
Peloton raises $550M at a valuation of $4B - huac
https://techcrunch.com/2018/08/03/peloton-raises-550m-at-a-valuation-of-4-billion/
======
dmode
This, right here is our Pets.com moment. The TAM for a $2k bike + $40/month is
hilariously small. Think about it, you would need a decent sized home to fit
one of these bikes. That rules out 90% of the world who live on 1-3 bedroom
apartments. Next, there isn't any new disruptive technology being introduced.
It is a bike and can easily be replicated. The value of "community" is
overrated. Lastly, their competition is FREE. You can go running and biking
outside. It is nice out there. Even a gym subscription provides more value.

~~~
poulsbohemian
I don't disagree at all... but I thought Juicero was our pets.com moment.
Heck, I thought _uber_ was our pets.com moment, as it was significantly more
expensive than any taxi I'd ever taken. I'm still not convinced that my wifi-
connected thermostat is actually saving me money over my previous ancient
analog model, and that's significantly more useful still than so many other
things crying out for my dollars. With each passing month, for each new
startup promising us magic, I find myself wondering like Walter in the Big
Lebowski if the whole world has in fact gone crazy.

But, the question might be - ok, so yeah, it's a crazy valuation and raise for
what it is, but it is actually going to bring down the economy like we are all
foreboding? If WeWork or Peloton or even Bitcoin slide into the ocean with
their out of whack financials, is it going to make a difference for my
portfolio and retirement? So long as the answer is no, well... good for these
folks padding their own wallet then, I guess. I'll stick to a walk around the
block or the old fashioned "analog" bike.

~~~
seattle_spring
> as it was significantly more expensive than any taxi I'd ever taken

Either you don't live in the US or you have only taken Uber at 2x surge or
higher.

~~~
poulsbohemian
It's actually ironic that your name is Seattle_Spring, because I'm talking
specifically about a Seattle experience. Flying into Seattle and taking a taxi
or using a town car service downtown was at least formerly, much cheaper than
what I have gotten on Uber / Lyft, to the point I've just gone to using the
light rail even though it is slower to my destination. $65 on Lyft vs. $35 by
taxi / town car, from my most recent experiences.

------
infecto
I think there is an number of unfair criticism against the company. I am not
here to argue about the valuation, I have not examined anything about the
financials of this specific company BUT I do think these companies are hitting
a sweet spot in this market. This company is not selling you an exercise bike,
they are selling you the community surrounded from the classes. There was an
interesting talk by the founder of Peloton regarding religion and community.
His argument was that many areas of the country have largely transitioned away
from being religious and the one downside is people lack community that
religion used to provide. People are replacing this with fitness communities.
Look out how people treat SoulCycle or CrossFit as if it was a religion. They
don't go there just or the workout but also the community of people.

Companies like Peloton are trying to extend this relationship into the house.
SoulCycle classes are expensive, $2k for a spin bike is not terrible, I would
be surprised if the margins are not huge on this. So if I were to signup for
Peloton I would not blink at the cost of the bike. $40/month for a
subscription is also cheap when I compare it to things like SoulCycle. Sure
its different but I am also able to workout at home.

I can see the value in these companies. Is $4b too high? Perhaps but I have
not examined the marketplace. I think last numbers were 600k subscribers and
they have no something like 29 physical retail locations.

~~~
scarface74
As I said previously, I have exercise equipment and I am looking at two more
pieces....

[https://www.nordictrack.com/exercise-bikes/nordictrack-
grand...](https://www.nordictrack.com/exercise-bikes/nordictrack-grand-tour-
pro-exercise-bikes)

[https://www.nordictrack.com/grand-tour-
bikes](https://www.nordictrack.com/grand-tour-bikes)

But even _I_ can’t justify $2000 for a Peleton bike.

On the other hand, when people ask me what exercise equipment they should buy,
my answer is usually “none”. I saw too many people who bought equipment and
never used it.

