CEO of 'bed in a box' start-up Casper on going from zero to a $500 million+ company in 4 years
Less than four years ago, direct-to-consumer mattress company Casper didn't even exist. In the summer of 2013, would-be cofounders Philip Krim, Jeff Chapin, Neil Parikh, Luke Sherwin and Gabriel Flateman were just five guys randomly assigned to sit together at a start-up accelerator in New York City.
Now, Casper just may be on its way to unicorn status. In its latest fundraise in May, the company reportedly received $75 million from retail giant Target, in a round expected to reach $100 million. Though the terms were undisclosed, the money pushes the company beyond the $500 million valuation it received with its $55 million series B raise in 2015.
Recently, Krim talked to podcast Connections by Exact about memorable moments along the way.
How it all started
Casper CEO Philip Krim says the "stars aligned," for the co-founders to meet. Parikh, Sherwin and Flatemen knew each other – they had started an e-commerce company together. When Krim and Chapin sat with them at that N.Y.C. accelerator, they all became friends and started comparing notes, says Krim on the podcast.
As it turned out, Krim, Parikh and Chapin had something in common – the sleep industry.
Krim had founded The Merrick Group, and its two largest websites were AngelBeds.com and SleepBetterStore.com. Parikh's father was a sleep doctor with direct access to the experts. Jeff Chapin, an industrial designer and engineer, had worked at IDEO designing, among other things, mattresses.
Flateman and Sherwin had other important business expertise: Flateman knew e-commerce, and Sherwin, having worked Saatchi & Saatchi and Thrillist, had a background in media and brand building.
Random perhaps, but certainly serendipitous. The five banded together to disrupt a $14 Billion industry by designing a single, affordable "mattress in a box" consumers could easily buy online and have shipped to their homes.
How they became "Casper"
The name "Casper" has "nothing to do with" the friendly ghost, says Krim on podcast Connections. Instead, inspiration came from co-founder Sherwin. His roommate at the time was a six-foot-six German guy named Kasper, who slept on a twin mattress.
"He did not fit on the mattress at all" says Krim, which gave the team a good laugh.
Krim and his co-founders had set an arbitrary deadline to name the company, and despite lots of ideas, they kept on returning to "Kasper." Eventually they went with Casper (with a C).
Fundraising and pushing past doubts
Krim's vision was to build a company that would revolutionize sleep — a gargantuan task that the founders believed would require backing from the best technology investors.
The problem was, says Krim, not one technology investor believed they could succeed. They heard no "dozens and dozens and dozens of times."
When they pitched, they would hear things like:
- "You're talking to technology investors, but you're going to sell mattresses? How does that make sense?"
- "You're going to make selling mattresses cool? Like okay, yeah, good luck."
- "You're going to market with just one mattress?"
- "You're gonna sell a mattress that everyone wants to lay on without having a retail presence?"
The constant rejection took its toll on the co-founders.
"That can be something that really is very demoralizing and … it certainly made us question our conviction," admits Krim.
But, he says, "the best ideas come when no one else, or very few people, see things the way that you see it. That's what creates the opportunity."
Eventually the team was introduced to Ben Lerer, founder of Thrillist and managing director of Lerer Hippeau Ventures (LHV), who actually had a "thesis on the [mattress] industry needing change" even before Casper came calling, says Krim. And Lerer already had experience investing in direct-to-consumer businesses like Warby Parker, which allowed him to understand the vision.
LHV lead Casper's seed round in early 2014. Its series B in 2015 attracted celebrity investors like Leonardo DiCaprio and Adam Levine.
The Amazon air mattress incident
When the site launched April 2014, its first-year sales projections were $1.8 Million. The company hit that 12-month target in 60 days.
But was "amazing and mind-blowing," according to Krim, quickly turned scary, since the team didn't have enough product.
Finding a manufacturer to produce their mattress in a hurry was "like pulling teeth," says Krim, since, until Casper, most brands just wanted something off the shelf with their labels on it, shipped to a warehouse. Casper had a proprietary design it wanted shipped directly to consumers.
"It was chaos," says Krim.
Fledgling Casper had thousands of customers experiencing delivery delays. Referrals were a lifeblood, so the team needed a customer service solution.
Through the chaos, came creativity: Parikh came up with the idea to ship air mattresses via Amazon.com to customers whose orders were held up, as gifts from Casper.
"We thought Amazon would shut us down because we ordered so many, and they might think we were reselling them," Chapin tells Quartz.
Target and the 'Nike' of sleep
Casper did an estimated $200 million in sales in 2016. It has extended its product line to include pillows, sheets, duvets, box springs and even a mattress for dogs. It has also expanded into retail with a showroom in New York City and a partnership with West Elm, which has the mattresses in its 70+ locations across the United States. The company has launched in Germany, Switzerland, Austria, Canada and France.
With the May 2017 Target investment, which reportedly happened after talks to buy out the mattress company for $1 billion fell through, customers can buy Casper products at Target, including two exclusives — the Casper Layer (a mattress topper) and the Casper Lounger (a lounge chair) — through August 2017.
According to Recode, the Target investment also will help Casper expand its products to become known for more than mattresses and to compete in the growing "bed in a box" category against brands like Leesa and Tuft & Needle.
It's all part of the co-founders plan. They want Casper to be a ubiquitous global brand, like the "Nike of sleep," says Krim.
Daniel Rodic is the co-founder of Exact Media and co-host of Connections by Exact podcast.
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