Peloton was a risky bet even among venture capitalists.
At its core, the company sells a piece of hardware with virtual cycling lessons, a model skeptics say is easily copyable. They aren’t wrong: As Peloton has grown in the pandemic, so have its rivals including NordicTrack and fitness equipment maker Nautilus.
Despite the naysayers, Peloton has managed to soar in the past year, posting profits and ever-growing revenue in recent quarters even while struggling to produce quickly enough to match demand. No doubt its ability to create an obsessed community has been much of its secret sauce to success.
But does the valuation match the hype? The bottom line remains, as my colleague Robert Hackett notes in the magazine: “The math of Peloton’s valuation—it has a market capitalization of $46 billion—is difficult to justify unless one believes the company will become a tech-media titan. Jay Hoag, a venture capitalist with TCV who joined Peloton’s board after leading a funding round in 2018, should know. An early investor and longtime director of Netflix, he compares Foley’s ambitions to those of Netflix CEO Reed Hastings.”
Peloton seems to be taking an approach where its hardware gets folks hooked on its content, with CEO John Foley calling its equipment “a Trojan horse” that leads consumers to subscribe to its classes. The company is also testing what appears to be a rowing machine. And, as content is king among streaming services, Peloton will also have to keep its classes compelling.
But picking a winner right now in the exercise tech space, is perhaps not the point. Like the streaming wars, the exercise equipment market doesn’t look to be winner-takes-all. And for now, Peloton’s success is perhaps also more of a boon to its younger competitors than not. Private market investors, especially in the later stages, base valuations off of public market valuations. And Peloton is that exercise-tech business that all investors allude to as a sign of potential success when they put money into a hot and new exercise equipment startup.
Peloton’s long-term success might have more riding on its shoulders than just the one company.
MOVING ABOUT: Angel investor Sriram Krishnan has joined Andreessen Horowitz as a general partner, the venture capital firm announced Wednesday. Having held roles throughout the years in companies including Twitter and Facebook, Krishnan has been tapped to invest in bets related to social networks. But users of the Clubhouse may also be familiar with the investor through The Good Time Show, a live audio series that recently featured a high-profile conversation between Tesla CEO Elon Musk and Robinhood CEO Vlad Tenev tackling the recent GameStop saga. That show, hosted in part by Krishnan, became a sign of what Clubhouse could become in order to match its now $1 billion valuation, with thousands tuning in.
A lot of a16z is present in the show: The Musk-Tenev exchange was hosted by a soon-to-be general partner of the firm, on a platform backed by said venture capital shop (Clubhouse is backed heavily by a16z), featuring the founder of one of its investments (a16z also is an investor in Robinhood). The firm’s media empire seems well on its way.
In a separate move, Parler CEO John Matze is, well, no longer CEO of the company. The details are still incoming, but Matze says he had a disagreement with conservative donor Rebekah Mercer.
Last year, prominent female-led Aspect Ventures broke up, with co-founder Theresia Gouw starting early-stage shop Acrew Capital. Now Acrew is raising a new fund aimed at bolstering diversity within the industry, not by investing in founders with atypical backgrounds, but by targeting limited partners with underrepresented backgrounds. Read more.