a service.’ Everyone is going to pay $100 or $200 a month to have the
best fitness equipment in their home. And whatever combination of
devices you have, we’ll always be upgrading them. We’ll come in and
swap out the latest bike or the latest treadmill or the latest something
else to make sure you always have 10-out-of-10 equipment.”
That may come a decade from now, but Peloton’s numbers today
tell the story of a company at a crossroads. Over the past six years,
Peloton has sold 150,000 bikes—a small number of customers
compared with membership numbers at national gym chains,
which encourages critics’ arguments that Peloton’s bike is nothing
more than a niche product for the elite. But Peloton and its inves-
tors are happy with the bike’s traction and believe it proves the
market for Foley’s vision of the future. It raised nearly $444 million
through five rounds of fund-raising, revenue for 2016 hit $170
million, and the company’s unicorn-status $1.25 billion valuation
has it eyeing an IPO.
Now, to move toward that vision of “fitness as a service,” Peloton
must move faster than its pedal-pushing customers. Throughout
2017, Foley has armed himself for the future.
First he built a deeply experienced team—and in true “we’re not
a fitness company” form, their backgrounds may be surprising.
In February, for example, he recruited his former Barnes & Noble
colleague William Lynch, previously CEO of the bookseller, to join
Peloton as president and help steer the ship. Foley calls him a more
mature, measured leader. “There aren’t that many entrepreneurs
who like running a 12-person startup out of a garage and also have
the leadership and management capabilities to run a $100 billion
company,” Foley says. “I want to be both. I believe I can be both,
but I care too much about Peloton to risk it.”
And now, Peloton is about to make its biggest, riskiest, most expen-
sive bet yet. On January 9, 2018, at the Consumer Electronics Show
(CES) in Las Vegas, it will introduce the Peloton Tread—a pricey,
futuristic, at-home treadmill that will stream interval fitness classes.
It’s Peloton’s second-ever product and one the company hopes will
project its true disruptive potential. In fact, it’s so important to the
company’s future that for the past 18 months, it’s been code-named
Aurora and kept behind a locked door, accessible to just a few of
Peloton’s 500 employees—and then me, the first reporter in the room.
When the Peloton Tread starts entering consumers’ homes this
fall, it will truly test what this unicorn is made of. It will either
reaffirm nonbelievers’ most stubborn misgivings about Peloton or
bring the company boundless profits, and take it one step closer to
pushing conventional gyms out of business.
Under Foley’s leadership, the Peloton team is betting on the latter.
“John talks about us becoming a more impactful company than Apple
is, and it sounds like hyperbole,” says Tom Cortese, COO and one of
Foley’s cofounders. “But he so honestly believes it. And that seeps into
people’s blood in a way that motivates this team to do what has mostly
been an impossible feat. He can propel talent in a way that helps them
achieve more than they would anywhere else.”
→ The word peloton is a cycling term that refers to the main
group of riders at the front of the race. “The concept is, you’re
stronger together,” Foley explains. “If you’re breaking the wind by
yourself, it’s hard, but if you’re in the peloton, it’s more efficient.”
Back in 2011, when Foley first shared his idea for Peloton with
Cortese, it was a vision to solve a problem that was driving Foley
crazy: Cycling classes were expensive and in such demand that it
was almost impossible to reserve a bike. “There had to be a way to
give every customer the best seat in the house with the best instruc-
tor,” he says. To make that happen, he wanted to partner with
brands like SoulCycle and Flywheel and ask them to create videos
of great instructors leading classes. Peloton would then figure out
how to deliver them to customers’ homes.
Peloton approached both companies, but a deal never material-
ized. (Flywheel did submit a term sheet, Cortese says, but it didn’t
work out.) “This may be overly romanticized, but in tech there’s a
little bit of comfort around sharing, or at least an understanding
that ideas are cheap and execution is what matters,” says Cortese.
“We were trying to embrace this new [fitness] industry with open
arms, and it just resulted in a lot of rejection.” Cortese even says he
was blacklisted from SoulCycle: “I checked into class one day and
soon after got a tap on my shoulder. A very nervous employee from
the front desk told me I had to leave because my profile had been
flagged.” (SoulCycle did not respond to a request for comment.)
So instead of partnering, Peloton set out to build every part of
the experience on its own. Investors balked. “We couldn’t get any
institutions to give us money,” Foley says. “I’m a confident guy, but
after 400 institutions tell you no, you really start to question your-
self. Maybe you are the idiot, you know?”
Still, he soldiered on, eventually cobbling together funding from
more than 100 angel investors. With this money, Peloton built its
bike—and the state-of-the-art tablet that’s attached to it—from
scratch. It built its own distribution network: If you order from one
of its 29 retail showrooms, the bike will likely be delivered to you in
a Peloton truck and set up in your home by Peloton employees.
January-February 2018 / EN TREPRENEUR.COM / 53→ FORWARD MOTION (clockwise from left)
An early Tread prototype; sketches
of potential screen placements;Foley and his team discuss features.