March 29, 2024

TechNewsInsight

Technology/Tech News – Get all the latest news on Technology, Gadgets with reviews, prices, features, highlights and specificatio

The fall of John Foley from Peloton and the problem of the founder of the big market

The fall of John Foley from Peloton and the problem of the founder of the big market

John Foley, co-founder and CEO of Peloton Interactive Inc. , is pictured during the company’s initial public offering (IPO) in front of the Nasdaq MarketSite in New York, US, on Thursday, September 26, 2019.

Michael Nagel | Bloomberg | Getty Images

Almost two months after peloton IPO IPO founder John Foley appeared on CNBC’s “Closing Bell” where he described the “revenue predictability” of the connected fitness company.

“We know how to grow and we stick to what we say to the street, what we say to our board of directors and our investors [about] Foley said in that interview on November 5, 2019.

this very different dialect From what Foley said at the company’s second-quarter fiscal year 2022 conference call on February 8, in which he acknowledged that the company had “made missteps along the way,” that it was “holding ourselves accountable,” and that he would have “that — which included his departure as CEO, And several executive and board changes, and a wide range of cost-saving measures, including reducing nearly 20% of the company’s workforce.

Peloton, twice CNBC Disruptor 50Ltd., led by Foley since its founding in 2012, and fellow co-founders Tom Cortez, Yuni Feng, and Hisao Koshi have remained senior executives. The other co-founder, Graham Stanton, left in March 2020 but has remained as a consultant, according to his LinkedIn.

Peloton’s bumpy road that has seen its share price plunge more than 73% over the past year has raised the question of how long a founding CEO like Foley should hold on beyond its IPO, especially if that journey starts looking more like a HIIT and easy hill ride. .

See also  Left-wing investment firms are wiping out American companies, Bud Lite

The track record is very diverse. On the one hand, you have a founder like Jeff Bezos who stayed on as CEO for over 20 years after that AmazonInitial public offering with massive growth along the way. Of course, there’s Steve Jobs, who ended up leaving Apple amid tensions on the board after he appointed “professional CEO” John Scully, eventually returning to oversee one of the most remarkable business transformations in market history. On the other hand, you have Groupon Founder Andrew Mason, who was fired as CEO in 2013, roughly 18 months after the company went public, following a string of Wall Street failures, plunging stock prices, and general mishaps.

“Twenty to 30 years ago, the trend for many venture capitalists was to push foundational management into a life-cycle change critically,” said Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management. “unquoted”.

It’s happening less now, and Sonnenfeld said some of it is for good reasons, such as having a more experienced leadership group in place with experience in leading companies through different life cycles. Foley has done with Barnes & Noble and other start-up companies. But there are bad reasons, he said, such as “founders’ shares that secure you the status of a lifelong leader in the empire.” In the case of Peloton, where Foley will remain as chairman, he and other company insiders still control about 60% of the company’s voting shares.

Peloton has responded to a request for comment as of press time.

When is the time for the founder to step down?

More founders, especially in technology, are replacing themselves. Manish Sood, who founded cloud data management company Reltio, Written in 2020 CNBC op-ed That the reason he replaced himself as CEO after nearly a decade in office was because he “recognized that sustaining predictable hyper-growth required a special set of skills, and that Reltio required a CEO with experience in leading public companies.”

Sood wrote, “Preparing to grow requires courage at all stages.” “In the beginning, entrepreneurs often risk everything to start companies because they believe in a new or different vision. They often encounter obstacles that seem insurmountable. It takes a great deal of insight to know when a startup for growth needs to pivot or change direction as it grows. “

Jack Dorsey shared the same sentiment when he suddenly stepped down from the position Twitter CEO in November.

“There is a lot of talk about the importance of the company being ‘founder-led.’ At the end of the day, I think this is very limiting and one point of failure…I think it is critical that the company can stand on its own, apart from the influence or direction of its founder,” Dorsey wrote in a note Twitter employees.

There have been some efforts to try and find out exactly how long the founder and CEO will be. newly Harvard Business Review Study From the financial performance of more than 2,000 publicly traded companies, I found that founder-led firms, on average, outperform firms with non-founder CEOs.

However, that difference essentially drops to zero three years after the company goes public, at which point, “the founder and CEOs really start to depreciate the company.”

“Our data shows that having a founder and CEO increases company value before and during an IPO, suggesting that a founder-friendly approach actually makes great sense for bold risk takers, who typically invest while companies are still in their early stages and make money after Short time from IPO,” the authors wrote. “However, given our finding that, on average, post-IPO performance is lower for companies with founding CEOs, it would be wise for investors looking to enter after the company is already public to take a less founder-friendly approach. — and investors, board members and executive teams alike would benefit from the founder’s and CEOs proactive encouragement to move forward before they reach their expiration dates.”

It’s unclear what the future holds for Peloton and whether he can regain the momentum that has seen him disrupt the fitness industry.

The company’s new CEO, Barry McCarthy, cited his experience working with two “visionary co-founders” at Reed Hastings and Daniel Eck in Netflix And spotifyRespectively, In the first email I sent to Peloton employeeswhich was obtained by CNBC, saying he is “now in a partnership with Jon [Foley] To create the same kind of magic.”

McCarthy wrote, “Finding the right product/market is very difficult. It is extremely rare. And I think we have it.” “Our challenge now is to figure out the rest of the business model so we can win in the market and on Wall Street.”

Participation For our original weekly newsletter that goes beyond the list, providing a closer look at 50 CNBC Disruptor companies, founders who continue to innovate in every sector of the economy.