John Foley of Peloton (NASDAQ: PTON) - Part 2

Outliers

Oct 04, 2020

On goals, vision and the future:

Peloton Founder and CEO John Foley, said he sees room for high-tech and group-activity spice to what he called the “dull” exercise-at-home market. “We’re going to be the coolest thing in indoor fitness.” (Jun-13) [1]
"We are right now targeting affluent users. If we sold only to the top 5 percent, we would have a $5 to $10 billion business." (Sep-15) [22]
“At our core, we’re a technology and innovation company, and we want to make sure that the world knows us as a technology and innovation company. Fast Company recently announced us as one of the world’s ten most innovative companies in fitness. However, we don’t want to be known as innovating in fitness, because we think the bar is so low for fitness innovation. We want to be one of the most innovative companies of any category in the world, and that’s what I think you’ll see in the coming years from us.”(Mar-16) [32]
The Manhattan location is a microcosm of what CEO and co-founder John Foley believes will earn Peloton Interactive a $10 billion valuation in the next five years. (May-16) [34]
On virtual reality: It’s not going to change what we are going to do. It might complement what we do. We are already testing a virtual reality experience so that if VR headsets take off, Peloton will be the first to be there. (May-16) [35]
“Jeff Bezos has said he wants to make it irresponsible for people to not have an Amazon Prime membership. We’re going to make it irresponsible to not have a Peloton membership.” (Jan-18) [63]
“My goal is to create the most coveted consumer product in the world.” (Jan-18) [65]

On his vision for the next 10 years: “It’s called ‘fitness as 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.”(Jan-18) [66]

“Seven years later, it is very clear to me that we have an immense opportunity in front of us at Peloton. Peloton is so much more than a Bike — we believe we have the opportunity to create one of the most innovative global technology platforms of our time. It is an opportunity to create one of the most important and influential interactive media companies in the world; a media company that changes lives, inspires greatness, and unites people. And it is an opportunity to create one of the best places to work in the cities where we operate — we prioritize culture as much as any other business objective.
And to be sure, we are not taking these opportunities lightly. William Lynch, our President; Jill Woodworth, our Chief Financial Officer; Kevin Cornils, our Managing Director of International; my co-founders; and our extended senior leadership team: all of us feel an immense responsibility to deliver on these opportunities, and we are ready. We have worked our entire careers for this very moment.” (Aug-19) [87]

“We still believe we’re on the first out of the first inning of where we want to take this business.” (Sep-19) [91]
“It’s funny. Internally, I happen to be one of the people in the leadership team to think that [digital subscriptions] could over time eclipse the core connected fitness business. We are going to be watering the acorn that is a pure digital business and bringing that to as many people as possible.” (Sep-19) [91]
On when he expects Peloton to be profitable: “I think we are showing fiscal 2023 in our 5-year plan” (Sep-19) [94] – reported GAAP profits in Q4 FY2020
On what metrics investors should focus on: “We want people to focus on growth and net new subs, so think about Netflix-style media business... Net new subs is kind of our True North as a business… more members and changing more lives is kind of a True North on the consumer side. And if we get to, 10 years from now, tens of millions of subscribers, we allowing people to live a lot better and healthier lives and the I think Street would be very excited about that.”(Sep-19) [94]
“We believe Peloton will be a winner-takes-all global technology platform.”(Sep-19) [95]
“The biggest thing is we’re plying the long game. We see this building millions and millions of subscribers around the globe in the coming years.” (Sep-19) [95]
On how home fitness will look like in 5-10 years: “Technology will continue to play a huge role. For Peloton, technology underlies everything we do and it’s a big differentiator for us. Also, I think there will be more focus on the breadth of content. At Peloton, we produce broadcast quality content from state-of-the-art studios and we’re continually introducing new formats.” (Mar-20) [117]

“I see a couple hundred million people on the Peloton platform in 15 years.” (May-20) [108]
“I don’t think people are going to rush back to crowded gyms. I just don’t see that happening. Especially people who experience Peloton, and why it’s a better experience at a better location with a bigger community, with better instructors, for better value. There will be gyms and will be boutique fitness operators. I just think it’s going to be a massively contracting category. The gym model was challenged yesterday. And I think it will be even more challenged tomorrow.” (May-20) [108]

