Casper: Philip Krim

I never expected to see so many competitors come at us from so many different angles. And that so many of them would just try to copy what we were doing and be fast followers and and really just take everything we were trying to be innovative with and Immediately buying a mattress online became even more overwhelming and confusing than buying a mattress offline.

I'm NPR. It's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. Guy Raz and on the show today how Philip helped transform the way we buy our beds by building Casper.

Brand that makes it easier to choose a mattress. More fun to take it out of the box. Venture Capital has had a love affair with direct to consumer startups over the past decade. Even though the vast majority of products you buy are sold through third parties, the direct to consumer brand model has gotten a lot of attention. I'm talking about Peloton and Allbirds and Warby Parker and Bonobos, even Tesla. These are all more or less brands that were designed to be sold directly to you, either through the internet or a brick and mortar shop owned by the brand. The idea behind DTC brands is simple and elegant.

Sell a product directly to the consumer at a price higher than wholesale. But lower than retail, and then use the profits to aggressively advertise your product to acquire more consumers. Over time you scale, and then soon enough. Your brand is worth billions. Except that model has proved to be a lot harder than it sounds.

Customer acquisition costs are really high. And unlike 10 years ago when the DTC model really took off. There is a lot of competition now. Orby Parker isn't the only one selling glasses directly to consumers anymore. And All Birds is now among dozens of DTC shoe brands. Same goes for mattresses. Today, there are at least a hundred and seventy direct to consumer brands that sell mattresses online.

It's a crowd and confusing marketplace. But when Philip Cram and his partners launched Casper Mattresses in 2014, there were just a handful of these types of businesses. Philip was part of a wave of entrepreneurs who saw that the experience of buying something as mundane but important. As a mattress? actually matter to consumers.

He and his partners launched Casper as a way to make buying a mattress simpler, a mattress that could be ordered online, compressed into a box, and delivered to your door. And Casper kind of created the model for the way many DTC mattress companies manufacture, market, and deliver their products today. Kasper's rise was meteoric. At one point, private investors valued the brand at over a billion dollars. But since its initial public offering on the New York Stock Exchange in twenty twenty, Kasper's market value has dropped.

By half. And while all this has certainly rattled Philip Creme, He's also an ambitious CEO. With plans to make Casper much bigger than a mattress brand. He wants it.

to be a sleep brand. Sort of how Nike was once a shoe brand, but is now known as a sports brand. Phillip grew up in Sugarland, Texas, where his dad was an entrepreneur who tried out all kinds of business ideas. As a kid, Philip knew he would do something in the business world, which was his plan when he started college at the University of Texas.

I very much knew that I wanted to do business. I didn't think it was gonna be kind of the entrepreneurial path. I thought it was gonna be more kind of the finance path. I recall fondly playing like the stock market when I was in you know, fifth grade and like you know, during the dot com mania and just being you know, looking at the stock market quotes uh in the newspaper every day.

And you know, probably have read the Wall Street Journal uh since elementary school. And and so I started U T as uh finance major, but obviously Kind of pivoted as I started tinkering out with doing my own things and then ultimately did go down the entrepreneurial journey while I was in school and post school. I think in school, while you were in college, you started your first business, an an e commerce business, right? That's right. Um you know, at at the time I didn't say like oh I'm gonna go start my business, what should I start? It was more of Well, I don't really want to get a traditional summer job and sit in an office all summer. What are ways that I could use the internet to make money? Um

In a non traditional way, I guess, at the time. And so I learned what dropshipping was. I learned about HTML and how to you know, build websites uh using HTML. And so I figured out that if I built a website and could market the website online others could do uh drop shipping to do the customer fulfillment.

And that could be a way to make money. So Just started messing around with that. You had this idea. Maybe I'll start some kind of e commerce business. You didn't know what it was. But you thought it could be a cool and this is like what, two thousand two, two thousand three, something like that? That's right. So e commerce still really early days. People are still nervous about putting their credit cards online, but

What did you What did you decide to sell? Yeah, it it was early days. This was kind of post the crash of the dot com boom and bust. And so people were still very skeptical about it. You know, to me though, th there were people online searching for for products all day, every day. Um, and so I would look up what people were searching for, you know, you could see search volumes

And then I would go look for manufacturers that would ship directly to the customer if I gave them an order. And then you know, the manufacturer would charge my credit card and and do the fulfillment and I would charge the customers credit card through my merchant account. And I worked with you know, dozens of different manufacturers who would sell everything from

window blinds where people would give us their measurements and and it would be made to order eczema cream to help uh children with eczema. Um sofas or futons to how to play poker software uh all the way through to mattresses. Um so I've actually been around the the mattress side of things uh since the early two thousands as well. But at the time it was really just i anything I could find where I could f

figure out that people were searching for it. And I could find a manufacturer who would do the fulfillment. I could do the rest from my dorm room. Hm. But th but just to be clear, this was not one website because You I'm assuming you wouldn't go to a single website and see you could buy eczema cream and futons and window blinds.

Right. No, this this was a portfolio of different websites. So I would generally try to build a a targeted website. for the specific product or manufacturer um that I was working with. And it's actually at the time I think at the time Wayfair was doing something similar. It was exactly how Way Wayfair started.

selling, you know. All kinds of brick a brack and and then furniture and but they had a mul m you know dozens, hundreds of w different websites. And this is essentially what you were doing. Was it pretty cheap to do to do all this? It was cheap enough where I I could

kinda do it using uh misappropriating some student loan money and and you know d starting it with credit cards. So you know, it was something I I Did it all myself. I had no money, you know, w was on scholarship for school and so was able to kinda just put it together with you know some some sweat equity, I guess, and and get it going. And then the nice thing about the model Uh which's true also for Casper when we started it, uh is just a a it's a negative cash conversion, which is a a fancy way of saying

Customers give you the money to to buy the goods before you have to put the money out. So it's actually a very capital efficient way to start and scale a business. Philip, how did you find these co I mean it's it's I mean you would you would So young and and it's such a cool idea and but but this is like 2002 2003 like how did you find even find companies that were willing to work with you Did you just cause this is before you could just like find anything on the internet. It was still pretty early days. So how did you even identify those companies?

You know, I I wish I remembered the specifics. Uh I I remember just trying to call up companies But It was just trying to understand like who who was willing to do the fulfillment and call it the company and see if you could Convince them. Uh h hope you know, oftentimes they didn't realize that I was a college in the beginning. Yeah, a college kid. Um Yeah, it's it's funny. I remember

In my early twenties I I went to a Celtics game in Boston with some of the Uh guys that I'd been buying from for years. And I guess it was my turn to go buy the beers, but in the garden You can't buy you a until you're twenty five, and to had to come back empty handed. And it was like a an acute reminder of of uh my youth in business.

Alright, so you you started this company Uh by yourself. But but you did end up Hiring employees, right? Uh so over time I I had employees and then my family also helped. Uh so at one point I had a a conversation that didn't go exactly as planned, but I I went to my parents saying how I thought I should take a a break from school and work on the business because it was growing quickly uh and I was enjoying it.

And they shut that idea down immediately, but the the compromise we worked out is that they would help me with the business. And so ended up getting my family involved and we um No, at one point had Uh you know, I don't remember our peak, but like twenty, thirty employees involved. But this is after you graduate college, you had twenty or thirty employees, right? Not while you were still in school.

Yeah, no, in the in the beginning it was just me. I was Answering phones, taking live chats, taking the orders, working with the vendor, just doing everything. I mean, I I think that's one of the ways that I learned just about every part of the business. So You were probably making money from the beginning,'cause you had no expenses. That's right. Yeah.

It was profitable from the beginning. And out of all of the things you you tried out I guess you notice that mattresses Like selling mattresses or faux mattresses that was doing Better than other things that you were selling?

