Strategy: A billion-dollar fitness start-up that came out of nowhere could kill SoulCycle

Peloton is a high-tech indoor cycling company that was recently valued at around $1.25 billion after closing a $325 million financing round.

One of the hottest fitness brands in America only has two studios.

Most clients attend its spin classes in the comfort of their own homes. They've never even met an instructor in the flesh.

Peloton is a high-tech indoor cycling company that was recently valued at around $1.25 billion after closing a $325 million financing round. Its core products are an indoor bike and a subscription-based video streaming service.

And as the business expands, it's becoming a real threat to rivals like SoulCycle and Flywheel.

Here's everything you need to know about the billion-dollar fitness company.

Peloton's flagship indoor cycling studio is located on 23rd street in Manhattan. The company also has a studio in Chicago.

If you live nearby, you can take classes at the studio. But most Peloton riders livestream classes on one of the company's high-tech stationary bikes.

This is what a Peloton bike looks like. It costs $1,995 to buy one.

On top of that flat fee, you pay a $39 monthly subscription fee that gets you access to live and on-demand spin classes. The classes stream on a screen that's located between the handle bars of the bike.

The screen shows you how fast you're going, how much resistance you've got on the bike, and where you rank in the class in terms of output.

The price may seem steep, but when you break it down per class, it's on par with competitors like SoulCycle and Flywheel.

A class at SoulCycle costs $34 in New York City. So, if you take more than 6 spin classes per month, the Peloton bike is worth it over the course of a year. Flywheel also costs $34 per class.

When you take a Peloton class, instructors make you feel like you're there in the studio. You'll hear instructors call out individual riders: "I see you, Matt in Scarsdale."

"[We're] not trying to compete with SoulCycle or Flywheel in our studio business — running studios is a different style business than we're trying to build," John Foley, founder and CEO of Peloton, told Business Insider in 2015.

Source: Business Insider

"We see ourself more akin to an Apple, a Tesla, or a Nest or a GoPro — where it's a consumer product that has a foundation of sexy hardware technology and sexy software technology," Foley said.

Source: Business Insider

Peloton announced Thursday it had raised $325 million in Series E financing.

It plans to use the money to open more showrooms, where riders can buy Peloton bikes.

Source: Business Insider

It's also planning to open a massive 30,000 square-foot fitness studio in Manhattan, Business Insider reported.

Source: Business Insider

SoulCycle, which filed to go public in July 2015, has since stalled its IPO plans.

WATCH: Business Insider staffers try the Peloton bike.

Peloton is a high-tech indoor cycling company that was recently valued at around $1.25 billion after closing a $325 million financing round. Read Full Story