What does Peloton's IPO mean for startups?

Updated On: September 30, 2019
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Today, our pricing analysts look at more Peloton problems—and what that could mean for startup IPOs. We also get to know HubSpot’s Brian Halligan, as the CEO and Co-Founder who just so happens to rock out with Jerry Garcia’s guitar.

 

 

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Congrats for Klaviyo

Nasdaq reports Klaviyo snags a spot in the 2019 Cloud100, just after the Boston Globe featured Klaviyo’s CEO Andrew Bialecki on growth and building the next pillar company in Boston.

The Globe nods to Klaviyo as being something like the next HubSpot in "the tumultuous new world of advertising." Klaviyo is a growth marketing platform created for online businesses— featuring powerful marketing automation and a revenue-driving email platform. We're pumped to see how "the hottest company in Boston no one has heard about" gets its vocals spruced up. 


A new Pagely podcast drop

Pagely drops a podcast episode feat. our good pal Hiten Shah, a master in the startup community—who shaped FYI, Crazy Egg, and Kissmetrics into the successes they've become, not to mention an advisor to 120 additional startup endeavors. 

Pagely sat down with Hiten for a full hour of intel on:

  • His latest remote work report
  • His process for advising startups
  • Lessons from his own past startups
  • How he thinks about product-market fit
  • His approach to KPIs and analytics
  • The Tradeoffs series he's created with our very own Patrick Campbell
  • What he’s up to now with FYI

Head here to listen to the pod in full.

 

Doctor's orders: a subscription to prescription

GoodRx, a billion-dollar giant in the world of prescription fulfillment, is coming for subscription prescription with the launch of GoodRx Care

As reported by TechCrunch, several months after discreetly acquiring the online prescription service HeyDoctorGoodRx is offering a direct challenge to online prescription services like Hims, Hers, Nurx, Ro and others with GoodRx Care.

GoodRx Co-CEO and Co-Founder Doug Hirsch attests,

“Over the years, we’ve helped millions of Americans find affordable solutions for their prescription medications, but have also learned that many people struggle to get to the doctor... By introducing GoodRx Care, we aim to help fill in the gaps in care to improve access, adherence, and affordability of medical care for all Americans."

Demand for more healthcare options is on the rise, and big name companies like Best Buy, Amazon, and Apple are well aware—with hyper specialized healthcare alternatives for employees.

The GoodRx Care platform allows users to access online medical services like consultations, treatments, scripts, and lab results directly. 

Although more services will be laid out in the future, GoodRx's current focus is on bringing price points down and maintaining control over where to refer its customers.

Hirsch says more services will be coming in later months. “We’re at the very early stages of telemedicine,” he says. “We want to continue to expand into more primary services as safe and affordable and as we can.”

For now, the focus is on bringing the price point down and having more control over where to refer customers. 

 

(Maybe don't) Rent the Runway

Today, we’re eyeing subscription retailer Rent the Runway, which, as of late, has created some seriously unhappy customers. Rent the Runway users are reporting horror stories of canceled dress deliveries and customer service breakdowns, and apparently, Rent the Runway’s blaming a warehouse upgrade for the delays.

We’re talking hundreds of users saying they didn’t get their dresses on time, which is the exact opposite of RTR’s core business model and company promise. And these users are not shy about sharing their displease. Shoppers have absolutely flooded the company’s Twitter and Facebook pages with complaints about canceled deliveries, lack of communication, and absurd customer service wait times, topping at three hours.

Although, I’m not surprised here—as I’ve only had poor experiences with the company’s promises (and lack thereof of holding true to them). I personally haven’t been a user now for almost 10 years because of it.

But Grace is all about subscription fashion, so I was keen to hear her take. 

"I find subscription fashion fascinating. It’s more eco-friendly than continually buying new clothes and then getting rid of them after a few wears."

Rent the Runway was the first subscription clothing source Grace tried. 

"Beyond customer service, there’s always a risk to ordering clothing online, not being confident in the exact sizing. That’s the issue I had with RTR; nothing fit me properly, which was extremely frustrating... I froze my subscription for now and was on the fence about canceling, but after all these complaints, I’m definitely done with it."

But amid so many subscription retailers out there, I'm curious—how do you even choose?

"It’s trial and error, word of mouth, reviews. You have to do your research when it comes to subscription fashion."

Right now, Grace says she's digging Haverdash. More affordable than RTR, and priced at only $59 a month, what she likes about Haverdash is that there’s an element of surprise built into the model. You receive three items of clothing at a time, and can swap them out as much or as little as you want. Though you only get three, you have an online closet with at least eight items favorited. The stylists at Haverdash pick three items at random from your closet to send your way at one time.

"There’s also a new sub fashion line called Nuuly. It’s 88 dollars a month and you get six clothing items, but you can’t swap them out. So if you don’t like the six items, you’re kind of stuck. So far—I’ve heard mixed reviews."

Grace knows the list of sub fashion retailers is only growing, but unfortunately,

"I think RTR's flub may encourage potential subscribers to go elsewhere."

Deep dive


More problems for Peloton gone public

We’ve been hearing a whole lot about Peloton amid their IPO drop last week, and found an interesting take on AngelList Weekly. The newsletter asks: Can Peloton shed new light on startup IPOs? As of Thursday afternoon, investors were not feeling the love. 

With a stock trading at $27, down from the IPO price of $29, Peloton joins the ranks of unprofitable startups to go public this year. The common thread among these companies, AngelList points out, is that, while their large growth numbers and massive addressable markets made them darlings in the venture capital world, their lack of profitability devalues them in the eyes of investors on the public market.

But how misaligned are venture capitalists in the private market and stock traders in the public? Peloton could be that test.

The post goes on: By differentiating attributes, Peloton’s financials have some fundamental differences than other tech companies to IPO with no profit (think Lyft, Slack, Uber)... For example, only .65% of Peloton’s 510,000+ users discontinue service each month. Uber, in comparison, has had monthly churn rates as high at 13%

Peloton’s differences from other pure software companies (namely, that it’s also a hardware company in some regard)—and the way public traders respond to it—will provide extra information for mapping the disconnect we’ve seen in 2019 between public and private markets. 

Can a low churn rate and expensive hardware offering offset a lack of profitability in the eyes of investors, or will Peloton fall as another victim to the public market?

ProfitWell Pricing Strategist John Mangini and Pricing Analyst Kavita Singh chatted in depth on this one.

"Do you think people actually are missing the profitability of companies? Nowadays I feel like it's not really 'cool' to be profitable. You get more valuation when almost you're not profitable. But is the market [thinking] actually it is becoming important? And that is why we're seeing these dips right away."

Listen to the full conversation between John and Kavita in the episode linked above.

 

Subscription Sapiens


Today’s Subscription Sapien is Brian Halligan, who—as CEO and cofounder of HubSpot—has scaled the company to the #1 spot in marketing automation. In this segment, he advises we avoid the traditional sales model in our voyage to greatness. 


And that’s a wrap for your September 30th subscription news. Recruit your friends into the subscription know by sending them to recurnow.com to sign up for episodes on the daily.

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