Uh that's right. Mattresses I realized like they had big margins. It's also an industry that was very slow to embrace the internet. They were doing a lot of direct response advertising, you know, temper Pic, Sleep Number, uh back then were were growing their businesses to direct response advertising. And so I saw that the more these guys advertised on T V and radio It drove people to search for these brands online.

But these guys didn't even have e commerce capabilities back then. Wow. And so we could sell, you know, products that competed, you know, memory foam products, adjustable air mattresses. And we we could be early in the industry and it was it was very profitable because these guys weren't competing there. So so why and why was it that the margins on mattresses were so Hi. It would explain that.

Yeah, so that's where I I dug into the industry and just started to learn the dynamics, which is that for the last several decades it's been a very tightly controlled industry. And when when things are an oligopoly or a duopoly or a monopoly that's when you're able to really protect pricing, protect margins, and you see it in other industries. You see it in the razor blade business, you see it in the eyeglass business. very tightly controlled on the manufacturing side.

It's a business that private equity had loved to own. Love to protect. It was very predictable from a volume side. And so that's what allowed them to have big margins and and brands mattered here. Um and so brands also drove higher margins. Seely Certa Simmons, these brands have been around for a hundred plus years. And that that allows you to take margin over time. Okay, so you graduate.

uh from college around two thousand six and and I guess you at that point you really jump into this business full time and and you call it them the Merrick group, is that right? That's right. Um so I I ended up taking five years to graduate from Texas um because I was balancing school with uh running the company. Um, I grew up on Merrick Drive, so decided to start the Merrick Group. Sounds like a private equity group, like an investment firm. Like a V C from the Merrick Group. It was this was your your your street that you grew up on. That's right, from first grade uh into college. And did you stick with With a bunch of different things, blinds and futons and different products, or did you then focus mainly on on mattresses, selling mattresses? Uh over time it got more and more focused on mattresses. Um So yes. We ended up e exclusively in the the latter part of the business, only focusing on mattresses. And give me a sense of what kind of revenue you guys were doing at the time, like two thousand two thousand eight, two thousand nine, like

What were you guys doing? I think we were in the kind of ten to fifteen million dollar per year revenue range. Wow. And were you guys s were you profitable? Uh, you know, we had our ups and downs. Uh towards the end the business got very tough from a profitability standpoint. And You know, one of the areas that I always

personally focused on was our online marketing and our customer acquisition strategy. And what I saw was just every year customer acquisition costs went up. Uh, I think one of the brilliant parts of the Google invention is just the auction based model for Buying ads and so You just saw ad rates and and unique visitors and cost per clicks go up uh very steadily. And so

Over time it it just got harder. We we realized we didn't have kind of enough of a moat around the business to to have, you know, a defensible way to to run the business profitably. Uh, and it it's all lessons learned, you know, learned a ton in the early days and all the way through when things got tougher. You step down as the CEO of that company in two thousand nine. So you're still really young and you go

Ventures, which we'll talk about in a sec, but I know you eventually sold that company was sold. The Merick Group was sold in twenty thirteen, right? That's right. Um it wasn't sold in like you know, a big exit. It was sold to to manufacturers. Right. Uh and it was a really way just to to kind of maintain continuity when we didn't see a a path to kind of continue to operate it profitably. Right. And again, I like to say this on the show is when when people hear about exits or I sold my company Most of the time that doesn't mean that the founder or founders actually got rich off the sale.

That's right. Um A lot of complexity that goes into when you hear things like exited or sold, um, and it it's not It's not always the best situation. Like I said, we we were kind of forced uh to that point because We never raised outside capital. It was you know, just funding from myself and and my family and Again, I had been around the kind of the family entrepreneurial journey and and, you know, understood the ups and downs of that, but it's different when you're living it yourself and

So I I totally agree with your point though. Like the stories and headlines uh are often misleading. I'm I'm assuming in your In this case, you didn't walk away from this. Sale with lots of money. No, I I didn't walk away with any money. Meantime.

You have a lot of experience under your belt now. It's two thousand nine, you're just a couple years a c a college, but you've already been a CEO of a company. And you decide to move to New York to launch A new venture. Which was about

Online advertising. Tell me tell me about this. That's right, so um towards the the tail end of when I was running Mare Group what I saw and what started to emerge then was really uh mobile advertising and so The idea that I wanted to work on was if I could help uh make the mobile searches and mobile traffic as easy as possible for local businesses, I thought that would be really interesting. And said

That led to starting Vocalize Mobile, which was basically Click to call search for local businesses. So What does click to call search mean? So um at the time if if you searched like Houston tow truck driver, um you you could click directly from that search using a Google ad and be connected to a local tow truck company. you could go in and do that yourself and work with Google and set up your ads. Um but our idea was to

make the technology super easy and do it in more of a a s uh full service model. So we would set up everything for you. We would record the calls so you could audit them. We would give you a dashboard so you had analytics around the leads that you were getting. And instead of paying per click, which is how Google would charge you, We would just charge you on a per lead or per call basis. And so we we tried to make it as easy as possible for a local advertiser to embrace um mobile advertising, which was still pretty nascent at that point. And Like where are are you working at like a a we work type thing or like a uh like w where are you r where are you running your business out of? Uh I was a We Work tenant. Um ended up kind of bringing on a partner who was based in Atlanta, who was kind of back and forth between Atlanta and New York.

And we we ultimately set up kind of a call center to sell to local businesses that was based in Atlanta. So I I would go down there and that's where we had some employees, but uh I was the only one in New York working and it was out of a we work. I mean it sounds like a great business, but at the time I would imagine it was probably hard to convince small businesses to spend significant money on this. That's right. Uh there were like two core challenges that uh were hard to overcome, which is one, explaining to small businesses what click to call was, where you were generating these leads from, et cetera, like still very nascent.

And then you know, what I saw was just selling to to small businesses is really challenging. Yeah. Uh These are businesses which I I appreciated, like every dollar matters. These are businesses that are family businesses where you know, if something doesn't work, you know, that there are They're making less money personally. And so You know, a lot of times the the sales

would work and they would help build a business and that felt great, but a lot of times they didn't work and it was very contentious and Uh, it just, you know, was was difficult and not something I enjoyed. And this is why so many companies only work with huge businesses, right? It's it's like that is it the Pareto principle, the eighty twenty rule, right? Which is like Eighty percent of your business comes from twenty percent of your customers. And when you're dealing with tons and tons of little mom and pop stores, it's just much harder, presumably.

It's harder and and there was a lot of churn and again you would just see th these budgets they they would Afford you know, an advertising campaign this month and not be able to afford it next month and It's uh it's just a grind. Yeah. So from from what I've read, uh, y you never got this project uh vocalized to profitability. But I mean, but you worked at this thing for

For I think for about three years, right? Uh yeah, that sounds right. I mean did you you're thirty, were you l kinda looking around at your friend cohort who maybe got traditional jobs or went to law school and were now lawyers or went to finance and were now on on Wall Street and have these sort of well paying jobs and and I don't did you feel like ooh maybe

Maybe I I I gotta figure this out. Like were you getting a little anxious? Uh Yeah, I I I would say that's fair. Um It was it was probably less on the traditional side. Like I I had my friends that were like bankers and saw what they were doing and did not was not envious of that. Uh more I was interested in just like the the tech scene and what was going on

Facebook was all the rage and you saw these companies getting big and successful and a lot of people making all this money and it it felt like an ecosystem that was totally walled off and unavailable. You know, at one point I tried to apply for a job at Facebook and was told I wasn't what they were looking for. So like I I didn't know what I was gonna do. Um, I had learned a ton, but you know, I never had a traditional job. I never knew what a a traditional kind of company gig looked like. But of course, like still had the entrepreneurial itch and was I was working on Vocalize Uh, but I I just knew it was gonna be a tough gig and so maybe, you know, back to your point, started thinking about

Uh what I would want to do next. Okay, so at some point Uh while you were still working on the startup. I guess you were accepted into an accelerator program in in New York. And it was at that program where you would eventually m meet the guys who you would who would become your co founders for Casper, right?

