John Foley, co-founder and chief executive officer of Peloton Interactive Inc., stands for a photograph during the company’s initial public offering (IPO) before Nasdaq MarketSite in New York, US , on Thursday, September 26, 2019.
Michael Nagle | Bloomberg | beautiful pictures
About two months later Peloton’s IPO, founder John Foley appeared on CNBC’s “The End Bell,” where he touted the connected fitness company’s “predictability of revenue.”
“We know how to grow and stick with what we say to the Street, what we say to our board and our investors. [about] how we’re going to grow,” Foley said in a November 5, 2019 interview.
That is a very different tune from what Foley said during the company’s fiscal 2022 second-quarter conference call on February 8, where he admitted that the company had “made mistakes along the way”, that the company “self- responsible” and that he will “own” that – including his departure as CEO, a number of executive and board changes, and a range of thrift measures. cost savings, including cutting about 20% of the company’s workforce.
Peloton, once or twice CNBC Disruptor 50 companies, has been led by Foley since it was founded in 2012, and his co-founders Tom Cortese, Yony Feng and Hisao Kushi remain senior executives. The other co-founder, Graham Stanton, left in March 2020 but continues to serve as an advisor, according to his LinkedIn.
Peloton’s bumpy road, which has seen its share price drop more than 73% in the last year, has raised questions about how long a founder-CEO like Foley should hang on to after an IPO, especially if that journey starts off more like HIIT and more of a hill than an easy ride.
The track record is varied. On the other hand, you have a founder like Jeff Bezos who has been CEO for more than 20 years AmazonIPO’s with strong growth along the way. There was, of course, Steve Jobs, who eventually left Apple amid board tension after hiring “professional CEO” John Sculley, only to eventually return to oversee one of the remarkable business turnarounds. best in market history. On the other side, you have Groupon founder Andrew Mason, who was fired from his position as CEO in 2013, about 18 months after the company went public, after a series of Wall Street failures, the stock price tumbled and Very common risks.
Jeffrey Sonnenfeld, senior vice dean for leadership studies at the Yale School of Management, said that 20 to 30 years ago, the trend for many venture capitalists was to push founding management into a important changes in a company’s life stage, “then “professional management” has been cited,” he said.
That’s far less likely now, and Sonnenfeld says some of it is for good reasons, such as having a more experienced leadership team with experience leading companies through multiple life cycles. together. Foley did with Barnes & Noble and other startups. But there are bad reasons, such as “founder stock that guarantees your lifetime leadership in the empire,” he said. In the case of Peloton, where Foley will remain chairman, he and other company insiders still control about 60% of the company’s voting shares.
Peloton responded to a request for comment at press time.
Is it time for founders to step aside?
More founders, especially in the tech sector, are displacing themselves. Manish Sood, founder of cloud data management company Reltio, wrote on CNBC op-ed in 2020 that the reason he replaced himself as CEO after nearly a decade at the helm was because he “recognized that sustaining super-fast, predictable growth required an exceptional skill set and that Reltio will require a CEO with experience leading public companies.”
“Preparing for adulthood takes courage at all stages,” Sood writes. “In the beginning, entrepreneurs risk everything to start a company because they believe in a new or different vision. They are often faced with seemingly insurmountable obstacles. A lot of creativity is required. insight to recognize when an emerging growth company needs to pivot or change direction as it grows.”
Jack Dorsey also shared similar feelings when he suddenly resigned Twitter CEO in November.
“There’s a lot of talk about the importance of a company being ‘led by the founder’.” Ultimately, I believe that’s a serious limitation and a single point of failure… I believe it’s important for a company to stand on its own, free from the influence or direction of its founder,” said Dorsey. write in a memo for Twitter employees.
There have been several attempts to try to figure out exactly what that founder-CEO shelf life is. Recently Research by Harvard Business Review The financial performance results of more than 2,000 publicly traded companies show that, on average, founder-led companies perform better than those with non-founder CEOs.
However, that difference essentially drops to zero three years after the company’s IPO, and at that point the founder-CEOs “really start to devalue the company.”
“Our data shows that a founder-CEO presence increases company value before and during an IPO, showing that a founder-friendly approach really makes sense for startups.” VCs, who typically invest while the companies are still in their early stages and cash out shortly after they IPO,” the authors wrote. “However, given our finding that on average, post-IPO performance is lower for companies with founder-CEOs, investors wanting to get involved after a publicly listed company will It is wise to take a less founder-friendly approach – and investors, board members and executive teams will benefit from proactively incentivizing founders. Make-CEOs continue before they reach the expiration date.”
It’s unclear what the future holds for Peloton and if it can regain the momentum that has seen it disrupt the fitness industry.
The company’s new CEO, Barry McCarthy, cited his experience working with two “visionary founders” at Reed Hastings and Daniel Ek at Netflix and Spotifycorresponding, in his first email to Peloton staffobtained by CNBC, stating that he is “currently working with John [Foley] to create the same kind of magic. “
“Finding the right product/market is incredibly difficult. It’s incredibly rare. And I believe we’ve done it,” McCarthy writes. “The challenge for us now is figuring out the rest of the business model so we can win in the market and on Wall Street.”
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