even after finishing close to last, he found it “amazingly fun.”

      He was hooked. Du Bey signed up for several more local triathlons. Something inside him changed. “I’d been a working drone on Wall Street for seven years, solely focused on work,” he says. “I think a lot of people throw themselves into careers and get numb, a kind of lack of inspiration and passion for life. Triathlon helped me find that; I think maybe it really changed my life.”

      He identified the Ironman as the ultimate triathlon test and signed up for the Lake Placid version. He joined a team called Full Throttle Endurance at Chelsea Piers and discovered an entire subset of the population he wasn’t aware of. “It’s a whole world, all these Type A people who like to solve problems,” he says.

      The Ironman stands as an extraordinary physical test, and essentially began as a Hawaiian daydream, part of an ongoing friendly debate about which of three local events – the Honolulu Marathon, the Waikiki Rough Water Swim, or the Around Oahu Bike Ride – was the most difficult, and thereby produced the best athlete. A U.S. Navy officer named John Collins and his wife Judy decided to combine the three as the ultimate endurance test. In 1978, 15 participants took on a 2.4 mile swim, followed by a 112-mile bike ride, capped with a marathon (26.2 miles).

      The winner was to be called Ironman; Navy officer Gordon Haller was the first, crossing the finish line in 11 hours, 46 minutes, and 58 seconds. Eleven others completed the race, and Ironman