John Foley believes his best days are yet to come.
Many of Foley’s former investors and employees from Peloton, the fitness company he founded in 2012 and exited a decade later, are also joining his new venture, custom rug company Ernesta.
While lugs are an unexpected next step after creating a fitness giant, Foley says he’d been talking about starting Peloton for more than a decade and even mentioned it to investors in the company’s early days.
“Ten years ago, I was sitting next to Lee Fixel. [CEO of Addition Capital] “I was in a board meeting talking about this rug startup I was doing, and he looked at me like I had three heads,” Foley told the Post.
But he was persuasive: Fixel ultimately invested in Manhattan-based Ernesta after the company was founded in 2022.
“I love rugs and I love interior design,” Foley says.
Ernesta, a combination of the first name of his favorite author, Ernest Hemingway, and the middle name (Nesta) of his favorite musician, Bob Marley, is a direct-to-consumer company that allows shoppers to customize rug patterns and measurements to fit any room, with the finished product delivered in two weeks.
While Foley, 53, was enthusiastic about Ernesta and how he thinks the company can generate as much as $500 million in free cash flow by 2030, he also spoke candidly about his experience at Peloton, the company’s very public bankruptcy, and how his life has changed since leaving the company.
“Oh, I’m an open book,” he said of his brief time as a billionaire. “You know, at one point I had a lot of money on paper. In reality, [in the bank]Unfortunately, I lost all my money. I had to sell almost everything in my life.”
At the height of the pandemic lockdowns, Peloton was valued at $50 billion, but overcapacity, recalls, bad press and declining interest in its pricey bikes saw its value fall to just $1.2 billion earlier this month. A 40% increase was reported The company’s stock price has risen, with its valuation approaching $1.7 billion.
Foley spends summer weekends in the Hamptons, but has downsized twice, including selling his $55 million East Hampton waterfront home on pricey Further Lane. “My family has taken it well. My wife has been super supportive. And I think my kids have been better for it, to be honest.”
During the week, he works at Ernesta’s Chelsea headquarters with 40 employees, all focused on making it a success.
“I’m working really hard to make money again… because I don’t have much left,” he joked. “So I’m hungry and I’m humble.”
The phrase is even featured on his Instagram profile and has guided his career.
Foley grew up in Florida, graduated from Georgia Tech and attended Harvard Business School while working as a night shift manager at a Mars candy factory.
“I was the head of quality assurance at Mars, and we used to say we differentiate between the M and the W,” said Foley, who has a self-deprecating sense of humor.
He went on to start several consumer technology companies, join the executive team at Barnes & Noble, and then founded Peloton, whose rapid growth began months after it went public in 2019, when demand for at-home workouts soared during the early days of the COVID-19 pandemic.
The company tried to catch up by overhiring and overinvesting in $400 million in new factory space, but once Americans were allowed outdoors again, Peloton’s popularity waned and its stock price plummeted.
Then, in December 2021, in the premiere episode of the Sex and the City reboot, “And Then the Other Way,” the character Mr. Big died of a heart attack while riding a Peloton. At that moment, the company’s stock price plummeted 11.5%.
Foley was made a public scapegoat.
“We were coming out of COVID, stock prices were falling. He was a leaker. [who told the press of pending layoffs]”… there were activists in the stock market who wrote letters to the board demanding that Mr. Foley be fired,” he recalled. “Then this Mr. Big thing happened… it was brutal.”
“We really thought we were doing something special for the world. We really cared about our members. We really cared about our shareholders. We really cared about our employees. And all of a sudden we were just ravaged and it all came crashing down,” he said.
Foley stepped down as CEO in February 2022.
But by the end of the year, he’d raised $25 million for Ernesta from two big-name venture capitalists, Fixel and John Callahan of True Ventures, who had both invested in Peloton, proving that Foley’s success there wasn’t just a fluke.
“I don’t think we got lucky at Peloton. I think we were good,” he said of himself and his team, “so if we’re good, we can do something similar — build a similarly disruptive consumer brand and generate strong shareholder returns in the home goods space.”
Ernesta’s COO Jamie Beck, chief commercial officer Jennifer Parker, co-founder and chief legal officer Hisao Kushi, CMO Alan Smith, CTO Yong Feng and VP of product Marissa Bivoli have all left Ernesta to join Peloton.
And Foley said that Rag Rugs could be the next big thing. “The space is not well covered, so it’s hard to find data. It’s very fragmented,” he said, noting that 70 percent of rug searches on Google are unbranded. “For us, this is going to be highly profitable.”
But he has no interest in taking the company public again.
“[Peloton shares] From $170 to $2… With a difference like that, I don’t think the public market will price it properly… [Peloton is] “The way I see it today is that it’s not a $40 or $50 company,” he said. (It’s currently trading at about $4.50.) “The contract that the public markets would get a fair valuation is broken.”
Whatever the outcome, Foley believes New York City is a great place to do business.
“I think entrepreneurs in New York City have an advantage because of the flow of information, the dinner parties with the diverse and dynamic conversations,” he said. “Whether you’re working your way up the hill or, hopefully, when you get to the top, New York is a great place to live.”
This story is part of “NYNext,” a new editorial series showcasing innovations and those leading the way across industries in New York City.
Foley is ready to climb again.
“I think John Foley’s best days may be yet to come,” he said. “I love underdog stories.”