That's right. Um it was Gabe, Luke, and Neil. Uh they were working on a business. They were friends from Brown University. Uh their business w had an e commerce component to it, so I understood, you know, some parts of what they were trying to do and what were they trying to sell? So they they were trying to help um bloggers and content creators monetize their traffic by selling uh curated e commerce goods. So it was kind of like a Trying to operate a marketplace on bloggers' websites. And meantime, you just kinda get to know these guys. It's this is Neil Peri, Gabe Flaitman, and Luke Sherwin.

Right. That's right. Yep. And I mean how d how do you guys start talking about mattresses about about your background. Uh, you know, it's it's funny. I think it started as a conversation around sleep. And Neil's dad is a sleep doctor, he's a pulmonologist, so Neil knew a bunch about sleep. Um this was also when jawbones and fit bits were really first coming into the market. So we started talking about

What was it that that led the mattress industry to exist the way it existed today. And it was also just based around like business models and We started talking about what Harry's was doing and what Razors, yeah, Bonobos, yep. And

We we were in a startup accelerator, you know, everyone's reading Tech Crunch every day and reading about the you know massive amounts of money all these companies were raising. Yeah. You know, that that goes back to the sense that like we felt like there was this whole you know, universe going on that we weren't a part of. So at what point Did

Somebody one of those three guys say Hey. Philip. You you know about mattresses, you sold mattresses. Maybe we should do you wanna like join? Should we join together and

do something and around mattresses, like how did that conversation even start? Well You know, we we would sketch out like how would this business work if we wanted to do direct to consumer and mattresses and What were the things that would that would entail in you know, so you have to go build a brand, you have to go create the product, you have to

Create a website, et cetera. And After it felt like we sketched a lot of this out. We all looked at it and were like, Yeah, th this seems like pretty reasonable, like we're probably missing something. And so we we then

went and sat down with Jeff Rader, uh one of the founders of Harry's the Razor Company. And Jeff was also a founder of Warby Parker and we're like Thank you so much for making time. We know you're crazy busy. Like we really appreciate it. Just five minutes. Here's our idea. What are we missing? And He like, you know, he thought about it and I remember him being very like contemplative and asking great questions and and he's like, No, I think this could work.

And like for us that was like um validation from the highest authority. We were like okay, this is amazing. And we were still hesitant'cause we were still working on our respective businesses. And we're like, okay, now what? Um And I remember Luke looking at me in the eye and saying You know that if we don't do this, someone will do that, and won't that just kill you?

And that was the question that like I couldn't get out of my head. And I thought he was right. I was like th this should exist, it will exist. I think it would be really fun to go try to make this exist with this group and let's go give it a shot. Why don't we come back in just a moment? Why a lot of investors push back on Phillips' idea.

why he and his partners kept going. and how Casper got its name, which is not the way you think. Stay with us. I'm Guy Raz and you're listening to How I Built This. From NPR.

Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2013, and Philip and his partners have decided to launch a direct to consumer mattress brand. And they're one of the very first companies to experiment with the idea of selling a mattress online. And Compressing it into a box.

To send it. I remember buying my first mattress. at IKEA. And it was it came in a a in a tube, I think they still do. And I like cut it open and then just let it settle for twenty four hours. And it was cool to watch it like spring up, you know? So like

Compressed. Mattresses you could buy them. And this is I'm talking about the you know, early two thousands. Um what was the problem that That you you knew existed.

So y you could go do that if uh You wanted to go spend you know, a a few hundred dollars and get something that would last you Generally uh not very long. Hey, that IKEA mattress was great in my early twenties. Okay, keep going. When when you're in your early twenties you could sleep on pretty much anything. Uh and so that's a great solution, um, if you're on a budget and in your early twenties.

And then other than that, you you were kind of relegated to going into a store. Like really mattresses weren't uh popular online. And when you talk about going into a store, it it just was the worst consumer experience in existence. Like At that point in time we were living in New York and so Sleepies was the predominant retailer back then. And these stores felt like they hadn't been renovated in a long time and it it just was to us we said worse than buying a used car. And at this point in time, like used cars had been uh improved thanks to the internet and you could get information and transparency.

But th this was a marketplace that was specifically very opaque. You had no idea what you should pay for a mattress, you have no idea what MSRP is or uh any kind of quality standards of a mattress. The manufacturers changed the names on the mattresses year in and year out. It was the same mattress with a different name. Right. And that was one way that you couldn't price shop it. So

uh it very well could be that Macy's is selling A B C mattress and Sleepies is selling XYZ mattress. Those could be the same mattress for all intents and purposes, but you would never know that because you couldn't Couldn't compare them. You know, even

Even at this point in time you asked most people and we did the survey work before we started Casper was What kind of bed do you sleep on? Almost no one could recall it. And if you could recall it, it was usually either Ikea or Temper Pedic. But at at that point in time, there was nothing that we as consumers, you know, in our twenties and and early thirties that

you know, we're still on a budget and wanted to buy something that we felt proud of. There was nothing that existed in that kind of category. And so that that was the problem we wanted to solve. Alright. All four of you decide you're gonna go for it. y you have the meeting with this guy who co founded or founded Harry's Razors and you're thinking, Okay, he he we got his blessing. We're gonna start this thing Presumably you have to just start doing some research about

the direct consumer opportunity and and and what people want and and so what w how do you how do you start doing that research? Well uh We quickly honed in on kind of three themes. There were a lot of sub ideas under this, but the three themes were We have to

build a brand that's interesting, right? Like it has to stand for something. It has to be something that people remember that they want to connect with. That's one. Two is that however we sell that brand, so kind of our go to market strategy in in this case, like our website, has to be really Easy to use, interesting, frictionless, uh, and make the whole experience as easy as possible.

And the third, uh, and this is the one where we saw that we had a gap with the four of us, was that we needed to build a product that really was the best. And so that's when we brought on our fifth co founder, uh, Jeff Chapin. He was like an industrial designer. That's right. So um th this is definitely an example of just um being very fortuitous, but uh So we said, Okay, we need a product designer. Who among us know a product designer and and one of us, Neil, knew one product designer. So we said, Let's just call Jeff. We knew he was ex IDO. Which is uh obviously one of the great design companies in the world.

That's right. So we called up Jeff and we said, you know, here's our idea. Do you know anything about building mattresses? And it turns out yes. Um IDO had clients that were in the the space. And he thought our idea on kind of direct to consumer and going to circumvent the traditional retail experience was interesting. So Jeff had a design studio in Providence, Rhode Island.

Uh actually most people don't realize we actually incorporated the business as Providence Mattress Company. And Providence'cause those guys went to Brown and they Jeff. They went to Brown and Jeff's Design studio was in province. We brought Jeff on to go build a better mattress and start to iterate and test that. And we hired kind of our our first agency partner, which was a a group out of Brooklyn called Red Antler to help us with the website and the branding and the experience side of things. And then we went to work on the operation side. So finding a manufacturer. Um who would

Build the mattress that we designed, finding the packaging suppliers. Right. And so we went to kinda go put all these pieces together. There's a lot of moving parts here. I think there were five mean Now you've got five co-founders. Right, the the three guys who you met at the at the incubator, you and now Jeff Chapin.

And I guess they everybody agreed that you were gonna you'd be the CEO, right? That's right. Um I was the one with CEO experience, so so you become the CEO. But even with You know. when you pick a send me five different people, it's a lot of moving parts.

