Peloton was turned down by 400 investors before it became worth $4 billion

Peloton

• 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.'”

A stationary Peloton
bike.
Peloton

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. 

Online fitness classes are
just one part of Peloton’s business plan.
Business Insider/Mary Hanbury

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.”