Barry McCarthy: From Netflix CFO to Peloton CEO; How Netflix Beat Blockbuster | 20VC #962

Barry, this is such a joy to do. As we just said, I've stalked you for- for many, many weeks now with- with-

(laughs)

... references from Gustav, from Daniel, from so many others. So thank you so much for joining me today.

Oh, it's a absolute pleasure.

Now, I would love to start with a little bit of context. We look at the incredible journey you've had. And I'm gonna skip a few steps in between. But I'd love to know, how did you make your way into the world of startups first? And then, how did you come to be CEO of Peloton most recently?

Well, I got involved in startups in the- in the 19... (laughs) not to date myself, in the 1980s when I was at First Boston, uh, and they pulled together an investment pool, um, and were investing in startups, and I was invited to participate in that group, uh, as a venture capital investor, and I spent seven years doing it. And I made just about every mistake you could possibly make. And then, along the way, I realized that I wanted to be an operating guy, and then it took me quite a while to get my, convince someone to hire me in my first operating role. Uh, eventually, that led me to- to Reed Hastings' doorstep in 1999, when Netflix was quite small. I think I was the 40th employee. Um, and then, you know, the rest is sort of history. And then with respect to Peloton, I was k- comfortably (laughs) retired, uh, and, uh, uh, and an avid Peloton fan, user. And, uh, and, uh, had- had many, um, years of successful association with TCV, both co-investors in Netflix and co-investors in Spotify. And, um, and read about some of the difficulties in the business and thought it was particularly relevant, coincidentally, with things I'd done in my career that led me, gave me some insights into, um, maybe some of the challenges they were facing and possibly some of the fixes. And I was anxious to play another big game with an iconic brand, which Peloton is, and, um, fortunately, I was able to convince them to give me a shot at- at, uh, jumping in and turning it around.

I'm sure that was a tough decision for them looking at your incredible journey. (laughs)

(laughs)

Um, but- but, uh, I- I do, I- I just-

Well, I'm not everybody's cup of tea, let me put it that way. (laughs)

T- we'll get to it. (laughs)

(laughs)

I heard some weaknesses too. I just, I'm fascinated. And I'm sure Ben told you I go off schedule a little bit. What was Reed like back in 1999? We see this incredible leader today. What was Reed like back then in 1999?

Well, his- his original vision was to be retired and to run the company and be its chairman. And the performance kind of got sideways and he came in off the sidelines and replaced Marc Randolph as the CEO, and then the very first thing he did was to bring in Patty McCord and rebuild the entire team. And, uh, so I came in as part of the rebuilding and it was then an a la carte business. Now, he had been very successful building a company called Pure Software, which he ended up selling and had been taken public by Morgan Stanley, and I think was maybe the second most successful IPO of all time if I'm recalling correctly. A little bit out of my depth there. Um, and in hindsight, I think he wished that he had had the opportunity to build it in a slightly different way. He had been a first time CEO at Pure, uh, and this was his- this was his do-over, in effect. Um, and so he was, um, he was quite deliberate in the way that he- he built the culture, um, and measured performance. And, um, and then eventually we found product market fit. It's a sub- subscription model as it turned out, not as an a la carte business. And once we stumbled into, uh, into the subscription model, the- the business literally started doubling each year and for, gosh, five or six years just kept doubling.