How did you guys d divide and conquer? How did you decide who did what? So it was it was kind of a natural division. I mean we we said let's divide and conquer. So um Gabe was Self taught on coding and and so he was our C TO If you met Luke is naturally the the brand genius and guru, and so he took on kind of the creative lead. Neil is brilliant and a jack of all trades, and so he he kinda started to wear the operations hat because we really needed someone to go

figure that out and that was Confusing and different. I wore the CEO hat and Jeff wore the product hat. And and so you've basically went to go start raising money for this,'cause this is not This is not a a a a dropship company. This is a big idea. You gonna need some money for this.

So where did you W w I mean that summer did you start to look for money? Uh I would say that Fall summer and fall, yeah. We started to look for money um summer and fall of twenty thirteen. And was it relatively I mean, was the reception pretty good? Were you going to like V C firms? We were going to anyone that we could get a meeting with and the reception was terrible. Like uh icy, icy cold. Um

Several common objections were I don't understand like how do you have lifetime value if someone's buying a mattress and you're only gonna sell them every so often. Every six to eight years. Uh every six to eight years but actually um The average household's in market every two to three years'cause the average household has two to three mattresses. I'd say well I mean totally totally reasonable. Yeah. It's a good question, but I I don't

I don't You can make a lot of money selling mattresses. It's it's you don't need frequency. Right. Uh the other one was just, you know, it was hard to visualize something cool in You know, the mattress space. Like no one had ever bragged about buying a mattress before. No one posted on Twitter or Facebook like check out the mattress I just got. And so the idea of creating a cool brand, I think just did didn't resonate with people.

And so we were told no Dozens and dozens and dozens of times. Investors. They don't tell you. what they think. They're like, Okay, well we'll be in touch, right? That's right. No one ever t tells you what they actually think. And this is why fundraising is always so emotional, but w we thought these guys loved us. We we thought people wanted to invest in us and

The the idea everyone was very polite. Everyone was very enthusiastic even. Yeah, enthusiastic. And then Just one after the other was no you know. Not not interested, not a good time, you know, all the traditional venture and angel excuses. Yeah. And so it was tough and it was demoralizing because you get your hopes up and then not. And then Oh, we're meeting with this person. They would be the best uh you know, anchor investor or the best lead investor ever, and then

For whatever reason they don't come in. And there were definitely moments where like I don't know if this is gonna come together, you know, we're maybe we're missing something. And so it just creates a lot of self doubt and a big roller coaster of emotions. And when you went to meet with these these investors, you said, Did you like bring a box and say, This is the box that we're gonna compress the mattress in. It's gonna come to to your home in a box. You'll order it on the internet and it'll come to your home, but w were you showing them that? Well, we would sometimes bring like foam samples with us so you could feel what the bed was gonna be made out of and understand the construction a little bit more. But the

o only person who ended up getting you know one of our first demo beds was Ben Lear who led our seed round and so Eventually we were introduced to Ben. It's the guy who founded Thrillist, I think. Right. He's a partner at um Lear Hippo Ventures. And um Ben had invested in Warrior Parker and had invested in some other, you know, great consumer companies, was running Thrillist. And Ben immediately got it and was very passionate about it and excited and he did want to see like I gotta try one of these things out. So we we delivered the four of us, uh Neil, Luke, Gabe and myself delivered a bed to his apartment in Soho. And you know, he he slept on that for years and uh ultimately led our seed round and that that's he's the reason why Casper is in existence today.

I think you guys raised like a a little over a million dollars for your seed round, right? Is that right? Um it ended up being one point eight five million. So m more than considerably more than that. And he and and so When he kind of signed off on that or s decided to invest, that's when you get the waterfall, you get other people who want to join'cause they think, Well th this guy's doing it, I'll do it too. That's right.

Was his big name in in seed investing and so using his initial check into Casper was uh how we were able to build momentum to fill the round. And what what was gonna make your mattress different? Cause you could buy

memory foam, you could buy latex. What what were you gonna make it out of? So ours was a a all foam mattress with memory foam on top. Um but what we had worked on for months was Just w how do we construct it to be super comfortable? And this goes back to, you know, Jeff is an a a brilliant industrial designer. It's all about uh user tested design.

And so we would bring our friends over to an apartment to lay on different prototypes and get feedback. What what's the right level of bouncy and What bed sleeps the coolest throughout the night and Uh you know w what bed feels kinda universally the right firmness, uh, knowing that their that firmness was very subjective. And so we we went through dozens of different prototypes to get to the the

Casper mattress that we launched with. And it was what, it was a combination of of memory, foam, and latex? That's right. It was a combination of memory film and latex to get the right amount of bounce and sink and and heat absorption and the the feel that we were going for through user testing. And Jeff

The the designer, he was just m basically making mattresses in his in his studio in Providence? That's right. We would get foam samples from different manufacturers. Um there was one manufacturer that ended up being excited to work with us. It was very hard to find a manufacturer Um at this point in time'cause we were building something custom. We were doing, you know, proprietary foams and layers.

Um, but we had all of these different kinds of foams, and f foams come in different densities and have different qualities based on the formulation. And so we could build thousands, tens of thousands of different permutations of mattresses. And so That's what Jeff was spending time doing, is getting the feedback, testing um different properties, whether it was heat or ergonomics, things like that, um, and just constantly iterating to try to build the perfect mattress.

When did you guys know? When did you when did you all sort of did you all agree that you finally got the formula right at a certain point? Or was there like a discussion among the founders where Or you all had different some of you had different views. No, there there were tons of discussions, tons of debates, uh very debate. focused group of founders. Uh Ultimately though

We said we're gonna pick a date and we're gonna launch on that date Wherever we are. Uh wherever we are on the branding, wherever we are on the website design, wherever we are on the product. Uh roadmap we're gonna launch. And so I think it was early twenty fourteen, we said April twenty second. That's gonna be our date. Wha why that date?

Uh, I think it it just gave us enough time to feel like we could get it done, but not so much time where We felt like we were wasting uh time. So You know, I said we're not gonna let the date slip. We we that's what we told our investors, we're gonna do it. So You have this idea.

to compress a mattress into a box and make it a direct to consumer product, right? Right. And compressed Mattresses was not new, you didn't invent that. But from what I understand.

Uh you g that was your that was a the that's it, you branded it. Like that was your That was the thing that you branded. It was a compressed mattress in a box and apparently nobody was was doing it that way. That's right. Uh to my knowledge, we were the first to ever brand the unboxing experience. And so We we put the stripes on the box on the exterior and we

We put a tray on the interior. We designed kind of an instruction manual on how to unbox it. We actually included um a cutting tool so you could cut open the mattress that was basically shrink wrapped uh to stay compressed. And we actually would include gifts with our early purchases. So we went to the strand bookstore here in New York City and we would buy old you know vintage bedtime stories and include that in and so We we made it a a thing and and we did it just because we said

Let's try to optimize every step of the customer journey that we could in order to surprise and delight customers. That was kind of the overarching philosophy, if you will, on on like why we thought to go do that. But it actually ended up having a huge impact on our business in a way that we didn't anticipate, which was sharing. And When we started looking at sources of traffic to our website, we started seeing a ton of traffic come from YouTube in our early days.

And it ended up that the Casper unboxing experience was something that people love to film on their phone and love to post online and share And and that I think is one of the biggest that just created the you know, w were a catalyst to creating Casper in our early days. By the way, is is it an engineering challenge to get a mattress into a box. Is it just a matter of sucking all the air out and squeezing it in? Is it is it that

Relatively easy. It's um I wouldn't say it's easy because I'm sure whoever invented it wouldn't like that, but um it really is just a a question of like pressure And if you

put enough PSI onto Some big steel plates you can Compress a lot of things, including a mattress. Yeah. And it it turns out foam is actually a lot of air, so you have to get the air out of it. How did you come up with With the name.

