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Scaling Up [S4.E5]: ‘Racing through the Gears’ with Jill Woodworth, CFO of Peleton

Hear the co-pilot's perspective of one of the wildest scaling stories of recent times with Jill and her journey with Peloton (NASDAQ:PTON).

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Ed (02:48): Jill, welcome to Scaling Up. You’re in fact the first CFO we’ve had on this podcast. As many of the listeners know, we’ve really been putting the spotlight on the founders and CEOs of wonderful growth companies around the world. But we thought it was time to illuminate the backstage stars of the show in many respects, because the role of the CFO is often misunderstood. It’s underestimated particularly what it takes to be a great one. In our experience. It’s the hardest role to hire for, given the breadth of skills that’s required. So, I’d love to start maybe with some of your background, which was in banking, and then maybe we can dig into your transitioning role into that of CFO.

Jill (03:32):Great. Well, thanks for having me. And yes, prior to working at Peloton, I had a 24-year career in investment banking, which is hard to believe. I spent that much time within the industry, I worked at Morgan Stanley for 12 years and JP Morgan for 12 years. So, over my 24-year career, I’ve had a privilege to work with a lot of great companies, and I had a front row seat to meeting a lot of extraordinary founders, CEOs, CFOs and management teams. I spent a lot of my career helping companies go public and coaching them for what public life was going to be like, what the IPO process was going to be like. That was probably one of the most fun aspects of my job. And in so doing, I would grow very close to management teams. I would really love learning about their business and what drove their business and how to help them think about what type of goal posts they wanted to give to the market.

Whenever we would go to the stock exchange and celebrate an IPO, I remember the next day I used to feel empty in some ways that they didn’t need me anymore. And I was enjoying so much being a part of their team and really helping them get to the public markets. I will say in the back of my mind, for many years I thought, wow, it would be really fun to be on the other side. Now interestingly, the right opportunity never came up until Peloton which obviously was ticking every box, which we can get into. But I wanted to stay in New York, people probably know in New York, when you get your child into kindergarten, it’s a feat greater than getting into an Ivy League school. For me I had just gotten her into school, and I had a couple of opportunities that would’ve required me to move.

So that wasn’t really going to be in the cards. I also was very much looking for a company that was high growth, that was consumer, that had all the things that I used to look for in a great IPO as a client banker. Companies that had a fanatical following, companies that had great founder led leadership, which is was always a great marker of success in the public markets. I got introduced to John Foley through a mutual friend. And what was great was within 30 minutes, I basically decided to leave a 24-year career in banking, and I couldn’t have been more excited to join Peloton. And it was about three and a half years ago, and I was just remarking in a meeting that I had earlier today that when I joined Peloton in the last 12 months, Peloton did about $200 million of revenue and here I am three and a half years later, and we’re doing over 4 billion of revenue. It’s just been an absolutely staggering ride. I couldn’t have asked for more, and it was incredibly fun to use all of that IPO knowledge that I gained all of those years and actually help Peloton on that journey to become public.

Ed (06:50): You’ve laid down some, some great tracks here that I’m going to follow right through and some themes that I’m going to pick up on particularly your relationship with John and the importance of that and the IPO transition. We will get into that. I’m interested in the skills that you had developed over 24 years, as you say, very senior and high-profile banker. The skills that you found really valuable in this transition and maybe the skills that you thought, wow, I’m on a bit of a personal growth journey and I’m going to have to pick up quickly.

Jill (07:22): Yeah, they always say fake it till you make it. I didn’t have an accounting background, but I knew a lot about forecasting and planning. I mean, that’s essentially what we did with our clients, was really pulling apart their business models and helping them come up with credible forecasts for the market. You really had to dig in and understand the drivers and understand ultimately what would be important for investors and clearly back then we had private investors. I was doing IR from day one, not from the day we went public because we, we’d gone through several rounds of funding. So, for me, the easy things were forecasting, it’s, a more complicated business than you think. And it was really fun for me to essentially take a blank canvas and paint the P&L and paint the segments in the way that I thought made the most sense to run the business and eventually tell the story to the market.

