Apr 29, 2019 · 53m · how-i-built-this
Live Episode! Peloton: John Foley
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this live episode of How I Built This, host Guy Raz interviews Peloton co-founder John Foley on how he overcame hundreds of venture capital rejections, manufacturing setbacks, and personal doubt to build a multi-billion-dollar connected fitness empire.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 30.7% of the talking time here. How this is scored →
Guy as informed peer 1.8 Guest teaching 2.0 Guest disagreement 0.4 Guy pushing back 0.7
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 46:05 Foley pushes back on profitability claim
Foley directly refutes Guy Raz's assertion that Peloton was profitable by 2015, explaining that they never truly turned a net profit due to reinvestment.
Hardest push from Guy ▶ 27:16 Raz justifies investor skepticismGuy Raz challenges Foley's critique of venture capitalists by pointing out the extreme expense of hardware and the absence of category market data.
Biggest teaching moment ▶ 46:05 Foley educates on hypergrowth reinvestment vs profitFoley breaks down the mechanics of unit margin visibility versus actual accounting profitability in a business rapidly reinvesting cash flows.
Guy holds their own ▶ 27:16 Raz articulates the investor perspectiveRaz demonstrates industry knowledge by countering Foley's frustration with VCs, highlighting manufacturing capital intensity and lack of pattern recognition.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Announcement of Live Show in Portland | 0 | 0 | 0 | 0 | Introductory monologue and promotional announcement for a live show in Portland, followed by standard podcast show framing. | |
| Early Manufacturing Career at Mars | 1 | 1 | 0 | 0 | Guy prompts Foley about his early manufacturing background at Mars in Waco, Texas and Los Angeles. The tone is casual and narrative. | |
| CitySearch and Attending Harvard Business School | 1 | 1 | 0 | 0 | Foley reflects on moving into tech at CitySearch and being intimidated by peers before gaining confidence at Harvard Business School. | |
| The Dot-Com Bust and Revitalizing Evite | 1 | 1 | 0 | 0 | Foley discusses losing his post-HBS music job to the dot-com crash and taking over a drastically downsized Evite under IAC. | |
| Barnes & Noble and Entrepreneurial Ambitions | 2 | 1 | 0 | 1 | Guy presses Foley on Barnes & Noble digital division losses and asks what he specifically meant by wanting to be 'big.' | |
| Identifying the Boutique Fitness Opportunity | 1 | 2 | 1 | 0 | Foley explains how boutique fitness scheduling bottlenecks made him realize the massive potential of a distributed digital model. | |
| Pitching Mentors and Assembling Co-Founders | 2 | 2 | 0 | 1 | Guy playfully challenges Foley on recruiting co-founders who were either moonlighting or unemployed. | |
| Raising Early Seed Capital from Friends and Family | 2 | 3 | 1 | 1 | Foley gently corrects Guy's premise that hundreds of seed investors were involved, clarifying it was just eight people before explaining why they built proprietary hardware. | |
| Rebuffed Partnerships with SoulCycle and Flywheel | 2 | 3 | 1 | 1 | Foley explains failed partnership discussions with Flywheel and SoulCycle and corrects Guy on the nuance of Ruth Zuckerman leaving SoulCycle. | |
| Prototyping in Taiwan and Pitching Skeptical Investors | 2 | 3 | 1 | 0 | Foley describes sourcing manufacturers in Taiwan and notes Silicon Valley VCs' blind spot regarding indoor cycling trends. | |
| Overcoming Severe Self-Doubt and Mid-Interview Break | 3 | 2 | 1 | 2 | Guy pushes back against Foley's frustration with VCs by articulating the high-risk hardware profile and lack of historical market data. | |
| Prototype Failures, Kickstarter Flop, and Pricing Discovery | 2 | 3 | 1 | 1 | Foley details early prototyping failures, disguising bike wobble in Kickstarter videos, and discovering that raising the price increased demand. | |
| Building a Makeshift Studio and Recruiting Top Instructors | 2 | 2 | 0 | 1 | Guy highlights the complex operational burden of hardware, software, and TV production in a tiny office, while Foley shares instructor recruitment stories. | |
| Testing Retail at the Short Hills Mall | 2 | 3 | 0 | 1 | Guy questions opening retail in declining malls, while Foley explains how Short Hills pop-up kiosks drove sales and how cloud hosting answered bankruptcy fears. | |
| Hands-On Mall Sales and High Personal Strain | 2 | 2 | 0 | 1 | Foley explains his high-conversion mall sales technique and candidly shares the extreme psychological and marital strain caused by near-insolvency. | |
| Transforming into a Media Empire and Achieving Scale | 3 | 4 | 2 | 2 | Foley firmly rejects Guy's claim that Peloton achieved early profitability, clarifying that cash was continuously reinvested into growth. | |
| Long-Term Vision, Scaling Culture, and Future Growth | 2 | 2 | 0 | 0 | Foley details the long-term vision using an arcade-to-home-console analogy and highlights scaling internal culture as his chief worry. | |
| Personal Finances, Luck, and Advice on Risk | 2 | 1 | 0 | 0 | Guy asks his standard closing questions on luck versus skill and advice to younger entrepreneurs, with Foley emphasizing public commitment for accountability. |
Statements from this episode (22)
Foley: Mars Waco plant produced six million Snickers daily
“We made six million Snicker bars a day.”