Is it connected to the ghost? From the ghost. Um We were all working out of, you know, wherever we could from time to time. And so we would often work out of Luke's apartment in Brooklyn. And uh Luke had an extra bedroom that he would rent out on Airbnb and Luke's roommate at this time when we were working on Casper was a a six foot six German guy

Uh whose name was Casper with a K and We would always for whatever reason, whenever we were over at Luke's, he was there sleeping and he did not fit on his twin mattress at all Um and it was always a funny sight to us. And so again, we we kinda gave ourselves a deadline on the branding. We had a list of a million names and and when we ended up voting on the name that we uh all liked the most, Casper won the day. Um because I I think we all got a good laugh out of Casper's

the visualization of Casper sleeping on a twin mattress. And so he he was our inspiration for n the name. Uh we ended up going with the C instead of the K. Uh we gave him a free Casper mattress when we launched to thank him for the inspiration, so uh I'd say it worked out well on both ends. All right, so the the five of you guys are working to get to launch date. And

you get to launch date and what what happens? Like you just you you hit go and your website goes live and You've got mattresses available for sale, is that More or less what happens. Basically, so w we actually had convinced a couple of press outlets to cover the launch. And we were all

Impressed and blown away that People Woke up that day, read the article, and then came to our website and bought that day. I mean, we sold dozens of mattresses. We were only selling one mattress at that time, um, six sizes. And it turns out the story brought a lot of people into the website and those people wanted to try Casper and support Casper, so they bought from us and

They were very vocal about the purchase and we were just off to the races. And that fur I I think that first day I read that you sold like forty mattresses or something. Uh which is pretty good, right? It was for a you know, for a tiny little company. Yeah, I mean f forty mattresses is like thirty thousand dollars worth of business. I mean again that that was like what we were forecasting to do in month six or seven. Um and we did it on our first day. And where I mean, w did you have the mattresses on hand or or or were they at the manufacturer or wh where were they? So at this point we had moved into our first office. The office was uh a second story walk up in No Ho in New York City. Uh I think it was sixteen hundred square feet. And so we had a few in the office that we would ship out that day Put a UPS label on it and ship. And then we had a like U Haul truck that we had rented that had

Maybe one or two dozen mattresses. um that we were keeping out in Brooklyn. We thought we would like pull inventory from there and and ship it um as they would sell. But within two days we were out of all of the inventory we had. Wow. And and just to be clear, uh the mattresses were being were being manufactured. to your specifications, but but essentially like white labeled by by a manufacturer s somewhere, I think it was was in Georgia, right? At at the time?

Yeah, so we we had found a contract manufacturer who Makes beds for other brands. We had convinced him to work with us, Casper, and we said this is the type of bed we want to build. Here are the four layers that we want to use. And they said, Okay, we could build this bed and so they would build the bed for us and so they were Physically

built, you know, the foam was poured and they were assembled outside of Atlanta, Georgia. And then Eventually we would ship products from that facility directly to consumers. And then we would also take inventory to our office where we could do our own fulfillment if need be. So apparently your your first year target was to to hit to reach about one point eight million dollars. worth of mattress sales and and and apparently you hit that in two months. Which is

A a great milestone but also a huge problem because you were you were not shipping mattresses out fast enough. There was huge delays, right? There there were huge delays to like to the point where we thought I mean people were just

Super upset with us posting online about our delays. we had promised them to ship in two weeks and it was taking six or eight weeks And we we felt like the whole business could implode at this point. Um So we we were trying to brainstorm everything we could to, you know, keep these customers just having faith in us and and giving us the benefit of the doubt and not canceling the order. My co founder Neil had a brilliant idea at one point to

send customers who were delayed on their products uh aerobeds that we would buy on Amazon and ship to our customers via our Amazon account just as a way to say like sorry if you need something to sleep on, hopefully this helps. You just go on Amazon and send people Air mattresses while they were waiting. Yeah, up until Amazon canceled our account because they thought we were reselling'em. Which we weren't. But We we were buying hundreds of these aerobeds just to help people Sleep and

You know, again at this time there were only I think seven people in the business, including the five co founders. So we were all living and breathing the customer frustration. We were, you know, I was on ch live chat until I went to bed and was on live chat the first thing I would wake up and trying to keep up with emails and answer phone calls and trying to, you know, fly to Atlanta to get our our manufacturer to produce more

Um but you know a big A big manufacturer, they want to go make a run of five hundred beds, a thousand beds, and we're like, No, we just need to ship out the you know Dozen beds today, a dozen beds tomorrow, whatever it is. To try to catch up and uh it was just it was really tough to Build our way out of the hole.

Why? Was it was it was the bottom like the the manufacturer? I mean presumably they're making beds for lots of other people and you guys are like, Come on, make more of ours but but uh presumably they they just couldn't? Make enough, quickly enough. That's right. It was the manufacturer and it was really um One, it was tough to find a manufacturer to work with us in the first place. And then two We're still a a tiny customer in the grand scheme of things, and so we we would have to

We had a forecast. We shared that forecast with the manufacturer. They said, Okay, we can live up to this and then overnight said, Oh wait, you know that those beds that we thought we needed in two months, we need them Tomorrow or in two weeks. And so they're like, sorry, that's not how this works. You can't just kinda flip a switch. it it started you started to g attract more potential interest from investors.

that year in twenty fourteen.'Cause I think you did would go on to raise you d to series A in twenty fourteen you raised like thirteen million dollars or more than that, a little more than that. Was it now? With the initial success you had, was it easier to raise that money?

Very much so. So one one of the common objections we heard from investors was uh you know Just too early, come see us when when you're live and and we'll check back in. And I think At that point, you know, most I think that's just what investors say to push you off. And when we were able to come back and be like, Oh yeah, we you know, we did a million dollars in our first twenty eight days, um

you know, I think that was fairly unprecedented. And so that that caused a lot of interest into the business. Yeah, we we went from You know, the the ugly stepchild to the bell of the ball very quickly. And it was all new to us. And so you know, we we were we were trying to be deliberate, trying to take it all in, trying to be thoughtful.

Because you're picking you know a lifelong partner and The joke we heard from a lot of founders was It's kinda like marriage, but without the divorce option for your your series A investor. So We wanted to pick the best partner we could and uh um that also just meant thinking about like what do we wanna go do with this business? Do we really wanna swing for the fences? Do we wanna w run it as more of a lifestyle business and Um

It was a crazy time that was awesome and you know, different and overwhelming, but we ended up with a great partner. And and and that partner, by the way, was I think was NEA, which is a huge venture firm. The largest venture firm by by uh kind of assets under management, and we said So what what does that mean to be To go big.

Yeah, so the w the way we talked about and continue to talk about is we want to build the world's first sleep brand. We want people to Think of Casper when they think about getting a better night of sleep. Um, that could mean buying a mattress, but it could mean any other number of products or services or experiences when it just comes to getting the best night of sleep possible. And just like you think of Nike when I say, you know, going out for a great run or whole foods when I say, you know, go buy organic foods

We want people to think Casper when it comes to getting a better night of sleep And so it was just taking uh the money and start to build a product pipeline. start to build a distribution pipeline. We knew we weren't gonna be just digital, so we started doing pop ups. Um we wanted to build a global brand and business, so eventually we launched in Europe. And so th that's where we just started to

think about w what does this business look like down the road and and let's see how fast we can get there. your value proposition was it was gonna be easy to get direct to consumer, a good quality mattress, and it was going to be cheaper So I'm assuming your margins were going to be lower. than what they were for the traditional mattress industry. So we had always said

Вона We're not building a value play. You're not gonna buy from us because it's the least expensive option. And it's the lowest price, best value, lowest margin option. What we said is We're not gonna play games with how we price everything, we're gonna price it fairly.

