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

Roughly two months after Peloton’s IPO, founder John Foley appeared on CNBC’s “Closing Bell” where he touted the “predictability of the revenue” of the connected fitness company.

“We know how to grow and stick the landings on what we tell the Street, what we tell our board and our investors [about] how we’re going to grow,” Foley said in that Nov. 5, 2019 interview.

That’s a very different tone from what Foley said on the company’s second-quarter fiscal 2022 conference call on Feb. 8, where he acknowledged that the company had “made missteps along the way,” that it was “holding ourselves accountable,” and he was going to “own” that — which included his departure as CEO, several executive and board changes, and a wide range of cost-saving measures, including cutting roughly 20% of its corporate workforce.

Peloton, a two-time CNBC Disruptor 50 company, had been led by Foley since it was founded in 2012, and his fellow founders Tom Cortese, Yony Feng, and Hisao Kushi have remained as senior executives. The other co-founder, Graham Stanton, left in March 2020 but has stayed on as an advisor, per his LinkedIn.

Peloton’s bumpy road that has seen its stock price drop more than 73% over the last year has raised the question of how long a founder-CEO like Foley should hang on post-IPO, especially if that journey starts to look more like a HIIT and hills ride than an easy one.

The track record is very varied. On one side, you have a founder like Jeff Bezos who stayed on as CEO for more than 20 years after Amazon‘s IPO with massive growth along the way. Of course, there’s Steve Jobs, who ended up leaving Apple amid board tensions after he hired “professional CEO” John Sculley, only to ultimately return to oversee one of the most remarkable business turnarounds in market history. On the other side, you have Groupon founder Andrew Mason, who was fired as CEO in 2013, roughly 18 months after the company went public, following a series of Wall Street misses, a declining stock price and very-public mishaps.

Jeffrey Sonnenfeld, senior associate dean for leadership studies at Yale School of Management, said that 20 to 30 years ago, the trend from many venture capitalists would be to push out founding management at a critical change in the life stage of a company, “then the quote-unquote ‘professional management’ came in,” he said.

That’s happening less now, and Sonnenfeld said that some of that is for good reasons, like having a more experienced leadership group in place that has experience leading companies through various lifecycles. Foley did, with Barnes & Noble and other start-ups. But there are bad reasons, such as “founder shares that secure your leader-for-life status in the empire,”…