So those were the things that came naturally to me. What didn’t come naturally, as I said, was accounting and tax and other areas of finance AP and really that day to day running of the financial aspects of the company. For me, the most important thing was immediately hiring people that were a lot smarter than me and who were domain experts. When I started at Peloton, I know this going to be a staggering statistic, but there were 12 people across all finance functions at Peloton when I started. We had no tax functions, we had no treasury function, we had one person running data science. We had no financial systems. We had three accountants and three people that did financial planning. We stand over 190 today. So, if that gives you any concept of how much we really had to scale, and priority number one for me was identifying the people that were there already who were superstars in their own right and complimenting that with superstars in tax, in accounting and other functions.

For me, it allowed me to focus a lot externally, right? As I said, with our private investors and ultimately with our public shareholders forecasting on being hopefully a valued business partner to the executive team, but also all of our functional leaders in a very highly vertically integrated business. You can’t have a conversation about demand without talking to supply and member support. So, it really allowing me to focus on building those connections and really deeply understanding their businesses as well. So, it was as fortunate for me that we were able to attract incredibly talented people to Peloton who really believed that we were bettering the world and really wanted to be part of that mission.

Ed (10:19): Maybe it’s worth just touching on your own leadership style and how it’s evolved over time. I think for those, or everyone’s familiar with Peloton, it’s one of the fastest growing companies in the world, but I think people underestimate how many levers there are inside of Peloton that are pooled at any one time, particularly not just being a fast-growing company, but just the nature of the business model itself. I am interested in some of the secret sauce to ensuring there is not as much friction as you can imagine. I think even the last two months, Pelotons hired 400 people around the world. We’re talking about hyper, hyper growth company here. How’s your own leadership style evolved as your team’s grown and also just being a leader within the organization?

Jill (11:02): Well, I think the most important thing is there is no place, as far as I’m concerned, in any organization, and this coming from someone who’s spent 24 years in banking, there’s no room for ego. You have to hire people that are smarter than you that tell you what to do, right? I don’t want to tell people what they need to do. I want people to tell me what we should be doing as an organization. So, I think first and foremost, I have a very non-hierarchical team. Every single person has valuable answers. I don’t care if they started a month ago or they’ve been in the business for 30 years. What I love about Peloton is there are no shortage of good ideas from everyone. So, from my perspective, I think that’s, that’s key, right? It’s key in an agile young organization to operate in that way.

I would say secondly, it’s not a typical job in finance at Peloton. It really isn’t. In fact, I often look at how hard a lot of this team works, and again, it’s because they work at a company that they believe in is changing the world and making lives better. And for that they want to work hard. And when you’re growing very quickly, it’s easy for people on our finance team to log 70, 80 hours a week. It felt to me like my days in, in banking when I was young and sleeping under my desk with a portable heater. So, I would say as much as I feel like it’s on me to not have an ego and listen to everyone and hire smart people, it’s equally important. I consider my number one job to keep my team happy and stick up for them, listen to them, understand their challenges, and figure out where I can help them. And that’s what I think defines at least my leadership style. I hope it’s effective. We’ve had very little attrition on the team. I think, again, for the amount of hard work that we do, I think the team is just generally happy. But yeah, that’s my number one goal.

Ed (13:13): It’s amazing. The elevation of the CFO of the last 20 years from what people imagine the past as the bean counter to what now is this deep strategic role. It’s in many ways, as you’ve just mentioned, a people leadership role above all else, what do you think has caused the elevation of the CFO inside an organization? I mean, maybe it’s the emergence of software and the ability to sort of optimize the long-term outcomes. It does feel as though increasingly the CFO is just such a key component of the team.

Jill (13:48): Well, I think smart young organizations tend to be data driven and generally, when you’re a direct-to-consumer company who are trying to drive sales and you’re launching new products, some of the key decisions that you have to make, you have to analyze the data, right? You have to look at the P&L impact. You have to understand how this shaping the company going forward. Thankfully, I would say that our teams get included in a lot of big decisions and we should be right? Whether it’s pricing or launch strategy or how we bundle our products or how we price our subscriptions, or what different types of partnerships we, we want to do. I’m always proud to see my teams partnering really well with the business functions. My goal is for my team to be indispensable to the different areas in which they work.