[https://www.nytimes.com/2009/01/06/health/nutrition/06well.h...](https://www.nytimes.com/2009/01/06/health/nutrition/06well.html)

~~~
infecto
Meh. Yeah of course, most people don't need to buy exercise equipment but I
feel that these newer products are filling a religious niche that were not
filled prior with normal exercise equipment.

I could not specifically compare the two but I think you are buying into the
workouts not just the bike. But just on initial view the peloton looks better.
Magnetic vs flywheel. The workouts on peloton are night and day difference
with a much higher level of quality as their are live streaming daily.

Is it an expensive bike? Yes Is it for everyone? No Do people need to buy
exercise equipment? No.

Disclosure, I don't own a Peloton but own bike trainers. A good bike trainer
is going to cost $400-$1k and that does not count my road bike. When I see
peloton I don't blink at $2k if it was something I was going to be using on a
regular basis.

~~~
scarface74
Magnetic bikes are supposedly quieter. Which is a big deal since my home gym
is a converted bedroom close to my son’s room.

------
cellis
This is pretty insane. I've used the Peloton bike because there's one in my
apartment complex. It's a really nice exercise bike ( very stable, smooth,
continuous pedalling without locking up ), but the tablet/software they attach
to it left quite a lot to be desired. For instance, the UI is very clunky and
I couldn't even figure out how to turn off the damn music. It's hard to just
set a "free form" type of ride ( instead, you have to use their "classes" \--
basically a video of someone telling you whats happening during the ride,
whether or not you're in sync with the cadence ). I don't think it would take
much for one of the better bike manufacturers to duplicate the "nice bike"
part, and the UI should honestly just be a bluetooth to your phone with a
mount.

~~~
majormajor
I don't know if it has long term legs or is just an (extended, at this point)
fad, since I've never used one or done soulcycle or whatever, but all the
stuff that bugged you about it is the selling point. The hook is that nobody
ends up using standalone just-do-what-you-will fitness gear (I do have
experience on this side!). Some level of "training" programming has been much
more effective for a lot of people, and this is taking this outside the studio
into a broadcast form.

My suspicion is that once you take it out of the class setting you've lost
that hook, though.

~~~
chrisdsaldivar
I've had one for a bit over a year now and I really love it. You're exactly
right about the hook for this product. Before using the bike I've just stuck
with the same training I did in high school football because I've always
needed structure and a way to track progress. The bike classes are kind of
addicting since the instructors keep the tempo up (depending on the class) and
you have leader board showing with a live ranking. Even if you aren't at the
top it's still fun because you'll get used to seeing the same names around
your rank (if you're doing the live classes) and it'll push you to compete
with them. It's a lot like having a running group except you'll always have
someone that is around your skill level to compete with.

------
polskibus
For a moment, I thought that CMU's and Andy Pavlo's amazing database project
got serious funding.

[https://github.com/cmu-db/peloton](https://github.com/cmu-db/peloton)

I'm a bit disappointed now

~~~
googlemike
"The Self-Driving Database Management System" Lol.

~~~
hood_syntax
Is it satire? the rest of it looks legit so I don't know what to think.

------
evanagon
The thing I don't understand is that you can already do this for much less
money and arguably in a more fun way. Get a nice-ish real bike ($1,000), some
rollers or a trainer ($200), and a subscription to Zwift ($14.99/month). Zwift
allows you to create a biking avatar that rides around virtual racecourses
with other bikers who are also using the service (usually there are thousands
of people riding at any one time). You can do races, talk to other people, and
more, for a fraction of this cost. Plus you have a real live bike you can take
outside and enjoy.

~~~
dkhenry
I got a trainer for winter riding, and it ate my tires. Also a good spin bike
does a better job at keeping momentum which makes it feel more like a normal
ride outside.

I think like most things the amount of use really determines what you should
do. If you are going to ride outside most of the time, and just want an indoor
option then a trainer is a great choice, but if you are going to be riding
daily, spend the extra money and get a real spin bike.

~~~
radix07
You can even get a professional level Wahoo Kicker for $1200 (no tire wear),
have money for a mid-range bike and still save a ton of money month to month
with Zwift over Peloton's monthly cost...

Or buy a cheap training wheel and a $400 power meter and spend like $100 on
the trainer.

Why spend more for a spin bike when you can use a real one with just as good
or better power controls and feedback?

Point is Peloton is expensive indoors or out...

------
jqbx_jason
An anecdote: My father broke his collarbone (in a real bike) and I got him a
peloton to be a safer replacement. After about an hour of introduction to the
product he now uses it every day and so does my mother, who has never biked in
her life. I don't get the appeal necessarily but any new product that can hook
someone in their generation is positive signal IMO.

