Peloton, the stationary bike company, also known as the “Netflix for fitness” company, was a mere startup in 2012. But, in a very short amount of time, its meteoric growth had developed a devoted following that propelled the company into a growth curve that was hard to believe, until it wasn’t.
John Foley was an executive with Barnes & Noble in 2012. He perceived that workout sessions led by an actual instructor were more satisfying than merely going to the gym for a personal workout. His observation resulted in bringing instructor based exercises into the home. Foley obtained $400,000 of initial seed money, then secured another $3.5 million of Series A funding in 2012.
By 2013, a prototype had been designed and Peloton bike production had started. The initial objective of the company was to build awareness and create some revenue. Its approach generated an unexpected $307,000 in revenue. By April of 2014, Peloton pushed ahead, expanded its reach, and obtained $10.5 million in a Series B round of funding. It used that infusion of capital to improve the initial bike design and build more bike sales revenue. Bikes began selling at a consistent rate and later in the year, the company opened its first Peloton studio in New York City. The studios also happened to provide a location for its instructors to record video classes. Peloton was on a path of tremendous growth.
In 2015, only three years after Peloton started, another capital raise for $30 million of Series C funding was obtained. The objective of that funding was two-fold: Adding more retail locations and increasing bike production, all of which was needed to meet the growing demand for not only the classes but its bikes as well. By the end of the year, $75 million was raised for its continued expansion.
From 2016 to 2024, Peloton expanded its offerings with unlimited live and on-demand classes for a monthly fee. Subscribers could ride with or without a Peloton bike, which obviously added a huge amount of potential subscribers, resulting in a far greater potential market share and a significant potential revenue stream for the company. Their meteoric growth continued.
In September of 2019, Peloton went public with an opening price per share of $27. The initial offering was priced at $29. By December of 2020 it reached an all time high of $167.
The company grew at an astounding rate during COVID, since so many gyms were closed. Sadly, Peloton assumed their growth would continue after COVID. Unfortunately, it didn’t.
In 2021, however, the U.S. Consumer Product and Safety Commission recalled Peloton treadmills after numerous injuries and one death had been reported. The negative publicity which resulted put another damper on growth. By February of 2023 the stock price had tanked to $13.60. Plagued by lost equipment sales due to the recall and the unanticipated subscription decline post-COVID, its sales revenue and free cash flow continued to drop.
In hindsight, the company’s plan for continued growth post-COVID, based on their growth before and during COVID, was a catastrophic failure. John Foley resigned his position and Spotify veteran Barry McCarthy stepped in to replace him.
Sadly, the company is still struggling, even though its losses are shrinking, it is still not cash flow positive, as recently as the end of 2024 when its per share price was $9.07. It has stopped the manufacturing of its products and is selling off its inventory. Peloton has transitioned to become more of a software company that relies upon subscriptions instead of a diverse company that has multiple sources of revenue.
How fast is too fast? Peloton is an example of fast growth along with rapid decline. While Peloton faced two major stress points in their brief, but meteoric period of growth, they were unable to pivot in a successful direction when disaster struck. “Hindsight is 20/20,” as the saying goes.
While contingency planning is a critical component of growth, a strong argument could be made, in the case of Peloton, it was not only unable to pivot quickly enough when difficulty arose; it made some catastrophic decisions along the way, which resulted in a much longer road to recovery. Another key component to contingency planning for your company growth is to monitor and manage the results of your major decisions, once they are made, adjusting to market changes as conditions change, in order to maintain your upward trajectory of success. Obviously, in many cases, that is much easier said than done.