Disclaimer, all these thoughts and opinions are our own and our guests and do not belong to any entities we're involved in.
Also keep in mind we are active college students so any of this does not reflect active investment advice or counsel.
Yo Crockett, what would you do if you had a billion dollars?
I like where this is going.
Um...
I don't know, are there any caveats?
Yeah, one big one. You ended up losing 87% of it.
Alright, I don't like where this is going anymore.
Well what's your next move you think? You had a billion dollars and you lose 87% of it. What do you do next?
I gotta get that money back. Probably like, I don't know, going to finance, boring job, investment banking, something like that.
Um, I don't know, do you have any suggestions?
Yeah, what about, you know, selling carpets?
What?
Yeah, you know, carpets, rugs. Every house needs a carpet, no?
I feel like this is going somewhere.
Yeah, it's going somewhere.
I feel like this could make an interesting episode.
I think so too.
Alright guys, welcome back to Uninvested. Today we're going to be talking about John Foley, who is the ex-CEO of Peloton and his new venture, which sells custom carpets.
I'm Sahil Seth.
I'm Crockett Calloway.
And this is Uninvested.
Welcome back everyone.
Real quick in the beginning, thanks for the support on all the new social media channels. We've been trying to load up our Instagram, our YouTube is growing, our TikTok is growing actually.
Yep, follow us at un.invested on Instagram. We're posting funny short clips from the videos, got some memes up there.
Our memes are good.
All the good stuff.
Pretty good. And thank you again for the Spotify and Apple Podcast listeners for tuning in. Shout out to you guys, we never forget about you.
But let's get back to this. So, the idea today is John Foley, ex-CEO of Peloton and his new venture, which includes selling carpets?
Yeah, so it's called Ernesta. It's a new venture. So, for those of you who know the ex-CEO of Peloton, Peloton has gone through a pretty, you know, they've gone through a lot of turmoil.
Why don't we talk about that first, you know, the rise and fall of Peloton, you know. Sounds similar to when we talked about Adam Newman, you know, the rise and fall of WeWork.
This is not as bad, but I will say it's pretty bad.
Yeah. Let's give, I mean, I can give some background, right?
Yeah, for sure.
I assume most of the people listening, you guys know what Peloton is, the at home fitness bike and online fitness program company.
During the pandemic, they were huge. Let's give some background, right?
They got treadmills. They got treadmills.
They got treadmills too, but I feel like they're known for the bikes and the shoes.
Everyone likes to flex about them when you have them.
Yeah.
It's a big part of it. I don't know. I've never been on one, so have you been on one?
Yeah, I've been on one once, but I've never done it with like where you like have the giant screen, watch like the videos and like follow along.
It's usually like a normal like stationary bike.
Well, maybe it's good that we haven't used them because they're going through some stuff. I'll walk you through the background for the listeners.
So, the year is 2012.
Five people come together and they found Peloton. Those people include John Foley, who we're highlighting today, Hissow Koushi, Tom Cortese.
I have the names up here.
Graham Stanton and Yoni Feng. That last guy, Yoni Feng, he like met the rest of them because one of his roommates worked at the company where all the other founders worked.
They worked at IAC, which was a software and internet services company.
So they're like working like SaaS software center?
Yeah, basically. It still exists. Like their stock is up as of today.
So, you know, this company still exists, but they all quit IAC.
2012, they come together. They found Peloton.
They in 2013 go on Kickstarter and they released their first early bird bike.
Their like most expensive version was fifteen hundred dollars.
Really? Which I think that's like cheaper than it's like two thousand now.
I think the cheapest version is like two thousand.
Yeah, probably something crazy like that.
So, right. Humble beginnings. In the beginning, it said that Foley let the other guys kind of I think there's an exact quote.
The other guys took it, ran with it and built it while I was gone. And what he was gone doing, this is Foley in this case, was fundraising.
So he was leading, going out to investors. We've talked a lot on the show about there's the idea that, you know, investors have to pitch VCs just as much as VCs have to pitch.
Excuse me. Investors have to pitch founders just as much as founders have to pitch investors.
And so he was kind of the point man going out and pitching Peloton.
He was pitching or was he getting pitched to? Was he like?
Probably a bit of both.
Yeah, I don't think Peloton was that big, you know, like it is now.