------
tdees40
Why do they need financing? How is a company that sells $2000 exercise bikes
not profitable?

~~~
LarryDarrell
I also wonder how big the market is for $2000 exercise bikes/treadmills +
subscription service... especially when consumer debt is already at a high.
Maybe they are thinking gyms/apartment fitness centers will buy them?

~~~
scarface74
It’s aspirational. People think if they have the “convenience” of working out
at home, they will be more disciplined. Few actually do.

But on the other hand, having scheduled classes and the social aspect may
serve as a commitmemt device.

------
iblaine
Small installments seem to be gaining traction. With video games, it's micro
transactions. With large ticket items, it's installments. I'd never expect an
exercise bike to be part of this trend but here we are.

------
paulcole
My mother once bought a treadmill. My dad described it as the world’s only
$1200 clothes rack.

I guess the hope for Peloton is that people will subscribe and never cancel.
Otherwise they’re just another treadmill company and I can’t imagine there’ll
be much VC interest in that.

But it’s one thing to spend a few thousand on a treadmill and regret it. It’s
another to spend a few thousand and then another $100 a month.

~~~
ronilan
I bought 3 treadmills over the past 6 years and ran [2 of them] till the
motors burned.

And this why they say: YMMV

;)

~~~
ibdf
a 2k treadmill only lasts 2 years? That's a bad investment.

~~~
ronilan
_> a 2k treadmill only lasts 2 years?_

Don’t know. Never bought a 2k treadmill.

(Simple treadmills last to 50c a mile. I think it is a reasonable price).

------
cm2012
I interviewed for a marketing position with them a while back. It seemed like
a team that really knew what they were doing. Good luck to them!

------
collinf
Like the other commenters, I had never heard of this either until reading the
latest funding round recently. Here's a summary from the WSJ[1] from
yesterday:

> Peloton, founded in 2012, makes a $1,995 stationary bicycle. Most customers
> use the bikes at home, paying about $39 a month to stream live classes that
> the company produces using its own instructors. The New York-based firm,
> which has showrooms around the U.S., plans to launch a treadmill this fall.

Part of the soul cycle bubble as well it looks like.

[1][https://www.wsj.com/articles/pelotons-financing-round-
values...](https://www.wsj.com/articles/pelotons-financing-round-values-
stationary-bike-maker-at-4-15-billion-1533255443)

~~~
ryanwaggoner
Why is it a bubble?

------
hayksaakian
Is it typical for techcrunch to assume the reader is familiar with every odd
startup they cover?

I've never heard of this company, have no idea what they do after reading the
whole article, and now I'm too frustrated to care.

All I got there was "connected treadmill"... ok?

~~~
stingrae
Peloton started with a connected spinning bike. It takes advantage of the Soul
Cycle fad ($30/class) and sells people a $2000 bike and a $40/month
subscription (for live streams of classes) with the idea that they will save
money over time.

More recently they released the treadmill.

~~~
raverbashing
> and sells people a $2000 bike and a $40/month subscription (for live streams
> of classes) with the idea that they will save money over time.

I can't say this phrase without cracking a laugh. Really.

$40 is an ok gym membership. All the treadmills and bikes you can ride.

~~~
tedunangst
Most gyms make you pay extra to have somebody yell "the pain is an illusion"
at you, though.

~~~
michaelsbradley
Not necessarily. At many YMCAs (in the US at least), unlimited group exercise
classes are included with a monthly membership. 3 days/week, I teach an early-
morning cycling class at a Y in St. Louis, using a "canned" format named
SPRINT:

[https://www.lesmills.com/workouts/high-intensity-interval-
tr...](https://www.lesmills.com/workouts/high-intensity-interval-training/les-
mills-sprint/)

~~~
scarface74
The Les Mill movement to canned classes was one of the main reasons I stopped
teaching classes part time. But to each thier own.....

~~~
michaelsbradley
Understandable. I've found that I neither have the drive nor time (busy
software developer) to create my own playlists and workout plans. I greatly
respect instructors who do that week in and week out!