Foley: HBS showed no one is significantly smarter than anyone else
“It did in many ways changed my trajectory, because it gave me the confidence to know that no one is that much smarter than the next person, and everyone's trying to figure it out, and so it was a transformative opportunity for me to go.”
Foley: IAC acquired Evite for $3M and cut staff from 120 to six
“And I think we bought it for three million dollars, because it was 2001, and everything had crashed. And so, it had, at one point, a 120 people. I got it down to six people.”
Foley: Competing Against Amazon in Core Categories Is a Nightmare
“Trying to compete with Amazon 15 years late. I mean, you don't wish on your worst enemy competing against Amazon in their core category, right?”
Foley: Fitness instructors matter more to customers than the studio
“Sometimes you're say yoga, Your yoga instructor is more important than the yoga studio. If your yoga instructor went to a different studio, you might follow him or her, and so the content really is, is important”
Foley: Peloton raised a $400k seed round at a $1.6M pre-money valuation
“The seed round was relatively easy. It was 400,000 dollars At a 1.6 million pre money valuation, so two million post.”
Foley: Pure Software Companies Are Easiest to Build and Fund
“A pure software company is easiest to do, and it's easiest to raise money for. Every venture capitalist is looking for the next Instagram platform. Where you put 250,000 dollars in, and 18 months later it sells for a billion dollars.”
Foley: Fitness Equipment Industry Was Incredibly Dopey With No Tech or Design
“The fitness equipment category is incredibly dopey. No tech, no design, and just, it didn't feel like there was a bike that met the bar of the, of quality that we wanted.”
Foley: Relying on Third-Party Hardware Cycles Makes Products Obsolete
“I don't want to be that company that looks so dumb, because your product is made irrelevant based on some other company's hardware cycles. And so I said, I think you've got to make the tablet.”
Peloton reached term sheet stage with Flywheel before deal fell apart
“And we got a couple weeks into a term sheet with Flywheel and then they backed away. They'd just gone through a financing round, and it didn't make sense with their new investor.”
Foley: Early Peloton team got kicked out of Flywheel and SoulCycle
“Well, we all of us very quickly got kicked out of Flywheel and SoulCycle.”
Foley: 400 institutional investors rejected Peloton before 100 angels gave $10M
“We have a hundred angels to get the first ten million, but in order to get a hundred angels at my success rate, I probably pitched 3000 people. And then the fourth, the 400 institutions that all said no.”
Foley cleaned Peloton's bathrooms and vacuumed daily for three years
“I cleaned the bathrooms and I vacuumed every day for three years in this little place we had, and I kept it clean because We couldn't afford a cleaning office, and I didn't want anyone else distracted with the cleaning”
Foley: Peloton's first prototype was manufactured 40% too large
“There was a little scale problem where the first prototype was about 40% too big.”
Foley: Half of Peloton's 200 Kickstarter buyers were existing investors
“And 200 people I guess we raised 300,200 people bought, and a hundred of them were investors.”
Foley: Raising Peloton's price above $1,200 increased sales velocity
“We started pricing it at 1200 dollars, because it was just over 1200 dollars was our cost, and we're like, let's price it at cost, because we have the subscription digital content business model that comes afterwards, so we don't need to make any money, and we…”
Foley: Venture capitalists focus on minimizing risk rather than taking it
“You think venture capitalists, you know, want to have a vision and take risks, but you're absolutely right, guy. They minimize risk, and you get it if they're shepherding your capital. They want minimal risk”
Foley: Peloton converted 50% of mall shoppers who tested the bike
“Generally, if I could get somebody on a bike, honest to God, I got to a point where it was There's a fifty-fifty chance that you're gonna buy the bike, even though you just heard of it.”
Foley: Peloton amassed a 300-person cap table across its first five rounds
“The Series E, I mean, the date was two years ago, effectively, when investors started to really see it, and we actually turned down, I mean, for the first five raises, we took every dollar we could from anybody.
And that creates a cap table of 300 people, inst…”
Foley: Peloton will be one of the special companies of our generation
“I think if we do it well, this will be one of the special companies of our generation.”
Foley: I Bought Houses for My Parents and In-Laws
“I spend money as fast as we get it, and I bought my parents a house. They didn't have any money bought my parents a house, and we just recently bought my in-laws a house and so I am, you know we don't have much money in the bank account still, because I'm, eve…”
Foley: Telling People You're Launching a Startup Creates Accountability
“Putting the energy out there and telling other people gets a little, gets the momentum going and holds you accountable. And I thought that was a, that was an important thing for me having the courage, which is basically, I just, I had to deliver on my promises…”