And so no matter where you buy a Casper product, you pay the same price. Right. And from a margin standpoint There were just Less hands in the cookie jar, if you will, um on our products. So we didn't need as high of marginal.'Cause you don't have brick and mortar stores and you don't have uh retailers, you're direct to consumer, you're not Right.

That's right. So we were more efficient. So we we just didn't need as high of Yeah. we still have a high margin business and it's a high margin category. Uh so you know, you look today we're we're north of a fifty percent gross profit margin. business which is is good.

and strong and and that's enough to build a a defensible business. And To your question on like just you know, how many people are buying mattresses. It it turns out that every year about twenty million mattresses in the US are sold. And those twenty million mattresses mean that sixteen, seventeen, eighteen billion dollars in the US is spent on mattresses.

Alright, so one of the things that that was part of your ambition to to create a brand rather than just a mattress company, right?'Cause you it was it was it was gonna be All kinds of sleep products. It was gonna be uh uh sheets and Pillows and uh in and I I think

a a year after you launched, you guys b basically built a media company called Van Winkle. And from what I understand this was a a media company that was going to write it wasn't gonna promote cast for mattresses or sell them. It was just gonna write about About sleep and about things related to sleep, is it is that right? Um, it's right. I think m Media Company is a generous uh moniker, but um the ide the idea was that buying a mattress is an infrequent purchase with consumers. So what is a way that we can as Casper stay

uh in more frequent conversation and and build more frequency of a relationship with customers. And we said content could be a way to do that. Um And so we went out and we we started Van Winkles, we hired an editor. Um to help us create content around sleep and it it wasn't about selling mattresses, it was just let's put it out into the world to our customers and and you know, have people sign up for it. And if it's good quality content, people will read it and that will just help build the brand uh over time. I mean, it's a really interesting idea, right?'Cause you've got a consumer products company.

And you decide that maybe you could also expand by becoming a media company. This is a model that a lot of people There's a lot of I I mean uh investment firms or d and Drees and Orowitz is is essentially doing a version of this. And it seems to me that you actu that that one of the things you thought was that this media Arm?

Could become a Self sustainable. It could self sustaining. It could become profitable through ads. it it was a thought where the business could go. Which is either that it it becomes so interesting and so widely distributed that people do tie it to Casper and so it leads to people buying more frequently from Casper, or that it's a standalone editorial venture where we we bring in ads and other

um advertising partners in addition to Casper and we think of it as just like any other editorial venture. And so we we definitely thought that was one place it could go over time. I I know that you had Van Winkle going for a few years. Before you shuddered it. And um And shut it down. And I wonder w whether you ever think about

Going back to something like that, like going back to building content around sleep. I think That one of the biggest misses that We had

Early days was kind of missing the ability that content could have On sleep. And when we were starting Van Winkles, like we we saw some of the you know, meditation apps coming to market and people were using them for sleep. And we talked about like how how do people use content as part of their sleep routine.

And we missed that opportunity and I think you know, the folks like Comm and Headspace have gone on to build great businesses. And I think the killer application for those businesses is not meditation. I think it's sleep. And so I think that area is super fascinating. I think there's gonna be a lot of uh innovation when it comes to people evolving their sleep routine, including content, and we would love to to play in that. Philip, did you assume that Casper would be like a millennial brand?

You know, that it would and and was that how you kind of pitched it? And did it? Was it um? Was that did that come to fruition? You know, I would say we were worried about it becoming

too much of a millennial brand. Like We knew we were trying to resonate with New York City and San Francisco millennials because that's who We were and that's who our early customers were. But we we

And I think this was just listening to investors really. Like we were acutely aware of the risk of becoming too much of a millennial brand. And I think We heard that with how people were, you know, thinking about Warby Parker at a point in time. And we we just knew that that was something we were gonna have to overcome. Yeah. Um You know, when we started to think about, you know, non millennial opportunities, we would go try different advertising campaigns, we would try different pop up destinations, we would um just try to build the business in in by going kind of community to community and thinking about the groups that we want it to resonate with.

As you started to really take off. Something happens fairly quickly in in the the story of Casper, which is Competitors. You've got a great business, direct to consumer Compressed mattresses.

comparatively low overhead'cause you're selling direct. And then you've got That happened fairly quickly after you guys launched.

It did and it was Way bigger of an onslaught of competition Then I think

certainly I could have ever imagined. And I I think this is one of the things looking back that you know, was a mistake on my part. Um I I was kind of dismissive of competition in the early days. Um, I I never expected to see so many competitors come at us from so many different angles. And that so many of them would just try to copy what we were doing and be fast followers and and um you know really just take everything we were trying to be innovative with and

You know we we ended up saying like We started Casper because buying a mattress offline in a store was really confusing. You had all these options, you didn't know who to trust, you didn't know what the different options meant. You know I I think The proliferation of mattress startups certainly got very competitive very quickly and Uh immediately buying a mattress online became even more overwhelming and confusing than buying a mattress offline.

When we come back in just a moment. How Casper dealt with its competitors, did a deal with Target. And later. navigated a very rocky IPO. Stay with us.

I'm Guy Raz, and you're listening. To how I built this. From NPR. Hey, welcome back to how I built this. I'm Guy Raz. So it's around 215, and after a very successful launch of its first mattress. Casper is having to play defense.

Because competitor mattress companies are springing up all over the place. It does become I I think an arms race of Trying to think about how you're gonna have a defensible business and so Part of it is advertising, but part of what we saw is also the distribution matters and

having a place for customers to try the product is an advantage. In this industry in in this ecosystem. So that's why we started opening up stores. Today we have Seventy retail stores opened and and operating.

And that's because Combining that online experience with the ability to offer a trial experience with our customers. is an advantage. And we started thinking about other ways to build advantages. How do we have A one stop shopping destination for all things sleep. And so how do we expand our product portfolio? I think you guys did a partnership with West Elm, too. For example. That's right. Our first ever um partnership was with West Elm on getting our products into their stores and their showrooms and having them promote us.

As a way for you to buy a mattress as part of your overall bedroom set. So We were always thinking about ways to extend distribution. So

I I'm curious about is that Mattresses like cosmetics. And some other uh categories. tend to be made in central facilities where factories that make

products for many different companies, right? A according to their specifications. And I'm assuming that that as more competitors came into the space Um they were also making mattresses. in the say you know, ha using the same manufacturers you were using. That's right. So

In the mattress industry a lot of manufacturing is done at contract manufacturers. who will make foam or products for anyone in the industry. So it's not abnormal to see multiple brands being produced on the floor of any mattress factory. So I mean

I I'm thinking if I'm running the company I would get people who were making mattresses in the same factories where ours were being made and And that

that IP not being carefully protected. I I I wouldn't say I got anxious about like other people creating mattresses in the the same facilities because I I think there's enough secret sauce in our products that really do make them stand out. If you buy our Wave mattress today, it has this gel pod that uh system that we invented, we've patented Now, where I give myself maybe lower marks on kind of my personal scorecard is I don't know that we've done the best job of articulating those product benefits to consumers. And and it does get in the weeds to your point. It doesn't stand out as much because

You know, at the end of the day a mattress sits under your covers and you're not looking at it every day you're not it's not an aesthetic product. It it just has to work well. And I I think about it with like You know, razor blades. Like you would know very specifically if you're you're using

a a a razor blade that's high quality and probably expensive and You know, recent versus a low quality, inexpensive razor blade. And you you wouldn't be able to articulate exactly why, but it has to do with the engineering and the manufacturing processes and the quality standards and the specification and the input ingredients and all of the things that go into it. And I think we got away from that for a little bit and focused more on the brand and less on the product, but I I think we're really focused on the product story at this point. Philip, let me ask you about review sites because

mattress review sites or or websites that that claim to have honest reviews. They're hugely influential in what mattresses people buy. Like uh be before I started researching for this interview, I had no idea how important they are to sales. And some of these review sites have not been

Charitable. Uh to you to to Casper. And and you guys actually sued. some of these sites saying that they were being unfair. But I w I mean wonder why why did you sue them?

