The inside story of Peloton, a fitness media company that was turned down by over 400 investors but is now worth $4 billion
- Peloton CEO John Foley estimates that his company was rejected between 4,000 to 5,000 times by investors.
- Now, Peloton is worth $4 billion.
- Foley reveals the struggles he faced securing funding for Peloton early on.
When John Foley first pitched his idea for a fitness startup called Peloton to venture firms along the storied, four-lane stretch of Sandhill Road six years ago, investors were wary.
"Every round, for six rounds," Foley said, recalling Peloton's first three years of fundraising. "Andreessen, Bessemer, Sequoia ... they passed again and again."
While Foley said that many investors expressed interest in owning a Peloton bike themselves, they were still hesitant to offer financial backing of their own. The company's plan was expensive and cumbersome: stationary, internet-connected bikes sold out of branded retail outlets, along with an online offering of subscription fitness classes.
"Most investors would say, 'Oh my gosh, the degree of difficulty is an 11 out of 10,'" said Foley. "They'd say, 'So what if you do all of this stuff and fail? You still don't know the market for this product.'"
Despite these rebuffs, Foley was unshakable. He was certain that his vision for Peloton was the future of fitness. Why wouldn't people want to work out the same way they did in a gym class but from the comfort of their homes?
Comparing Peloton's ambitions to those of fitness outlets or subscription workout offerings like SoulCycle or ClassPass isn't quite accurate. The company has no interest in spurring the next faddish fitness craze.
For Foley, the company's aspirations are much bigger: Peloton wants to reinvent the way people work out altogether.
A better comparison, said Foley, is to think of Peloton bikes in the same terms of potential disruption that video game consoles had over 30 years ago.
"In the '80s, you'd go to an arcade to play video games, but consoles changed all that," he said. "Today there are hardly any arcades. That's how disruptive we believe Peloton will be for the fitness market."
However, this vision didn't quite resonate with the investors Foley pitched.
"By my count, in the first three years I pitched 400 investors," said Foley. "I got 400 'nos.' The worst part is that we're not talking about 400 individual pitches. A lot of people would want me to come back four or five times and have me meet more partners and pitch again. I would say that I've been turned down maybe five or six thousand times."
Eventually, Peloton did get funding, but it wasn't through the blue-chip venture partners Foley had hoped for. Instead, the company was born from investments made by more than 200 individual angel investors who wrote checks of around $100,000 apiece.
It took only six years for Peloton's fortune to reverse. Now, the company is valued at $4 billion and recently closed in on a high-profile round of funding, which included an investment made by Kleiner Perkins Caufield & Byers.
"I would say that it took about five years for the really smart money to start getting involved," said Foley. "When Mary Meeker is calling you to say, 'Hey, I want to invest' - that's pretty cool."
Still, Foley admits that those years of rejection took a toll. After all, having some of the smartest minds in venture capital turn you down again and again isn't easy.
"I used to be a jolly guy," he said. "I'm still a happy-go-lucky guy, but after the years and the scars of the early days at Peloton, I've become slightly more cynical, more callous. It was rough."
Foley credits much of Peloton's recent success to the company's founding members, but also to his persistence and the faith he had his vision for the project.
"When you take your first check, you're either committed to raising money and building a great company or you lose the money," said Foley. "Failure was not an option. I decided I was going to raise the money, and I knew if I kept going, I could do it."