Especially. No, you're definitely at that point wasn't that big.
But, you know, the point is from a financing perspective, he was the guy going out and trying to raise capital on their behalf.
So they start shipping their bikes in 2014. Again, slow rise.
Twenty eighteen, they start to pick up a lot of momentum.
As of twenty eighteen, they'd raised more than half a billion dollars in VC funding.
The five hundred and fifty million in VC funding that put them at a valuation of four point one billion.
That's crazy. All that funding, like even before the pandemic, everyone stuck at home and like essentially forced to use, you know, home exercise units like a Peloton.
They were already the market was already primed.
They were already like there was a rising interest in at home work.
So COVID was like a gift to them almost. Oh my. It was like the layup.
They like really just fast tracked them. Beyond the layup.
So so here's the thing, Sahil, and like you pointed out, it's a brilliant segue.
COVID happens, right? People can't go outside. Yeah.
I'm sure many of our listeners know this Peloton skyrockets to a point that actually in twenty nineteen they IPO.
Yeah. An IPO is an initial public offering.
So that's when me and Crockett go out. We could become, you know, owners of Peloton now.
Yes. So now at this point, you can buy a share of Peloton.
It's what's known as it's now a public company before it was a private company because anyone can go out.
They IPO at thirty dollars a share. That means you can buy one share of Peloton is thirty dollars.
I know there are some like Schwab lets you buy half shares and like you can buy like Robin Hood. Right.
You can buy like a fraction of a share. Yeah, exactly.
So you could go put a dollar into into Peloton. You wouldn't own much of it.
But they started off in COVID. Thirty dollars a share at the height of COVID.
They're trading at one hundred and seventy one dollars a share.
Yeah. And that's that's what John Fowler becomes the billionaire. He gets the B. Yes.
He hits the one B, which is which is where intro came out in the beginning of this.
Even before that, they'd hit unicorn status. Right.
Unicorn status again is a startup valued at least a billion dollars. Four point one billion dollar valuation.
So they're doing really well. Right. Since then.
And by the way, we just noted like COVID was a prime time for them.
Right. Because it's just it's it's everything Peloton will want. There's online classes.
You have a perfect at home workout machine.
You can brag to your friends about these awesome things you're doing at home.
And suddenly they want to up their like in-home workout space. It's perfect. Yeah.
And since then, how have they done so? Yeah, I know.
I think people were like, do I pay two thousand dollars to get a bike that doesn't move,
that sits in my house, but you know, I could go outside and run, you know, just as good going to bike outside.
It's nice. And I feel like, you know, after a couple of people really cooped up.
So it's like, I don't want to spend more time at my house than I have to.
If I go to a gym, finally, I might as well just go out and get myself a membership, which is exponentially cheaper.
Maybe like thirty dollars a month. I like a lot of gyms.
They can get more expensive, but nowhere touching two thousand dollars.
So it's almost like you can tell the future because that's exactly what happened with Peloton.
They ended up their stock ended up taking at one point.
Their stock was trading at like six dollars and sixty cents a share.
Mind you, like I just said, they IPO to thirty dollars a share.
At one point, they were at one hundred and seventy dollars.
So you can one share is one hundred seventy dollars. You're going down to six dollars.
These days, they're consistently trading below their IPO price.
So they're less than thirty dollars just this year. Companies laid off reportedly more than five thousand employees.
They lost their top four executives.
I mean, that's nowhere near what Metta just Facebook Metta, whatever you want to call them, just laid off.
Eleven thousand people. Yeah. Just, you know, one weekend and then Twitter the weekend before.
Everyone's here. That's here. The thing is like everyone's going through tough times right now, especially.
But I think when you look at Peloton, like this is a business who made their profits off the pandemic that, you know,
obviously, covid still going around. There's no denying that.
But the height of their success, the environment that they operated in is gone.
Metta is just like, look, crypto is here to stay.
And if he's here to stay, the metaverse is here to stay.
They're just going through tough times, especially given like the recession. Yeah. Fair enough.
Would you blame Foley like you think it's his fault?
Do you think it's just like, you know, company blew up?
Look, you know, got too big or I think he had a little bit of poor leadership there.
You know, I don't think he really had that, like took full advantage of that growth and like anticipated for the downturn.
No, I think you're right. Like there's room for foresight.