“We want to make our products even more affordable than they are today. Right now our bike is just over $2,000. But it’s $58 a month [for a 39-month, interest-free loan that covers the cost of the bike]. $58 a month [divided] by two people who are going to use it. Maybe even three people in your home. If we can get those monthly payments down, we can really open it up. And we want everyone in every socioeconomic class to be able to afford Peloton. That’s a big focus for us in the coming years.” (May-20) [108]
On Peloton turning into a straight-up subscription business: “5-10 years from now I would be surprised if it was not [a subscription business]. It’s not something you’re going to see in the next year… All in the name of affordability of our members, making sure they feel incredible about the value.” (Sep-20) [113]
“I believe we can have – in ten or fifteen, twenty years from now – we could have 100 million subscribers. Right now we have one million. So we're one percent into our opportunity from the way we're defining it. And so it just feels like very early days.” (Sep-20) [114]

On his philosophy and management style:

“If your Peloton bike becomes a clothes hanger, we have failed as much as you have”. (Nov-14) [14]
On his biggest mistake: “I majored in industrial engineering. As a technology leader, I wish I would have gone [down] the electrical engineering route. If I had, my software engineering teams might actually acknowledge my presence in the lunch room.”(Sep-15) [23]

On his best mentor: “John Pleasants [the former CEO of Playdom] has been my mentor for over 20 years. He embodies everything I appreciate in a leader: leading from the front, hard work, team work, no ego, true empathy, and unparalleled charisma and energy.”(Sep-15) [23]
On how he motivates people: “Just surround myself with people that are better than me, smarter than me. I think I’m an ok leader and I’m not a very good manager because I don’t like to manage. I like to hire fantastic, hardworking, self-managed people and get out of their way”. (May-16) [35]
“I have a goal setting philosophy which is slightly unique and slightly counter to what you’re taught. You’re taught that goals should be quantifiable... But you also hear that goals should be achievable because you don’t want to set yourself up for a failure. I don’t think the goals should be achievable. I think that if you’ve hit every goal you’ve ever set up for yourself, you will never know how far you could have going. So I like to set really stretched goals for myself. I think the Peloton brand will be bigger and more influential that Apple in 10 years”. (May-16) [35]
“It’s not the smartest people who go the furthest, it’s the people with the most confidence. It’s this mentality that’s really helped me build my company from the ground up. I went in truly believing that consumers would be interested in an exercise bike that let them stream high-quality indoor-cycling classes they could take from home. And now, because I’ve surrounded myself with a smart, scrappy team and instilled the confidence I have in this idea in others, we’ve sold thousands bikes and counting.” (Jun-16) [39]

On the best piece of advice he has received:
- “Don’t let perfect be the enemy of good.”
- “The avalanche starts with a pebble.”
- “When you’re going through hell…keep going.”
- “Sometimes you have to rob a few gas stations on the way to the perfect crime.” (Jul-16) [41]

On his management style:“By far the most efficient hack is to let go. Trust your co-founders and your team. Give them autonomy. Divide and conquer. Slap high-fives in the hall. Don’t sit in the same meeting with anyone who can represent your thoughts. If you truly give everyone full autonomy to do their piece of the puzzle, they will be happier, the business will move faster, and your life will be manageable. But again, you can only do this if you have a team that is smarter and better than you. That’s the key to Peloton’s success to date—our team is world-class and we very efficiently divide and conquer.” (Jul-16) [41]

“There’s a quote from Churchill I had to lean on several times, ‘When you’re going through hell, keep going.’ I was just like, ‘Don’t stop in hell.’ ” (Jan-17) [46]

“Like a lot of entrepreneurs, it’s part ignorance, part hubris, and a little bit of confidence. I thought I was a proven tech leader, I had a great idea, and I had a great team… I was going to be able to afford my lifestyle, raise tens of millions of dollars, pay myself a nice salary, and live a nice life as an entrepreneur. It was massively flawed thinking… I had to pitch thousands of human beings to get 104 angel investors to give us the first $10 million to get any momentum going.”(Jan-17) [46]

On whom he aspires to be as a leader: “So, I look in all directions to try and find inspiration in leadership. I look to politics, so you think of Angela Merkel; you think of Michael Bloomberg obviously here in New York. In business, I am a student of who the great leaders of course going back to Jack Welch. But in today’s world: Jack Ma, Jamie Dimon, Mark Benioff, and Carlos Brito. Some real inspiring people, that I look to and look up to and try and emulate as much as I can.” (Jan-18) [68]

On how would colleagues/co-founders describe his strengths as a manager:

“I’m not sure they’d say I have many strengths at all. I do think that they will agree that I’m pretty hungry. Our team is pretty hungry. We’ve still got a lot to prove. We are in the first out of the first inning from our perspective. We’re just getting started. And I think we’re humble.” (May-20) [108]