I find what LM puts together to _generally_ be pretty good. I also teach their
BODYPUMP and CXWORX formats (used to teach GRIT as well). By experience, I've
learned that to keep class participants happy, it's best to rotate material
every 2–3 weeks. That keeps me and them from getting too bored of a workout,
but also allows them time to master technique and discover areas in which they
can push a little harder. LM publishes new stuff every 3 months, and I've
built up substantial catalogs of quarterly releases, so it works out pretty
well.

~~~
scarface74
I am also a software developer. When I first started teaching was back in the
days of Napster before iTunes. When the iTunes music store came along it was
like manna from heaven. For cycling, boot camp, and the occasional water
aerobics classes it was easy to put together a playlist just choose songs
based on the drills.

For classes where I had to stay on beat like step, cardio kickboxing (early
on, it was a fad), and general strength training, it was a combination of
buying 32 count aerobic mixes and creating my own consistent beat mixes music
with CoolEdit (now Adobe Audition).

I could find plenty of 32 count combos by going to other instructors classes
and turnstep.com.

My wife just started teaching for a local les mills type organization that has
prechoreagraphed workouts and she loves it and her classes do look fun
especially for people who naturally have rythym and can dance.

I had neither, but I could do pretty well to standard 128-136 bpm, 32 count
phrased music.

~~~
michaelsbradley
LM formats, at least the ones I teach, mostly consist "counts of 8". With
respect to beats in the music, each count is 2 beats. In BODYUMP, for example,
a "slow" clean-and-press is 8 counts (instructor can comfortably and naturally
say aloud 1-2-3-4-..., from start to finish of the movement), but it's
indicated on the choreography sheet as 2x8. In SPRINT (HIIT cycling), I might
say something like: "next interval is 25 seconds seated sprint, then 10
seconds standing power, then another 25 seconds seated sprint, then rest for
25 seconds". That equates to head-counting with the music of 8x8, 4x8, 8x8,
8x8; but strictly by beats would be 16x8, 8x8, 16x8, 16x8.

------
jbob2000
This is ridiculous, these bikes are a fad. The company will get sold to a gym
or furniture giant for pennies once people get bored and realize they paid
$2,000 for a clothes hanger.

I will say it's an interesting take on an old business. Furniture and exercise
equipment manufacturers have this problem where everybody buys their stuff and
they go bankrupt because nobody needs new equipment after the initial
purchase. So attaching the subscription business model to this might give them
a bit more longevity!

~~~
joezydeco
Think about how many people sign up for gym memberships and then never use
them _but_ keep paying the monthly fee.

~~~
Zimahl
Doesn't make gyms $4 billion businesses.

~~~
joezydeco
What other fitness equipment manufacturer has cashflow not tied to equipment
sales?

------
samstave
So... at $550MM in funding. Just to simply get the $550MM BACK from selling
the bike and getting users, that means youwould have to sell 183,000 NEW bikes
AND have them maintain 2 years of paid membership fees (24 months at $40/mo)

\---

So, then you assume some attrition of those users, which means you will need
to upsell the remaining users on some new products and continue to get new
buyers of these bikes and services.

You'll have to spend a fair bit on marketing, development and the general
maintenance of paying your existing costs/overhead etc...

I can't even come up with any fictitiously optimistic napkin math that would
make this work.

So, what do the Peloton people know that we dont know that allowed them to get
$550 MILLION dollars in funding? All theories welcome.

Heck, whomever it was that was able to get VCs to invest in this should be
selling their services to a ton of startups...

~~~
ryanwaggoner
Seems pretty obvious:

1) They're selling a ton of these bikes. I bet they'll sell another 200,000 in
the next 12 months.

2) They're selling even more subscriptions than bikes. They had 600,000
subscribers six months ago. That's basically pure profit.

3) They're introducing new products. A treadmill this fall, and I'd expect an
elliptical, a rower, and perhaps some other things to follow at some point.

------
ironjunkie
Some of my colleagues got one of those connected treadmills in California.

Seriously, why would you not go on a REAL bike ride instead of using an indoor
bike? Everyday is a beautiful day outdoor.

I'm all for tech, but in sport and fitness I think that sticking to the basics
that work well is a pretty good idea.

To me it looks like an attempt to capitalize on the crowd of geeks//nerds that
wouldn't do fitness otherwise by gamifying the product.

~~~
servercobra
Sometimes it rains. Sometimes it's really hot. Always, there's a lot of cars
around.

I generally agree and love to run outside, but I can easily see the appeal for
a lot of people.