There's room to look at his own success, be aware that the pandemic is what's contributing to it.
Yeah. And maybe make like a strategic pivot.
What is it? Just for our listeners, what is a pivot in the VC and entrepreneurial space?
Like define pivot. Well, pivot can be in celebrate things.
You know, it could be changing of ideas, changing the business, really just a change.
We'll call pivot a change. But specifically Foley had a very big pivot in what he's doing with his life.
He had a life pivot. What's that?
So now he's going to see he just started this company, Ernesto. So he quit.
So he's done. Yeah, he did quit.
We came under a lot of scrutiny. It wasn't like, you know, putting on my own accord.
It was like people are like, listen, like this company is failing. We need new leadership.
So he quits. And by the way, he's not quitting it like just any time.
There's reports right now that like Nike, Apple, Amazon are interested in actually purchasing and buying out Peloton.
Right. So he's like he's feeling a lot of external pressure at this point.
He's a hard and entrepreneur. He's a hard and leader.
Actually, before he had left ISE to go found Peloton, he was the president of Barnes and Noble for a little bit.
Oh, wow. I didn't know that. Yeah. So he so he's he's a hard and leader.
He's he's no newbie. So he's well.
So it's like a founder and like a proven CEO. Yes. OK. Well, proven.
I mean, prove scale company. Well, I mean, what does he prove exactly?
Yeah. I mean, we could say like Adam Newman is proven.
They're able to scale it, but, you know, consistency was that they will call it.
So so he leaves just like Adam Newman at his which we'll talk about in a second.
He leaves and he found Ernesta. What's the current status there?
So this raised twenty five million dollars in a series day.
So basically like one of the first big funding rounds will call it by a lot of his old investors that invested in Peloton.
So he kind of used his network, used his connections to get more money for his new idea.
This is kind of brings back to that point about Adam Newman of these venture capital firms really having faith in these founders, knowing the team itself, not just the idea.
You can have a great idea, but these firms also have to have a lot of faith in the people backing the idea.
And that's that's also the role of like an active investor.
It's like you back the person, you back who they are, you back the concept that this person is going to go on to do bigger and better things.
Yeah. And they're going to keep being successful and entrepreneurial.
And you stick with which is what which is what, for example, a true venture is doing.
Exactly. True Ventures in addition, you know, both the both the people that, you know, love those companies were early in on Peloton.
You know, their series B and C round. So they're very accustomed to Jack Foley.
They have a lot of faith in him. They think he's going to scale his business.
But, you know, it's kind of hard to imagine that this custom rug idea in like this recessionary environment got twenty five million dollars.
There's got to be something more to it. There's got to be something special.
Look, are people like to get more context what the company does essentially instead of, you know, going to like Home Depot Lowe's buying like these generic carpets they sell in bulk.
You know, you know, it's like going to a pottery bar and getting like a specialty rug for your house instead.
And the idea is that they're all they're all a custom cut. Right. Yeah. So they like whatever that means. Yeah. I don't know.
They buy like they like lots of carpets, I guess, and cut them and do everything themselves.
But I don't know. Makes me think like, is that the number one people are like worrying about now? Like gas prices are really high.
I think you're going to save to buy gas for your car rather than buy a new rug, especially like for first time homeowners.
Well, what I'm curious about, too, is we keep questioning like whether or not this is a good idea.
How can you justify pivoting from like a massive like something in the fitness industry, which is like a booming industry?
Yes. That's tech slash tech industry. Right.
I think there's got to be another angle on this carpet. Like what is their next product? Like are they trying to sell something else?
This is just like the beachhead product for those of you that don't know.
The beachhead is like kind of like how you enter the market, how you like grip your customers before, you know, selling them something else, selling them more products, really like hooking them in.
Because what I have a hard time forgetting about right now is, look, he was the president of Barnes and Noble.
Barnes and Noble is a B2C business. B2C means business to consumer. And so you're a business, you're selling things to consumers.
Other other types of businesses are like B2B. You're a business who sells a product to another business like software or something like that.
So we use B2C, business to consumer at Barnes and Noble. Then he goes to Peloton. That's a B2C business as well.
He knows the space. Yeah, direct to consumer. He's selling just to consumers, not to other businesses.
Direct to consumers. So he obviously knows like the times when B2C businesses work, when they succeed, the team you need.