So It has nothing to do with the content of what they were writing, and it has everything to do with the way that they were representing themselves to consumers. And what we quickly saw happen in this industry was That people were creating content They were

highly, highly compensated by certain companies for that content to be very favorable. And that's fine. As you said, it it can be the opinion of someone. But where we draw the line is if they misrepresent what they're doing to consumers, which has to do with disclosure. There are some companies and some sites out there, especially at the time when we were litigating against this, that did not represent themselves as being paid by these advertisers. And they represented themselves as independent and unbiased, and that just wasn't reality. And so

not having proper disclosures is what we we litigated about. And I think today we have a better ecosystem for consumers in the industry because you you see more disclosures. And and look, you're in a high stakes business, right? I mean the you are in a competitive high stakes business environment. So there there is gonna be a war footing in some sense. I mean it's not Um it's it's That's just the reality. There's a story out there that um one of these companies you settled with called Sleepopolis

was eventually acquired by another company called Jack Media. that Casper provided a loan to to uh acquire Sleepopolis. And then the story is that the review of a cast for Mattress on Sleep Opolis turned from a negative review to a positive review after that happened. I'm not saying that it's not illegal. It's not I'm just saying that that that's a story and you got some flack for that from some uh some media outlets for doing that.

That's right. I I think the narrative that the that that media outlet took was not Fair or accurate. No, so so uh the narrative that was behind the story. Again, so there are good operators in this ecosystem and there are bad operators in this ecosystem. And in our view, uh Jack Media was a good operator. They wanted to

And th we talked to them about financing that acquisition so that they could operate it and they had complete independent editorial control and they ran their business. We were just a A financing partner for them. And today we're we're fortunate there are a lot of very good actors providing content around mattresses, providing content around sleep, and the ecosystem is much better than it was

back when we were forced to litigate. I mean l litigation's always a last resort. Um but if if If the N A D the you know, the if the advertising standards that the the law says and that the independent advertising bureaus are are saying are not being upheld and that's misrepresented to consumers We we again just felt it was uh you know an obligation upon us to to take action to let the good actors build their business and there there's a great business to be built on the content side and on the adventorial side.

of the the mattress industry and of the sleep category Um so long as you do it with proper disclosures, which is what's going on. And so we again it's the narrative behind it, I think, that was a little off. I know that around Two thousand seventeen.

You started to enter into conversations. With Target. Target from what I understand. started to look at you as a potential acquisition.

And and you guys started to talk pretty deeply. And now. Knowing what I know about acquisition talks, that is they're very intense. You gotta open up all your books. It's you gotta stay totally secret. You can't talk about it with anybody. It's I I mean y you you you sort sort of enter this process with Target? So I I wouldn't say we got as far as as you're alluding to in the process. Um

Target had taken a a keen observation to what Casper was doing. They saw what our partnership was at West Elm. And Target wanted to push more into the wellness side of things. They uh wanted to make a bigger push into sleep, uh into

the mattress side of things, they had a big bedding business. They wanted to do more in their pillow business. Brian Cordell, the CEO who I was introduced to and He said like the commercial opportunities are huge. I think we can build a big business together. Yeah. And

That's where we we sat down, you know, we we talked um You know, uh amongst our board and and you know, the founders and the management team and We said what's the best way to work with Target today? And we said if they want to make an investment and and take a, you know, minority position in Casper and if they wanna help us more importantly than the investment, if they wanna help us commercially and the investment will help catalyze that.

Then great. That's the win win. Yeah. And that that's what we ended up doing. So now with target as a strategic kind of investor you are your mattresses are in target stores still today, right? That's right. Alright, so Casper You hit a a huge milestone in March of twenty nineteen. You raised

around. You brought in another hundred million dollars and I think you at a at a one point one billion dollar valuation. And uh I mean that's Huge. Um but it also

I imagine increases pressure, right? Because you've got a you've got a Now. show that that's you're really worth that. That money. What did you

D did you already in March of twenty nineteen believe that you were going to take the company public within a year? March of twenty nineteen, we definitely started focusing on What does it mean to be Public ready, IPO ready, what does the IPO process look like?

And what do we need to do to be prepared to be a public company. Um so we were definitely working on that in early twenty nineteen. I mean this is what happens, right? When when an investor makes an investment in a in a in a company They are expecting that there's gonna be some kind of exit. Either it's gonna be acquired. Or it's gonna go public'cause the investor needs a return and and you guys first went to investors in twenty thirteen.

So it's you're now looking at Seven years later. And uh, you know, the clock is ticking and and and is that why you decided that going public was the right decision? You know, we we actually really didn't feel pressure from investors. Um since we started the company, since the five of us got together, it was always like What's the next milestone for the business? What's the next milestone for what we want to build? And then let's get there as quickly as we can.

Okay, we we raised you know, as you said, another hundred million dollars in March of twenty nineteen. What's next? Okay, let's get ready to be a public company. What is that like? So It was really, I think, more self imposed pressure to to kinda get public than anything.

But going public means that you have to reveal everything. Going public means your all your financial statements, your documents are now public documents because that's what it means to be a public company. And so A month before your IPO you had to, you know, this all your documents are out in the open. And it showed that you were not profitable.

that actually you had lost money in the previous quarter and that the company wasn't yet profitable. That's fine. That happens all the time with many companies. And when people buy a stock, it's often on the belief that eventually they'll reach profitability, but But it but all of a sudden you kinda lay lay it out there, right? I mean you're not you you it's all out in the open. That's right. It's it's all out in the open. Um but we weren't we weren't afraid of that. Like we We had we have a good story and we have a very bright future and

We're a business that Even to this point in time. I think in in my judgment it's been the right point in our business life cycle to invest capital to help us grow. our foundation to help us

ultimately become a very large and profitable business. And that that's very common for companies early in their life cycle. And If you look at other companies that went public in twenty nineteen, that was a very common narrative. You had Uber and Lyft who were going public and not Profitable. You had

Smile Direct and Peloton that we're going public and not profitable. And Casper continues to have a story that I think will ultimately prove to to resonate in the public markets. Um We've had a a choppy time since we've been public, but you know, I I think That's as much timing as it is anything else. I don't I don't want it to s come across as sounding like um

You know. going after you or criticizing you or m I I don't want to make you feel I'm not trying to make you feel bad. I'm just uh just as an exercise in running a business and the ups and downs of a business. I'm just really curious about where your mind goes, which is You had raised money on a billion dollar valuation. uh in in twenty nineteen. You go public in twenty twenty.

And investors essentially value the company at the end of that. That IPO at five hundred million. Your valuation was when you raised money.

And um You know, today. It's it's about Little over three hundred million dollars and it's m the market cap valuation. And so

H what is a story you tell yourself about? That um How do you Process that. That is the reality. Um and I I would say uh you know, I'm comfortable saying it's not good. You know, the the last thing I

personally would ever want to do is is lose an investor who You know, I think of it is investing in me as as much as it is investing in the company. The the last thing I would ever want to do is is lose and investor money. And so it it doesn't feel good at all, and it's it's not good. Uh and so I I it is a very motivating factor to me to Get our stock price. Up and and to have our investors make money.

