Peloton: An oral history from 'janky broken' bikes to champagne bottle-popping

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Peloton’s rise during the coronavirus pandemic may make it seem as if the company was an overnight success. But the connected fitness-equipment–maker had been grinding away for nine years before achieving real liftoff.

Fortune spoke to four of Peloton’s five cofounders—the ones who are still with the company—to better understand how they turned a harebrained idea into such a sensation. The video interview took place in January, and featured John Foley, Peloton’s chief executive, along with his three closest and longest-serving lieutenants.

Most of the Peloton crew met at InterActiveCorp, billionaire media mogul Barry Diller’s Internet conglomerate, prior to starting Peloton. Beyond Foley, those former IAC colleagues on the call included Tom Cortese, Peloton’s chief operating officer; and Hisao Kushi, Peloton’s chief legal officer.

Yony Feng, Peloton’s tech chief, also joined the call. He’d never worked at IAC, but his college roommate did, which is how he ended up getting involved in Peloton. (A fifth cofounder and ex-IACer, Graham Stanton, left the company last year to start his own business.)

The discussion—supplemented by two follow-on interviews—ranged from the CEO’s odd water-drinking habits to memories of Peloton’s earliest days, including the team’s formation and the “janky, broken” prototype bikes that trainers had to use to audition for their jobs. The Peloton cofounders dismissed their early doubters, but they aren’t celebrating their successes just yet.

Read on for more about Peloton’s history, edited and condensed for clarity and length.

You can read about Peloton’s pivotal year and future prospects here in the latest issue of Fortune magazine.

Fortune: First off, John, that interview you gave where you talked about chugging water until you wanted to vomit every morning. What was up with that?

John Foley (CEO): I studied industrial engineering at Georgia Tech, and industrial engineers are efficiency experts. Literally, putting water in a cup and then drinking it is twice as inefficient as drinking directly from the faucet. I just can’t be bothered waiting that extra 30 seconds to fill up my cup.

Now that that’s cleared up, how did this crazy idea for a company come together?

Foley: This is important for the founder story. I had a vision and recruited these guys. Within a couple months, I was no longer involved in creating Peloton as you know it. I thought of something, and these guys took it, ran with it, and built it while I was gone. I was on the road for two or three years with a PowerPoint trying to raise money, very much ineffectively.

Who joined the company first?

Foley: Hisao was my trusted, best friend. I called him and said I had this idea. For better or worse, he had a family in Los Angeles, and he said he wasn’t in a place where he could jump into the foxhole. So, he moonlit for a year or two.

Hisao Kushi (chief legal officer): I have a vivid memory of John describing his idea for the business. But I was like, “Wait a second. I don’t get this. You’re talking about a stationary bike in your basement with, like, a screen where you have classes?” Sounds like a great experience [spoken with sarcasm]. Two days later the light bulb went off in my head, and I said, “This is not about the bike. This is about the media. This is an interactive media software platform.” I get that. That’s a world we understand.

Foley: My next call was to Tom, who lived in New York City. He was a competitive triathlete, an outdoor runner, and cyclist. I invited him over to our apartment in the West Village and gave him several bottles of wine to loosen him up a bit so he would be weakened when I made my pitch.

Tom Cortese (COO): Before I showed up at your house, John, I had been out at a bar with the woman who is now my wife, Rachel. We were planning to go on vacation to Patagonia. I told John I liked the idea, that it was awesome. I remember asking, “Can I just have two weeks?” John took that as me needing two weeks to think about whether or not I wanted to be on board. When I called him back in two or three days, he was like, “Oh, I thought you were out. I’m interviewing somebody who could be you.” I was like, “Really? Come on, man!”

When did you know you wanted to join Peloton, Yony?

Yony Feng (tech chief): I hadn’t taken an indoor cycling class before John took me. It was a Flywheel class. That was one of the hardest workouts. It captivated me—the dark room, the energetic music, losing yourself in the workout. Time flew by. It reinforced my gut instinct, from that initial call with John, that I knew I was going to do this. So, I packed up all my stuff and moved across the country from California to New York.

How did Jenn Sherman become the first Peloton trainer?