So he's clearly seeing some. And so Ernest said this rug business, the carpet business, it's a B2C business as well.
So he's clearly seeing. So he knows the space. He knows people. He knows how to sell retail.
It's a very different product, you might say, but same industry will call it. It's also like an at home industry too, right?
Yeah, exactly. Just like Peloton. It's like big assets, expensive assets. Rugs aren't cheap.
You know, when I first rented out, when I first rented this place, I had no idea how expensive rugs were.
Much more expensive than I initially thought. So it makes me think this is like this is gold undercut the rug market and sell like mass amounts of cheap prices.
I guess, but still like it's not like he will. His claim is like pitches is like people are going to protect the hardwood, hardwood floors under number one assets.
No one asked it being their home. But I don't know the future. I see people buying homes less and less, you know, interest rates touching right around seven percent.
Only going to climb, you know, the Fed, the people that control the interest rates are just saying, you know, they're not slowing down at all.
They want to slow down spending and they're going to keep raising the interest rates. And that means buying a home ultimately is more expensive.
They cut like for every dollar you put on your home, it's more than just that dollar. You have to pay that interest rate on it.
So then. OK, so my question to you is that this is just speculation. Yeah.
So in a time when people are concerned about their home value, they have less purchasing power as well.
Like, do you want to be upping the value of your home by purchasing a rug?
Because now you're making this space nicer, like if you're buying a place where they're not, you're buying a place with or without furniture.
If you're showing a house and there's a nice rug in the house, home value goes up.
Or is it that like maybe this is dangerous because you're already worried about the amount of money you have, you worried about your home value.
Why are you going to go spend money accessorizing your house? Exactly. That's what my thoughts.
That's exactly my thoughts. Why would I go buy? It just seems extra.
There seems to be like no demand there for carpets, like as people have less demand for spending carpets going to go right down with it.
It's not like carpets have this steady inelastic demand that's going to be persistent over time.
I feel like one of the first things to go in this room is going to be the carpet. It's not going to be the couch.
It's going to be the furniture. It's going to be the first thing we're selling when our house goes under is we're selling our carpets.
Yeah, like none of you can see the carpets, but you can all see the couch if you're watching, of course.
But I mean, this makes me think too, right? Is like we keep going.
We have so many questions for him at the end of the day.
There are VC firms that just raised twenty five million dollars for him.
So we must have picked something special to someone. Yeah. Right.
Because you can be an active investor, but the end of the day, you're going to you're going to question things.
You're going to do your due diligence. You're not just going to accept his idea for a just like a completely.
Your custom rug business. Right.
The other thing I keep thinking about is he had a little bit of foresight when he was doing Peloton. Right.
Like he must have explored this market of people increasingly doing at home.
Yeah. Fitness industry itself.
He knew he he had ideas that people didn't have about like where space was going. Yeah.
Is there a certain direction that like the rug market is going?
I wonder what like the average lifespan of a person buying a rug is.
Do you buy a rug keep that for the rest of your life? Like a custom rug?
Mm hmm. Like how long do you keep like a custom rug?
I would imagine you keep it up. Right.
That's like you're customized. You're putting value into it.
Like but then you don't have a lot of repeat customers.
I mean, I guess you buy a rug for like every room in your house.
But that customer is not coming back.
You don't really have to like sell something like we're like Peloton.
You have two thousand dollars. Super high churn. Right. Yeah, exactly.
And let me. Yeah. So churn, by the way, in entrepreneurship in VC is.
So there's retention and churn.
Retention is the people that stick with your business and keep doing it.
Churn is the people that churn out of your business.
Yeah. And they're no longer customers to your business.
And so when we say that they have intense churn here, it's like you're buying a rug once.
And then you never buy from them again. You're never using this business.
Unless it's like a subscription, you know, like you you pay 30 bucks a month to keep your rug.
Yeah. And then as soon as you don't pay the 30 dollars, someone knocks at your door, pulls the rug out of your house.
Yeah. I mean, what's crazy to me is they don't even have like a product.
They haven't even established like maybe they've gotten like deals in contracts that can make cheaper rugs.
But it's not like they have listed a rug, shown a physical product, having a custom rug that is cheaper.
I mean, what happens when you go on the website right now? Like what's the website?
Yeah. The website does have like any information.