That said, uh I do truly believe it's a moment in time. I think we did have unfortunate timing when it came time to tapping the public markets. We were The first uh I think visible high profile company to go public post We Work, which m meant there was a ton of negative sentiment around companies that were investing capital into their business and around you know these the startup

s side of things. And we were really one of the last uh visible companies to go public pre-pandemic, which just means that that people immediately started to focus elsewhere as they should. But Um you know, you you live with the the timing that you have in life and so, you know, it's gonna take time to work our way out of where we are. Um, but it it's definitely a reality that we're dealing with and and that I feel a lot of responsibility for. Mm-hmm.

How do you handle it as a leader? 'Cause uh you are the CEO, so all the firepower. Right, is is aimed towards you. That's just how how it happened. You choose to be the leader. you've gotta absorb the firepower. but you also have to diffuse it, diffuse it somehow and and and deal with it.

How do you deal with you know, articles like in in you know courts wrote an article about your IPO and it was critical and I think Forbes had an utter had an article said, Don't buy Casper. uh and and there have been other critical articles, I'm sure you read them. You have to be aware of them because that's part of your job.

How do you internalize that kind of criticism. Do you just think to yourself they're wrong? And I'm gonna prove them right. Yeah, I I'm not one of these people that uses it as A way to get super fired up and like

That that's not what motivates me, like let's go prove these guys wrong. And and that's not what you would hear at Casper either. Like you know, I don't use it to to rile up the troops, if you will. Um And and largely I I also I don't dismiss it, so I'm not like just heading my sand head in the sand and like not understand what's going on. But I don't sit there and and read these. I don't get overly focused on it. Um, I don't internalize it. Like I I won't lose sleep if if someone were to write something like that uh about the company or whatever it may be. I mean do you like meditate or do you are there things you do to

Cope with it or are you just wired that way? I think I've just wired that way. I I don't meditate Um I you know, I I don't take like my aggression out in a workout class or anything like that. Um I try not to

let the highs get to me and I try not to let the lows get to me and and I just try to stay pretty balanced. And I think That It's felt at Casper so I you know, I I Try to keep the company focused on that.

Remember that we're going towards a point on the horizon. We're not living in the today. And you know, over time these things take care of themselves. Yeah. I wanna ask you about um something that you guys were actually really pioneered in the in the mattress industry,'cause initially when you when you sold them, I think it was like 40 days you get as a 40 days trial period, but you up to a hundred days now pretty much every mattress company. A hundred days you can try it out, and if you don't like it, send it back to us.

That still to me seems crazy because I think you don't even require people to use a mattress cover, but if someone is using it for 90 days and sends it back for the money back guarantee, I have to assume that that that mattress is dead, you can't reuse it. That's right, so you don't you don't actually send it back, we'll recycle it locally and Uh give you a credit. Oh you g okay, they get you get a credit to buy an another product. No, no, you get a full refund. Full refund.

Take your cash and and do whatever you want with it. So you just eat that? Yep, just cost of doing business. Because you can't write a mattress like you sleep on it and we know how much skin and sweat is inside of a mattress. Just look at any science website, you'll find out if you're curious. Um you can't the secondary market for mattresses, I can't imagine is that hot. It just seems like a crazy thing to offer people. Hundred days.

No, it it started with the idea of Let's put ourselves in the customer seat and work backwards and The idea of laying on a mattress for thirty seconds in a store and then saying, Okay, I want to spend a third of my life on this for the next ten years. was equally crazy to us. Totally crazy. Yeah. And so

You know, if s if that is one end of the crazy spectrum, the other is W what would be the most crazy way to sell a product that when Casper launched was sight unseen? And we said like Just no questions asked return policy. If you don't love it, we'll we'll take it back. And Fortunately, you know, few customers do, but we just want you to find something that you sleep great on.

You have about four hundred and twenty employees now, something like that? Um I it's About three hundred and fifty kind of HQ employees, and then we have several hundred retail employees as well. And you are the last one standing, right? All the other founders, co founders have have moved on in some way. I mean they may be involved, but they've they're not involved in the day to day Of Casper, right?

That's right. So do you sort of feel like, you know, hey, guys, where where where'd you go? I mean, I know y you you earlier mentioned you're good friends with everybody, but Do you sort of wonder like hey, wait, why are you why is every wha what's what's going on here? No, I I don't. I think these things like Just take their their natural progression and

Some of my co founders are younger than me and and earlier in their careers and you know wanted to move on to new challenges and you know, totally Accepting of that. And I I think early on we said Um, let's be mindful that like, you know, none of us signed up for this to be our forever job until we retire, but Let's always make sure we put Casper first in our decision making, but also just be realistic that

You know, if if one of the founders wants to go on to do something else, like let's just prepare for it and talk about it and and Do right by you know the rest of the team and that's kinda how it played out. When you Started

selling mattresses in your dorm room at At U T in two thousand two. Mm. Could you have imagine running a public mattress company in uh I mean a s uh more than a mattress company, but could you have imagine running a public company that is Centered around.

Mattresses, direct to consumer mattresses? No would be the short answer. Um Certain not anything that specific, but um I will say I like I growing up Like business was what I was fascinated by and

my sister would tell you like I I would force her when we were little, like, let's play business and I would use my briefcase and you know, before I could write, like scribble out, you know, f fake letters and and checks and things like that. Like Um, business has always been what I've been like really passionate and curious about. And so I do think I always dreamed of like w what would it be like to run a public company, be a public company CEO.

And so this was definitely on on my bucket list. Like d did Did I think I would get here this way and at this age and with this kind of company? No. But uh Yeah, definitely something I aspired to since I was little. When you think about Where you've got

You've gotten two. as a founder and a CEO. Um How much of that do you do you think is because of how hard you worked and how much uh of it do you think it's due to just being lucky and and meeting the right people at the right time and The right.

kind of things breaking your way. Uh that's a tough question. I I definitely am someone that puts a lot The majority Of the way life happens into luck.

you hear the references of like running a a company, running a startup, it's like, you know, being in a boxing match and you're just constantly hit in the face and And I think that's a hundred percent true. And and having traits that were ingrained to me since I was little, like perseverance and persistence and to to be able to absorb that and work through it and and absorb the ups and downs. I'm lucky that

that I'm in the position to to have that chance and to be where we are at this point in the journey. So um definitely I think biased towards the luck side of things, but no that there's a lot of factors that go into The journey that people end up on. That's Philip Krim, co-founder and CEO.

Of Casper. J just one more question for you. Uh you've got a uh a two year old at home, right? I do. Do you let him jump on your bed? I uh I'm a bit more encouraging of it than my wife is. Yeah. I mean the only thing is there's no springs in mattresses anymore. No one's making I mean they are, but when I was a kid you'd jump on the springs and you destroy the springs. Well, so the newer models of Casper actually hybrids and so they do have springs in it. So they're bouncing. I think the advantage is that if he destroys your mattress,

You can easily replace it. He's got a guy. Yeah, he's got a guy. He knows a guy. He's got a guy. Hey, thanks so much for listening to the show this week. If you're not a subscriber to the podcast, please do subscribe wherever you get your podcasts. If you want to write to us, our email address is hibtnpr.org. If you want to follow us on Twitter, we're at how I built this or at guy's. Our Instagram is at how I built this NPR and mine is at guy.ros. This episode was produced by James Delahouse with music composed by Ramteen Areblui. It was edited by Neva Grant with research help from Dereth Gales. Our production staff includes Casey Herman, Rachel Faulkner, JC Howard, Julia Carney, Farah Safari, Liz Metzger, Janet U Jong Lee, and Annalise Ober.

Our intern is Harrison VJ Choi. And Jeff Rogers is our executive producer. I'm Guy Raz, and you've been listening. How I built this. This

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