And it’s not the CFO that’s defining it. I think it’s the finance function overall that really defines that need. And again, as I said, it goes back to hiring really smart people and giving them the platform to do their thing. And I don’t have to be in every meeting, and I’m so excited, my favorite thing is when I get an email from one of our business partners praising someone on my team for providing them a ton of great analysis that really helped inform a decision that they needed to make. That’s really the key. It’s the team, it’s not the CFO.

Ed (15:20): We can broaden the discussion in this question to what makes great finance teams, but are there any other skills that you think make for great CFOs that maybe you can look across and aspire to think, oh, that’s one area that can really improve my own skills or maybe build out my team around where the market’s moving?

Jill (15:40): I mean, I could answer that question in so many different ways. I think more and more our data science team is becoming a critical partner across finance and across the organization. For a company like Peloton, you can imagine we sit on a mound of data, I mean, just hundreds and millions of pieces of data every day. We barely scratch the surface on using that data to inform what we do. So, I think more and more you’re going to see data science and financial models ultimately being built by algorithm and I think we just have to get smarter in that area. And I’m just so fortunate a couple of years ago to have inherited our data science team. I can already see a lot of the great partnership, right? They obviously today help us report a lot of the great KPIs that people track on our business, like our churn and subscriber workouts. But again, I just think we’ve barely scratched the surface on using that data in, in a much more meaningful and robust way. And I don’t know, I don’t want to say we’re all going to be replaced by robots, but I do see a world where it’s going to be less human capital intensive, and more data driven over time. I was fortunate to get that team integrated into finance.

Ed (17:21): Let’s shift gears momentarily. And you spoke earlier about John Foley, the founder of Peloton. Often these founders, their visionary product people and the people that want to change the world, but product is where their heart is. And great CFOs can come in and provide some rigor and process around them and help shape the strategy to ensure that vision is enabled. For those that don’t know, John started with no venture capital money, it was a Kickstarter campaign that started Peloton. It’s an incredible story in and of itself, scrappy and passionate and incredibly visionary. I am curious as to how your relationship with John has evolved over time and also just generally dealing with these visionary founders.

Jill (18:07): I would first off say that there have been many moments since I’ve joined Peloton where I look at what his vision was and what he’s built. And it is truly unbelievable. It’s an unbelievable story. And I am humbled by how hard he and his co-founders had to work to take it as far as they did. To your point, nobody believed them. It was very hard to raise capital in the early days. I probably joined Peloton at an inflection point. It was after they had done their series E, they had achieved over a billion-dollar valuation in the company. So, I could argue that, that my road was far easier than the road that they had for those first few years. So, no question, I am in awe of someone that has the guts and the courage to basically take an idea and get the door slammed in the face hundreds of times about that idea of being crazy.

And then to see it come to fruition through a lot of work and perseverance is unbelievable to me. And I can say that as a banker because one could argue the banking industry is for the risk averse, right? Is for the, not the doers, but the people that are kind of shuffling things around. No offense to the bankers out there. I did it for 24 years. But I mean I just looked at people who built companies in an entirely different way. I looked at the members and I looked at the employees who as a baseline, their lives have been changed by being part of this company. So, I pinch myself that I get to, to watch that up close. And I think you have to appreciate that in your interactions because this their baby in some way. It’s like a child.

For me it’s always been about how do I influence without authority or without telling someone, this how you have to do it, but really like, just demonstrating, well, here are the options, here’s why we might want to do this instead of that. And I was really fortunate that John let me take the reins on the IPO process, but it was still critical for me as we were telling the story in the prospectus as we were telling the story in the roadshow video. And as we were telling the story to investors that I had his stamp of approval to make sure that it still felt genuine and true to the company and to his vision. There are ways to influence people and put your opinion on the table in a really good way. And then there’s a way not to do it. And I am so respectful of what they built that we generally come to good terms when we, we don’t see eye to eye on something, but he’s great to partner with and work for, and again, truly, truly inspiring to see what they’ve built.

Ed (21:04): How’s his leadership changed over the time that you’ve been there? As I said, from this scrappy founder to building a business with over 4 billion in revenue, it’s an incredible scaling journey. But there’ve been lots of different scaling pain points that he’s had to navigate as a leader. Imagine he’s had to withdraw himself, still obsessed by the detail as all founders are, but also probably having to, to withdraw from the detail at times as well.