Just like, oh, join our newsletter, you know, sign up for your information.
News will launch like in the spring or something. Right.
I mean, there's pretty much nothing. Which I mean, you know what this exactly reminds me of?
Speaking of nothing on it, we have talked about in a previous episode is Adam Newman.
Yeah. Right. Like, Adam Newman, founder of WeWork, like we talked about in a previous episode.
We can we can roll the clip for everyone listening.
Adam Newman, famed and somewhat failed CEO, has just had a massive recent 350 million dollar investment
backed by his same former lead investor, Anderson Horowitz, for his new company, which people are widely speculating about.
Yeah. So so there you heard it. Adam Newman, extreme parallels here.
He goes on to found his next real estate venture and there's no information on it.
And there's very little information about Ernesta here, too. Exactly.
Like are they operating in stealth or like are they just still too early for any product to be out there?
I don't know. Because at the end of the day, right, like you're a new founder.
You want a certain degree of stealth, especially when you're you have so many eyeballs on you.
Yeah. Like John Foley does here.
Like people know he has good ideas.
It's he's clearly afraid that like as soon as he releases any information, it's going to get copied,
which happens with every single business out there. Exactly.
What do you see is like the differences between what he's doing versus what Adam Newman has also done?
I don't know. I mean, there wasn't really that much like press on.
If you're not really following like V.C. News, like you would have no idea that the ex-CEO Peloton is starting to start.
You know, but I guess like that's twofold just because the amount of money he raised was three hundred million dollars.
And Peloton, unlike we were, didn't like lose people billions at the top of the people lost a lot of money.
But it wasn't like a complete failure like we work is today.
But I guess the parallels would be like between the two people themselves just like using their like charisma to go out and give themselves a second chance.
But I don't know, are they owed that? Like do they have the ability? Like should they get this chance?
Look, I I deaf. OK, in my opinion, I think this is really different than we work.
I think that John Foley is is owed this experience.
He can continue on. He can continue on and like found a new venture.
It's very different than Adam Newman, like Adam Newman made a lot of poor leadership decisions in we work.
Of course, then, like even if if it was heavily like dramaticized and there was we crashed, like even if that stuff wasn't completely true,
that's how people see him now. Right. And you can't help but like changing people's minds.
John Foley didn't make any like direct like maybe he didn't have the foresight to anticipate that the end of the pandemic would also lead to kind of a decline in Peloton.
But like that's something a lot of people could have made a decision like to do the exact same thing.
He's just doing the best he can. I don't know.
It's like that's so he didn't do like promise anything like fake dreams.
I think at the end of the day, this is a lot just more interesting to me than it is like scary.
Like Adam Newman stuff scares me scary like giving him three hundred million dollars.
Scary. Yeah. Terrifying. This is this is just you're having nice active investors stick with you, giving you another twenty five million dollars.
He made a safe exit from the company. It wasn't a contested exit from the company.
Maybe the like the status he left Peloton was contested. But yeah, it feels pretty.
Yeah. I mean, twenty five million like to us, that's like a lot.
That's a lot of a lot of money. But like to these firms, you have to think about it.
They have to like they have to spend all the money in their funds.
They have to like deploy that capital, we'll say, and give it to entrepreneurs.
You know, they have billions of dollars to get twenty five billion like is a big check size, I'll say.
But, you know, in the grand scheme of things, they're allowed like they have the ability to take that bet.
Right. It's also like it's a big check size. We don't know what kind of valuation they have yet.
So it could I don't know, it could really be anything at this point. But what we'll do is like look, we'll probably continue to post updates about this on our on our Instagram and all of our social.
They're expected to launch or Nessa officially in the spring. So yeah, we'll keep up.
They may we'll do an update episode on how our nest is doing. Maybe if it's cheaper by our custom rug, who knows?
Oh, maybe we should do an Arnessa review. Oh, yeah, that'd be fun. We'll get like a little uninvested rug or something.
Let us know. Give us a give us a comment in the YouTube or on the on the Instagram or any of our platforms and a little bit of review on it. Yeah.
Good stuff. For sure. Well, hope you guys enjoyed the episode.
Sorry to John Foley for getting the rug pulled out under him. No pun intended from Peloton.
But as always, I'm so Sahil, I'm Crockett Calloway, and this is Uninvested. Thank you.