How Peloton exercise bikes became a $4 billion fitness start-up with a cult following

"We were going to shift this fitness industry from these commercial gym environments into the most convenient place on earth," he says.

Foley secured $400,000 in seed funding from a group of angel investors and the company was officially founded at the beginning of 2012, with Foley taking a French term for a pack of bicycle racers, "peloton," to name their new creation. From there, it took Foley, Cortese and their three fellow co-founders — Graham Stanton, Hisao Kushi and Yony Feng — nearly a year to build a test bike using off-the-shelf hardware, including an Android tablet for the bike's touchscreen.

By the end of 2012, that test bike proved to be enough to show investors that a high-tech, connected stationary bike that tracks the riders' metrics while live-streaming video could work, allowing Peloton to raise another $3.5 million. They built a real prototype Peloton bike and launched a Kickstarter campaign in the summer of 2013 to create buzz around the bike.

It only took about a month for Peloton to top its Kickstarter funding goal of $250,000, but at $1,500 apiece, Peloton had still pre-sold fewer than 200 bike, so wanting to appeal to suburban consumers who wouldn't have as much access to brands like SoulCycle and FlyWheel, Peloton set up a pop-up store in the Mall at Short Hills in Millburn, New Jersey, a luxury shopping mall roughly a 40-minute drive from Manhattan.

Cortese remembers "high-fiving that we had sold, maybe, five units in a single day," he jokes. "But it ... allowed us to be in there providing our message to every customer who walked by."

Slowly, buzz for the brand started to build. Over the next year, Peloton opened seven stores in California, New York, Massachusetts and Virginia, while sales continued to tick upward. Peloton's sales in the first two months of 2015 more than doubled the company's expectations, and that spring Foley said that he expected to have sold a total of 10,000 bikes by the end of the year.

As the company continued to grow, more investors took notice. Two separate funding rounds in 2015 raised a total of $105 million, which was roughly seven times the company's total prior fundraising.

By 2016, Peloton had booked $60 million in annual revenue, and Cortese now tells CNBC Make It that Peloton's sales "essentially double or triple every single year" going back to 2014.

"What's amazing about our growth is just this past year, 2018, we had at least one day where we sold as many units in that single day as we did in that first year of 2014," Cortese says.