Jill (21:32): Well, I think part of the charm of anyone, honestly, is someone that doesn’t change over time, no matter how big the company gets. And for me, and for him, accessibility is a really important thing to offer your teams. Do I know everybody personally on my team? No. Does he know everybody personally at the company? No, but he communicates with the full team every four to six weeks. He communicates very frequently with the senior leadership team. And I would say that that’s actually a pretty big team. It’s about 90 people of senior leaders across the global organization because he’s still the same person. And that’s what I love about John is he’s still genuinely John and that comes across to our entire global team. And that’s the way I want to lead my team as well. I still actually personally meet every new team member on the Peloton finance team.

I take 30 minutes to meet every new hire for the week. And he’s the same way. He does new hire introductions all the time. So, I think he’s just really good at staying sort of true to who he is, despite the fact that the organization is growing up, it’s obviously getting more complicated and clearly as you grow, you have to let go of some of the details. But I think where it matters in carrying the culture of the company and being very open and knowing a lot of people within the organization, I think you would be surprised. It really matters and it’s really important to him.

Ed (23:10): Some great call outs there around the power of being an authentic storyteller as well as this coaching and mentoring role and really being the ultimate culture carrier. I guess the next theme I want to dig into is how do you create wonderful IR and particularly these relationships with investors, ensuring that they are strong and fluid and the role of the CFO in this?

Jill (23:35): Obviously as a private company it was a little bit different because a lot of our investors were on our board or had information rates. From the get-go, from my standpoint, it was really important for me to be responsive. It’s a really unutilized characteristic, but I think it’s actually really important, right? It’s so easy to say, oh, they’re not important, or they’re a smaller investor, or they don’t hold much. But in the beginning, it was really important for people to at least know I’m there, I’m on top of it, I’m paying attention and every one of our investors matter. For me it was really important to be responsive to all of our investors. And I say that with the true fact that it’s really hard to do when you’re juggling a new job and we invested a very large capital structure.

I put in a lot of, a lot of hours in the beginning establishing those relationships. Because, I knew a lot of our investors, early investors were critical to getting this company off the ground. So, it didn’t matter to me that they were a small investor, but if they wanted to chat or they needed information, I wanted to help them. Some of it was administrative in nature, but again, I wanted to start that track record off. Well, especially because transitioning from private to public, you might have these investors stay with you for a long time or they might move to different pockets and funds within some of these larger mutual fund complexes that owned us. So, I just tried to be really accommodating and helpful and it sounds really basic, but it goes a long way. I might sometimes get accused of being overly responsive by my head of IR, who obviously has raised my game quite a bit on the IR front.

But I just think it’s crucial and frankly, it’s who I am and who I want to be with our investors. There are so many times where we can’t answer questions right now that we’re public and I want to, I wish I could tell everybody everything about what’s going on at Peloton, but finding really, really tactful way to give them what they need without giving away the farm. hat’s been a fun skill to develop over the course of the last, I guess it’s now been a little more than a year and a half since we went public. So, it’s just trying your best to give them what they need. I don’t know, I think it’s pretty basic. It’s like when people say all you need to know about life you learned in kindergarten, I do think IR is about these basic principles of respect.

Ed (26:14): And the investors appreciate that. We always talk about the three Cs being clear, consistent, and comprehensive when it comes to how IR is reporting to investors. And certainly there’s an element of the investors have a bargain to hold up as well to make sure that they’re doing the work, they’re asking the right questions in a respectful manner. Maybe the last theme to talk about is this insight that you can provide into transitioning Peloton from the private markets to the public markets. Every founder and CEO that has gone public that we’ve spoken to has called out the role that the CFO has played in this. And as you alluded to John, let you run with it. So, this a huge moment not only for the company, but also just in terms of work for the CFO to undertake.

Jill (27:03): So having been on the outside looking in for so many years and watching companies go through it, I can tell you now, having done it from the inside, if I could’ve gone back to my former self, I would’ve been the best IPO banker that ever existed because I clearly had no appreciation for how much heavy lifting the CFO, the finance and legal teams do. I kind of naively thought that, okay, so it’s January I’m going to start drafting our story, I’m going to start putting an RFP together, maybe we’re going to start interviewing banks and we’re going to be public in September. And I’d done other preparatory work. I made sure the financial statements we had to change our fiscal year; I changed our segment reporting. All of that was in the rear view, and that was, that was hard, but I was a little overly ambitious on timeline.