Cortese: She sent an email to this alias we created called coach@peloton.com, or something like that. It went to all of us. Every once in a while, I like to pull up the email and do a dramatic reading because she’s crude in it. It’s hilarious. She’s cursing. She says something about her booty. But what came through in the email was this is somebody who has a ton of personality and is capable of putting it on display.

What was the audition process like?

Cortese: It took place in a cold, dark, weird space with a bunch of engineers on one side of a curtain we bought from Walmart. There were dangling electrical wires and strange, bright lights. We gave people old, rickety bikes. It was a weird, weird scenario to walk into. And they’ve got to perform. They’ve got to teach a remarkable class and pierce through. Almost nobody could do it, and I understand why.

Jenn Sherman [describing her first audition in a separate interview with Fortune]: They had this little tiny corner of the office that was sectioned off by black velvet curtains. So friggin’ shady. I can’t even tell you. There was a camera on a tripod sticking through a circle people literally cut out of the curtain. There was a janky, broken bike in there—the instructor bike was like this rusted piece of crap. It was ridiculous. John asked me to make a playlist of four or five songs. He said to show us your personality, show us what you can do. I did a class for Tom, Yony, and John. They all put on workout clothes, clipped in, and I got the job.

Why did you guys keep hammering away at Peloton when John kept getting “no” from all the investors he was approaching?

Foley: Speaking specifically for Tom and me, we’re two peas in a pod in the sense that the more we heard “no,” the stronger our conviction was.

Cortese: The noes were all stupid. They would be things like, “Oh, well, this doesn’t fit our portfolio thesis.” Or, “No, we don’t like that you have a hardware component. We only think Facebook-style software is going to work.” It’s like, “Are you guys idiots?” Most of these pieces were things that existed in the world—the bike, video streaming. Our job was to bring them together. It’s not like we were inventing a stationary bike from scratch.

Why would anybody stick with Peloton and not decide to just buy a cheaper bike, put an iPad on it, and watch YouTube?

Cortese: We employ 4,000-plus people who wake up every single day and want to figure out how to keep you motivated. We are incentivized, as a business, to get you to work out more every single day, every single year.

Foley: For forever, working out at home was a lonely thing in your basement. You were alone. And it sucked. Now, with millions of people on the platform, we bring a community of supportive people high-fiving you, motivating you, sharing the experience. The instructor breaks the fourth wall, looks you in the eye, and says, “You can do it.” That’s a very powerful thing in a live class.

The investors who said, “No, because hardware is hard,” weren’t entirely wrong. You’ve had production problems, shipping delays. How are you going to fix these issues?

Foley: I do think if we could have scaled our supply-chain capacity faster this year, we would have sold a lot more bikes and “treads.” We had to pull back on marketing. If we were a pure software business, we could be three or four times bigger than we are, with more subscribers. There’s no question it’s harder. But in some ways, it makes it a better business. It’s more defensible.

Let’s finish off with a lightning round. When was the moment you realized this thing was actually going to work?

Cortese: 2013, Black Friday. Me, John, and others were standing in the Short Hills mall [in N.J.], which was supposed to be a pop-up store. We had the first six bikes we ever made. The only six bikes we had ever made. We put them in that store just to get it open. We were standing there when, all of a sudden, people started coming in. By the end of the day, I think we sold four to six bikes. We went out and celebrated like it was a million bikes. I remember thinking like, “Holy shit, people get it. We’ve got a business.”

Have you envisioned that turning point for you? Is it a Peloton in every home?

Kushi: Through COVID, we’ve seen how important physical fitness and mental health are. To have every household on the planet engaged in some kind of physical activity, that is a worthwhile goal. Having it be Peloton would be fantastic. But just even starting to change what people’s historical mindset is around fitness, which has long been this gimmicky, weight loss misunderstanding about all of the benefits of physical activity.

Foley: When we have 35 million households in the U.S. and 100 million households worldwide [Peloton reported having more than 3.6 million total “members,” meaning user-created profiles on its connected equipment or digital fitness app, at the end of its last fiscal quarter, ended Sept. 30], I will pop a bottle of Champagne and pour it on all these guys.