From Investopedia:
"Unicorn" is a term used in the venture capital industry to describe a privately held startup company with a value of over $1 billion. The term was first popularized by venture capitalist Aileen Lee, founder of Cowboy Ventures, a seed-stage venture capital fund based in Palo Alto, California.
2017 (Inc.)
Fast forward 18 months or so, and Peloton Cycle closed a $325 million financing round, with the likes of Wellington Management, Fidelity Investments, Kleiner Perkins, and Comcast NBCUniversal pouring money into the company. JPMorgan was sole placement agent for the offering. Wintroub worked on the deal with another cycling enthusiast, Eric Stein, who is head of North American investment banking at JPMorgan.
The Series E financing round valued the company at around $1.25 billion, making it a unicorn.
The company is vertically integrated, making its own hardware, producing a tablet computer and the bike it sits on, and software, with 75 software engineers in New York City. It produces 12 hours of live television content a day, and sells through its own retail stores. It also delivers its own bikes in some cities.
"Peloton is a cultural phenomenon and has redefined what it means to build a connected experience disrupting multiple industries simultaneously: in home fitness, boutique class fitness and connected media devices," said Jon Callaghan, cofounder of True Ventures, another investor in the firm.
Peloton is temporarily halting production of its connected fitness products as consumer demand wanes and the company looks to control costs, according to internal documents obtained by CNBC.
Peloton plans to pause Bike production for two months, from February to March, the documents show. It already halted production of its more expensive Bike+ in December and will do so until June. It won’t manufacture its Tread treadmill machine for six weeks, beginning next month. And it doesn’t anticipate producing any Tread+ machines in fiscal 2022, according to the documents. Peloton had previously halted Tread+ production after a safety recall last year.
The company said in a confidential presentation dated Jan. 10 that demand for its connected fitness equipment has faced a “significant reduction” around the world due to shoppers’ price sensitivity and amplified competitor activity.
Peloton has essentially guessed wrong about how many people would be buying its products, after so much demand was pulled forward during the coronavirus pandemic. It’s now left with thousands of cycles and treadmills sitting in warehouses or on cargo ships, and it needs to reset its inventory levels.
The planned production halt comes as close to $40 billion has been shaved off of Peloton’s market cap over the past year. Its market value hit a high of nearly $50 billion last January.
Peloton shares closed Thursday down 23.9% at $24.22, bringing the stock’s market value to $7.9 billion. During trading, shares hit a 52-week low of $23.25. The drop also brought the stock below $29, where it was priced ahead of Peloton’s initial public offering.
The personal lesson I'm taking away from this is not to put off posting about high flying companies with stupid business plans. I'd meant to do a deep dive into Peloton back when it was everybody's darling, but all I actually produced were a few tangential references, snarky tweets and quotes from other, harder working writers.
And a CEO with a history of making... let's call them questionable claims.https://t.co/C0A2vXxWEp
— Mark Palko (@MarkPalko1) December 6, 2019
Thursday, October 17, 2019
Disappointed by the omission of MoviePass, but...
Several weeks ago, I met up with a friend in New York who suggested we grab a bite at a Scottish bar in the West Village. He had booked the table through something called Seated, a restaurant app that pays users who make reservations on the platform. We ordered two cocktails each, along with some food. And in exchange for the hard labor of drinking whiskey, the app awarded us $30 in credits redeemable at a variety of retailers.
I am never offended by freebies. But this arrangement seemed almost obscenely generous. To throw cash at people every time they walk into a restaurant does not sound like a business. It sounds like a plot to lose money as fast as possible—or to provide New Yorkers, who are constantly dining out, with a kind of minimum basic income.
“How does this thing make any sense?” I asked my friend.
“I don’t know if it makes sense, and I don’t know how long it’s going to last,” he said, pausing to scroll through redemption options. “So, do you want your half in Amazon credits or Starbucks?”
I don’t know if it makes sense, and I don’t know how long it’s going to last. Is there a better epitaph for this age of consumer technology?
Starting about a decade ago, a fleet of well-known start-ups promised to change the way we work, work out, eat, shop, cook, commute, and sleep. These lifestyle-adjustment companies were so influential that wannabe entrepreneurs saw them as a template, flooding Silicon Valley with “Uber for X” pitches.
But as their promises soared, their profits didn’t. It’s easy to spend all day riding unicorns whose most magical property is their ability to combine high valuations with persistently negative earnings—something I’ve pointed out before. If you wake up on a Casper mattress, work out with a Peloton before breakfast, Uber to your desk at a WeWork, order DoorDash for lunch, take a Lyft home, and get dinner through Postmates, you’ve interacted with seven companies that will collectively lose nearly $14 billion this year. If you use Lime scooters to bop around the city, download Wag to walk your dog, and sign up for Blue Apron to make a meal, that’s three more brands that have never record a dime in earnings, or have seen their valuations fall by more than 50 percent.
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