I was like, we’re going to pick banks in February, we’re going to file in May, we’re going to publicly file in August and we’re going to launch in September. And I literally had in my calendar, we are pricing this deal on September 26th. And for me the most important thing was hitting a timeline, right? As a banker you can kind of like waltz in and out of drafting sessions and just throw some ideas around and then like call it a day. I was literally toiling over every single word, every KPI, every graphic, every comma is the comma in the right place. And it was a total labour of love. But I think I underestimated it. And then because I kept saying I’m not going to miss a deadline I basically had two jobs for nine months. If I could have gotten an A++ on every part of that process, that’s what I was going for.

I wanted the best road show video, I wanted the best analyst day. I wanted everything to be perfect and so, for me, what culminated in our roadshow with the market meltdown and WeWork and all of that, the narrative around unprofitable unicorns, I slowly saw this beautiful A+ starting to fade into the distance. And if we hadn’t have gone public on that day that I chose nine months before that maybe the market would’ve melted down to a point that we wouldn’t have gotten a capital we needed, we wouldn’t have gotten public. Yes, I didn’t love the way the stock traded afterwards, but obviously it was a moment in time and you kind of wanted the perfect ending to the nine months of, of super hard work. But in retrospect, we’re so excited to have gotten the capital, we recently raised more capital in the form of a convertible, which we wouldn’t have been able to do had we not gotten public. All’s well that ends well, but it was definitely hard to take all that burden on and want it to go so perfectly.

Ed (30:07): I think that’s a common theme that always comes across. People underestimate what is involved not just in the actual backend process and systems that needed to be upgraded in the years before, but that one year before any large company goes public is just a crazy time and the work that goes in. Can you touch on the differences in having to report quarterly and how your job has maybe changed from the private markets to the public markets and the rigor that that might bring to your teams?

Jill (30:38): It hasn’t really changed much day to day, and I would say the things that I enjoy the most are the things that happen in between earnings, which is when I have more time to connect with my team. It’s not to say that I don’t enjoy talking to investors about our results, but obviously there’s probably about a month out of every three months where you’re spending time prepping and then you’re spending a couple of weeks explaining and that’s great, but unfortunately it requires taking a step back from a lot of the other internal meetings that honestly can be a lot more interesting than saying the same thing over and over again. But it’s critical and it’s important and I embrace that. But I do love the business meetings as opposed to the meetings talking about what we’re going to say on an earnings call.

It’s a little more fun. There’s obviously upside and downside to, to being public and you always want to ask yourself when you’re making decisions as a business, if being public is any part of that decision, it’s bad, right? It’s something that I constantly in the back of my mind am always thinking about whenever I form an opinion or say something in a meeting, I always make sure to remind myself we have to make decisions that are right for the long-term growth of the business and health of the business. And we’re never going to make decisions based on a quarter or based on something that I think will be potentially negatively perceived. For example, in the past year we had some logistical challenges and I thought, oh my god, we really have to spend some money to airship bikes in to deal with our order to delivery crisis.

And I green lit that so fast because I was like, if we can solve this issue for our members, great. And ultimately, yeah, maybe it’s not great from an investor perspective because we have to spend all of this money, but that that is like not even entering the equation. Thankfully I think most of our shareholders totally got that. They’re like, of course this exactly what you need to do. It’s more important to keep the longevity of that subscriber, get the bikes in hand people have been waiting long enough even though we were doing everything we possibly could from a manufacturing perspective, we couldn’t magically wave a magic wand over the port congestion. It’s just an example of like, yeah, these are things that sometimes in the back of your mind as a CFO, you’re scared when you’re thinking about, okay, well I have to explain why we, we need to do this. This a lot of money. And then at the end of the day, just always taking that step back and doing what’s right for the member and right for the business. And that’s the compass that every CFO and frankly every leadership team should have that’s public, and everything will work out in the end.

Ed (33:33): Jill, Peloton, as I mentioned, one of the great growth companies around the world and behind every great growth story is a great CFO. And thank you for sharing your insights today. It’s been an absolute treat to hit.

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