On what responsibility he delegates: “Finance. Our CFO does 99% of finance. I engage because I want to know how we’re doing. But to say I don’t add value to her operation is an understatement. You can also say the same with technology. Our CTO doesn’t get any help from me. I’ll go sometimes months without talking to our CTO, which as a CEO of a technology company, that’s kind of rare. I try to add value on the culture stuff. I care about people. I care about how people are feeling. I care about how people are getting along and the team spirit and the intangible of how our team is feeling. It’s something I’m passionate about.” (May-20) [108]

On culture at Peloton:

“We actively talk about failure and fail fast and creating a culture where failure is accepted and it’s applauded. It has to be a commitment from the top, it has to be talked about and celebrated… we do fail at Peloton all the time.” (Jan-18) [68]

On how he motivates people: “So, one of the biggest things is you give them autonomy. We have every hot shot, smart; you know, most of the people at the company -450 people, are smarter than I am and just as ambitious; so giving them the autonomy to run and to fail and to have a big piece of… we talk about a lot of these bigger companies that software engineers or other could go work for, they have a much bigger opportunity because Peloton is a smaller company so they have a big piece of the stake and we give them autonomy. We secede their failures, they learn on the job, they are not told what to do, they are given a direction and it’s kind of what you or I would want if we were 25- that type of opportunity to shine, really and do what you love to do.” (Jan-18) [68]

“I hope they [employees] say it's the best place to work in the world, and it's the best place they've ever worked. We work very hard to try and create the best place to work with the best culture. You'd think, if you're an engineer, it's the best tech stack, it's the best progressive HR, mission-driven culture, the right Kind bars, the right IPAs on tap, the right Aeron chairs, the right architecture of the office. The right leadership, the right category, the right pre-IPO currency, the right growth, the right growth in your own career opportunities, and the right growth for the company, the profile of the company… You hear these things, "In order to win in the marketplace, you must first win in the workplace." I think that's more true today than ever.”(Mar-19) [84]

On what kind of people he hires: “There's a mantra I heard at one point that I've stuck with is "hire specialists, promote generalists." In order to succeed at Peloton, I look for those people that are the micro-leaders that are carrying the torch on all the agendas that I care about. The entrepreneurship, the fun, the supportive, great culture, and those are the people that rise up at Peloton, I believe.”(Mar-19) [84]

A lot of companies, after an IPO, find that the culture is different. What are you doing… to make sure that the company stays the way you want it to stay?
“This is the number one thing that I care about. We have a world-class VP of HR. A VP of people, Amy Stoldt, who is a 10 out of 10 and has crushed it for the past four or five years building us from 60 people to 2,000 people. We recently talked to her and said, "Do you mind if we bring in somebody who is a chief people officer, who has taken a company from 2,000 to 20,000 and maintained a world-class startup fund culture?"
And she said, "I don't mind, I've never done that, let's go find somebody." So she checked her ego and was fine with being layered in a sense because she's so committed to what we're doing. And she and I are now ... The three of us with William [Lynch] are going to look for the best chief people officer in the world, who has taken a company from 2,000, 20,000, without any degradation of this fun, startup culture, which I care deeply about.
I want it to stay the same, and we're going to find somebody who's done it. And I will tell you, there's five or ten people in the world who have done it. You think about the great companies, the Googles, the Facebook's, the Netflix that have scaled in that sense and maintained culture? I will say some of them, some of the great companies that you and I study are no longer that, and have gotten too big. You hear about rest, invest, and some cultures just don't have that hunger and that dynamism, and that familial feel and the stuff that makes Peloton great today. I'm nervous that we're going to lose it in three or four years, especially if we transition into the public market. So it is one of the biggest things that I'm focused on right now.”(Mar-19) [84]

Other:

“The benefits of staying private would be not having to report quarterly earnings so you can invest more. You can be more innovative I would say as a private company, you can disrupt yourself and not worry about how that will destroy your stock.”(Jul-18) [73]
“We have built a team that I believe is ready to run a $500 billion company. Pick a number. A FAANG-style leadership team…” (May-20) [108]

References

1 New Startup Peloton wants to bring Spinning classes to your home

2 Peloton Bike: Excercise Bike With 21″ Screen Running Android On Kickstarter

3 SoulCycle Instructors may soon be underpaid

4 Peloton Cycle’s First Retail Store Opens in the Short Hills Mall

5 At-Home Spinning Pioneer Wants $7.5M For Village Penthouse

6 Peloton Closes $10.5M Series B Funding

7 Tiger’s Fixel Leads Investor Incursion Onto Venture Turf

8 Spinning a Narrative

9 Sweat Equity? Private Equity Firms Bulk Up Investments in Fitness

10 Peloton gives a new twist to the home workout with high-tech stationary bike

11 Peloton's tech allows consumers to attend cycling classes — without leaving their homes