Mattress startup Casper attains $750 million valuation in 5 years
Since launching in 2014, Casper, a direct-to-consumer mattress company, has grown from a small startup to a company with over 250 employees in multiple countries and hundreds of millions of dollars in annual sales. Within the last four years, the company has risen to a $750 million valuation. The company’s co-founders, Jeff Chapin, Gabriel Flateman, Philip Krim, Neil Parikh and T. Luke Sherwin, met each other at a startup accelerator in New York City, according to CNBC. Parikh, Sherwin and Flateman already knew each other from working together in e-commerce. The five quickly became friends and decided that they wanted to disrupt the $14 billion sleep industry.
Some of the co-founders already had relevant experience in the industry. Krim founded The Merrick Group, which owned two websites dedicated to sleep products like mattresses, pillows and sheets. Parikh’s father was a sleep doctor with connections to sleep experts. Chapin had worked at top design and consulting firm IDEO, designing mattresses among other things.
This prior experience, coupled with Flateman’s knowledge of e-commerce and Sherwin’s background in building brands, formed the basis for Casper’s creation.
According to Architectural Digest, Casper was founded during what Parikh considers a critical period. At the time, the co-founders believed that the mattress industry was terrible and that the experience of purchasing a mattress was similar to purchasing a used car. Additionally, people were becoming more concerned with their health and wellness. Consumers were investing in health shakes and wristbands that tracked their exercise, but there was no definite way for them to invest in their sleep. Casper wanted to simultaneously disrupt the mattress industry and deliver a product that assisted consumers with their wellness.
At the beginning, the company faced a myriad of challenges. Casper struggled to acquire fundraising from technology investors who were skeptical of the company’s potential for success. They asked numerous questions, such as how Casper would make selling mattresses cool; how they could go to market with only one mattress; and how they could sell mattresses, a product most people want to try before they buy, with no retail presence.
The company finally received the necessary investment money from Ben Lerer, the founder of Thrillist and managing director of Lerer Hippeau Ventures. Like Casper’s co-founders, Lerer believed that the mattress industry needed change. His prior experience in direct-to-consumer businesses like Warby Parker helped him understand Casper’s business model.
When Casper’s website launched in 2014, the company reached its 12-month target of $1.8 million in a mere 60 days. As a result, Casper quickly ran out of inventory. The business struggled to find a manufacturer to produce its mattresses quickly, since Casper has a proprietary design they ship directly to customers, unlike other mattress brands.
The young startup suffered from thousands of delayed deliveries, which was especially detrimental for a company dependent on referrals for sales growth. Casper spent a lot of time trying to build and acquire more inventory, create factories and train others to make its product. Parikh says that they were caught off guard, but it was ultimately a positive thing, as “it taught us the importance of delivering great service to make up for it,” according to Architectural Digest. The company decided to create a 70-person customer experience team, which Parikh considers to be a “pillar of the brand.”
Numerous mattress startups have emerged in recent years, including Sapira, Helix and Leesa. But Casper is not overly concerned with the rise of new competitors. According to Parikh, since approximately 90 percent of mattresses are bought in person, Casper could still tap into a tremendous amount of the market. He also says that running a successful mattress startup does not simply consist of selling mattresses in rectangular boxes and building beautiful websites.
Parikh claims that Casper’s role in disrupting the sleep industry requires much more: creating the most innovative products, developing and maintaining a solid relationship with customers and having a well-funded research and development team.
Casper has over 50 patents and is currently developing innovative products that regulate temperature, humidity and other factors. By focusing on this area, Casper is trying to maintain its position as the leader among its peers.
Some of the largest mattress companies in the United States have thousands of stores across the country. However, this also comes with large amounts of infrastructure and thousands of square feet in each store, which Parikh considers inefficient. Instead, Casper delivers its mattresses through delivery companies like UPS, paying a fraction of the shipping costs for a normal mattress company.