The Hustle

🚴 How Peloton fell off

The Hustle - Silicon Valley Tech News


September 1, 2021

Yesterday, LinkedIn announced it will drop its Stories feature by the end of September. Wait, LinkedIn had a Stories feature?

Today’s rundown:

  • Peloton pulls a groin: Why the company’s feeling the heat.
  • Cool AF business: Healx identifies existing drugs that can treat rare diseases.
  • Don’t swat these flies: The Singapore-based startup using flies to manage waste.

Let’s do it.

The big idea

Peloton was winning the pandemic, but a series of fumbles have slowed its growth

While most companies struggled early in the pandemic, Peloton was increasing its forecasts. Now, the connected-fitness pioneer is doing the opposite.

In its Q4 earnings call, the company posted a $313.2m loss, and a lower-than-expected forecast for Q1 2022.

So what happened?

The trouble started with delivery delays

After the pandemic forced many gyms and fitness centers to shut their doors, Peloton saw a flurry of orders that they weren’t prepared for.

While Peloton has been called a cult for its devoted customers, the shipping delays sparked the 1st crack in its reputation. At the height of the delays:

  • 10k people joined a Facebook group dedicated to Peloton delivery problems
  • 1.1k complaints were registered through the Better Business Bureau

Customers frequently complained that delivery of their new bikes would be canceled and rescheduled far in the future.

Peloton took the issue seriously and invested $100m+ to expedite deliveries.

Then came the treadmill recall

In May, Peloton recalled its Tread and Tread+ machines after reports of numerous injuries and a child’s death.

The company also offered full refunds to any customers who wanted to return their treadmill — and more customers took advantage than the company expected, doing damage to the balance sheet.

Now, the company is cutting prices to drive customer acquisition

The company announced plans to lower the price on both its signature bike and treadmill:

  • The Bike will drop from ~$1.9k to ~$1.5k (though the Bike+ will hold at ~$2.5k)
  • The Tread will sell for ~$2.5k compared to the original Tread+, (which sold for ~$4.3k)

Peloton CEO John Foley believes the Tread will outsell bikes by 2x-3x, and a recent report suggests the company is working on a connected rower as well.

If Peloton can keep both products safe, and figure out its delivery woes, we may just be looking at a momentary blip.

SNIPPETS

Running x Retail: Hoka One One, a running shoe brand, announced plans to open its 1st retail stores. #ecommerce-retail

Sweet dreams: Eight Sleep, a pioneer in sleep tech, raised $86m at a $500m valuation. #emerging-tech

News feed shuffle: Facebook announced plans to de-prioritize politics and current events in the News Feed. #privacy

Layer 2 unicorn: Offchain Labs, which offers an Ethereum scaling solution, raised $120m, valuing the firm at $1.2B. #fintech-cryptocurrency

Amazon’s live audio secret: The company is working on a Clubhouse competitor with a focus on live music. #big-tech

Come again? The Hustle‘s Adam Hayes wrote about the strangest side hustle he’s ever heard of. #hustle-picks

COOL AF

Healx is solving a problem for 400m people by repurposing medicine

THE BREAKDOWN

  • Problem: 400m people in the world have a rare disease. There are 7k rare diseases — 95% of which have no FDA approved treatment.
  • Pitch: Healx uses AI to identify existing, clinically approved drugs that could be repurposed to treat rare diseases.
  • Timeline: David Brown and Tim Guilliams founded Healx in 2014, and the company raised a $56m Series B in 2019.

Healx isn’t David Brown’s 1st foray into drug development. The dude’s a big deal in pharmaceuticals — he co-invented Viagra in the ‘90s.

Viagra, though, was discovered by chance

Brown and his team at Pfizer created a drug they thought could be a treatment for cardiac chest pain, but early trials returned disappointing results.

Weeks away from getting the axe, an interesting side effect popped up: the participants had all experienced increased erections.

Brown pivoted immediately and began a new trial for what would later become Viagra.

That happy accident informed the concept behind Healx

The UK-based startup doesn’t actually develop new drugs but uses its AI platform, Healnet, to match existing drugs with the world’s 7k rare diseases, 95% of which don’t have approved treatments.

AI that enables the repurposing of current drugs can save time and money:

  • The cost to develop a prescription drug surged 145% since 2003 to $2.6B
  • Existing treatments for some rare diseases can cost millions out of pocket

It’s hard to beat the legacy of the little blue pill, but we think the potential to cure the millions of people affected by rare diseases — 50% of whom are kids — is just epic.

(Have an idea for a Cool AF Business story? Tell us about it here.)

Emerging Tech

Meet the startup using flies to fight food waste

Next time you grab for your fly swatter, you may want to reconsider.

Insectta is a Singapore-based startup using fly larvae to fight food waste.

The company set out to solve a local problem. In 2020, Singapore had 665k metric tons of food waste, and only recycled 19% of it.

So how do the flies help?

Insectta feeds its flies ~8 tons of food waste per month, creating 2 byproducts:

  1. Flash-drying the bugs creates animal feed
  2. The insects’ waste can be converted into fertilizer

The firm isn’t alone: Goterra, Better Origin, and AgriProtein also utilize insects to convert food waste into agricultural products…

… but Insectta is looking beyond fertilizer and feed

The company developed technology to remove biomaterials from the insects, like chitosan, which can be used in moisturizers and other cosmetic products.

It’s all part of the company’s mission of leaving nothing to waste, which seems like a mantra that could grow far beyond Singapore in coming years.

Podcast

What’s a crypto ‘short squeeze’?

Shaan explains last month’s Bitcoin surge in plain English.

Then why Ethereum smart contract writers (programmers who speak Solidity) could soon be in very high demand. It’s episode No. 204 of My First Million.

The future of online courses, newsletters, and gas stations

Shaan’s also bringing back his live Power Writing course. Round 1 netted 6 figures, so Sam has questions.

Show notes in the description.

Crypto and courses →
AROUND THE WEB

🐣 Wholesome: Need a break? Every click on this website earns you a cute picture.

⛸️ Wow: Limbo staking requires participants to skate under extremely low bars or objects. The world record holders can do it on ice and under cars. It’s pretty impressive.

🌱 Haha: This woman turned her entire car into a Chia Pet by smothering it in seeds and letting it grow. Dare to dream, friends!

💻 Hmm: What would happen if AI tried to replicate New Yorker cartoons? Enter the “Neural Yorker.”

💰 How to: To figure out if a new job offers the same or better pay than your current job, you need to estimate your total compensation — not just your salary. Here’s how.

Meme of the day

This is not fitness advice (Source: Reddit)

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