~~~
ranic
And sometimes you have small children who nap, allowing parents a small, often
unpredictable, amount of time to exercise.

------
jotjotzzz
They sell these treadmills and bikes with video training and scenery on it. I
have no idea who is buying their products though.

I bet this is just another pump and dump startup.

~~~
SubuSS
Adding some context since you said you have no idea:

This is actually a huge market: Biking outside is dangerous/exposed/has real
terrain that may not be amenable for your current intervals etc. It works when
you do it for commute/weekend rides, but if you want anything like a training
plan, you need an indoor trainer.

Biking also is a rich (wo)man's sport nowadays: There are bikes you can get
for $10-15k and many folks (like software engineers) don't bat an eye.
Anecdotally, I personally have 5-6 bikes (one is in parts...) and add about
10k miles a year, and I am not even a racer at the lowest categorized level.

NOTE: I don't own a peloton, I have a wahoo kickr. Similar trainer without the
social aspects because I didn't care for that.

As more and more people start becoming fitness conscious / want an active
hobby - they are going to want a weekday option to keep up the fitness. This
is it.

Other companies to look at are Wahoo / Strava / Zwift / Trainer Road /
Training Peaks / Flywheel / Soul cycle / sufferlandria and a ton more I am
probably missing.

~~~
sonnyblarney
$2K stationary bikes + $50 a month is still a niche market.

~~~
SubuSS
So is $5 a latte. But seeing how Starbucks is doing - you can figure how this
market will play out.

The initial amount is steep - but I wouldn't be surprised if lease plans show
up very soon.

~~~
sonnyblarney
Coffee is ubiquitous and everyone can afford a $5 latte now and again. It's
easy to 'try once' and then to stay hooked. They have the benefit of chemical
addiction.

'Stationary bikes' are already a niche market to begin with, then add on the
crazy price and monthly?

Crazy.

The problem with regular financing is that these things have little to no
residual value, i.e. difficult resale. You can put a price on a used car so it
can be kind of de-facto collateral. Not Pelotons.

Don't any of you remember 'Bowflex'?

~~~
LarryDarrell
"Don't any of you remember 'Bowflex'?"

$50 or Best Offer. Every time I visit an estate sale.

------
davedx
No mention of what the company does?

~~~
Yhippa
Spin class you can dial in to. You have to buy the dial in apparatus for
$2,000.

------
supernovae
I wish a company would get valued this big on just getting people outside on
their bikes.

------
ebbv
$4B? That's insanity. I know it's a dead horse but valuations are totally
detached from reality.

------
sonnyblarney
I lived through the .com bubble and the last couple of years I feel warrant a
lot of comparison.

The tech bubble burst because of a 'spook' i.e. interest rate change and
massive bubble in the regular markets that needed to be cooled. So the smart
money fled first, the dumb money later, and things became difficult.

The underlying economic impetus these days is reasonable - but it could be
fudged any moment by Trump's 'trade wars' (I'm not saying anything about him
or the policy, just that there is risk), or it could be revealed that a
marginal shift in rates really does have a bad effect.

The all of the surplus 'lift' in the market evaporates and all of this gets
wiped out.

ICO's in particular are a really bad sign.

CEO's are currently trying to get in on the IPO market while they can - with
companies like Sonos popping on float day even with not particularly strong
fundamentals.

It's not that startup land is bad, it's just that fundamentals don't justify
the valuations.

These Peloton bikes and their services are _way too expensive_ for mass
market, and I'm not confident. It seems like one of many fitness fads to me.

Note: this is series _F_. At $4B Billion. This behoves the question, why not
public? Maybe because any amount of public scrutiny wouldn't bear such a lofty
valuation? It makes you wonder who's writing these big cheques. This is not
Uber or AirBnB which have naturally massive markets and cashflows. These are
$2K + $50 / month stationary bike / status symbols.

~~~
jlarocco
Yeah, _way_ too expensive is right. That $2k for the bike is enough to buy a
nice mid-range bike and a nice indoor trainer, with the added benefit of being
able to bike outside, if desired. And I believe there are tons of streaming
workouts free on Youtube.

Not to mention that a lot of people already think >$1k for a bike is crazy, so
$2k for a stationary bike seems like it'll be a hard sell, but what do I know?

I'm sure there's more to it, and they add more value than just that, but like
the OP, I'm really skeptical.

