Peloton, Whoop and the Pivot to Enterprise

Disclaimer: I wrote this article in December 2021. My initial thought was to rewrite the article based on the significant changes to these companies since then, but it actually reads more interesting right before the bubble popped. Since December 2021:

• Peloton: laid off 4,150 employees in 2022, >50% of staff
• Whoop: laid off 80 employees, 15% of staff
• Calm: laid off 80 employees, 20% of staff
• Cameo: laid off 90 employees, 20% of staff

A lot of go-to-market thought leadership focuses on the consumerization of B2B software. Executives at fast-growing tech companies are relentlessly experimenting to find efficiencies in their distribution models, asking questions like:

• How do we increase time-to-value?
• How do we get this into the hands of the user-buyer, quicker?
• What kind of sales force do we need based on our target market?
• How do we make our product as easy to use as Facebook?

The PLGing of software has become central to executive strategy for B2B companies. But the reverse strategy, growing as a B2C and pivoting to a B2B to generate stickier revenue and reduce CAC, is becoming crucial for B2C companies buoyed by the COVID economy.

Whoop, Calm, and Peloton are companies beyond Series D, with Peloton one of the hotter IPOs of the past few years (expect Whoop and Calm to follow suit). But as these hot COVID companies, that up until now most certainly identify as consumer first, look at their growth strategy moving forward, it’s clear to them that selling into the enterprise is a necessity to continue growing at an incredible clip and become profitable.

Peloton was one of the kings of COVID. The company saw a 700+% increase to it’s stock price between March and Christmas of 2020, but has since come back down to earth. And with gyms re-opening, at-home competitors like Hydrow and Mirror cropping up and taking away market share, leadership is scrambling to figure out it’s next chapter of growth.

Given the amount of hardware associated with the brand eating away at margin, it’s difficult to see a scenario where they build a closed-loop ecosystem of consumer products like Apple to sell into their existing customer base. They have attempted this by releasing a treadmill and other at-home products, which, at least initially, has been a flop.

Though Q4 Earnings were grim, it is clear that their focus moving forward is attacking the enterprise through their aggressive Corporate Wellness program. The economics of each partnership is still very consumer focused, and in most cases won’t offset the costs to consumers completely, but bringing in “partners” like Wayfair, United Health Group, Samsung, SAP, etc… to achieve revenue growth at a much lower CAC, is a model that over time will significantly increase the health of business growth without relying on black swan events like COVID-19.

Though Whoop and Calm are earlier in their company life-cycles (and still private), they are taking advantage of Peloton’s learnings. Both companies benefited from enormous growth as a result of COVID-19, as consumers with bigger bank accounts (free government money+ reduced spending) had both the time and funds to invest in optimizing their wellness. Whoop and Calm know this macro environment won’t last forever.

Two indicators show that investing in B2B is a strategic focus for them:

• The rise of corporate wellness programs that offer employee discounts for things like Whoop and Calm Subscriptions.
• Both companies have hired veteran Enterprise Sales Leaders to build B2B business units.

Even companies not focused on the wellness space, high-flyers like Cameo and TikTok, have hired leaders to figure out a B2B business unit. The question now is, have these companies learned from Peloton’s mistakes and invested in B2B early enough? Or has pandemic-induced growth faded too quickly for them to preserve their growth rates?

My guess is we’ll see some sort of correction, where these astronomical valuations will get slashed. However, these companies will survive and eventually thrive with healthier, steadier growth in their B2B business units.

Some articles will be first-person, and some will be just general thoughts on industry trends. Feel free to reach out with feedback, thoughts, etc… nate@bluebirdanalytics.co