Complex Made Simple

The sleep economy: US online retailer Casper Sleep files for IPO

Online mattress retailer Casper Sleep is making the leap onto the big leagues, announces IPO filing.

The company is looking to raise $100 million from its initial public offering Like many fellow US startups, the company has yet to post a profit since its founding in 2014 Casper will expand its product offerings in line with its goal to become the "Nike of sleep"

In a world of loss-making Silicon Valley startups, IPOs have become a dime a dozen. While not every one of these IPOs turns out favorably, like the maligned WeWork IPO, it is not stopping these companies from trying. 

The latest on this bandwagon? US online mattress retailer Casper Sleep. 

The business of sleep 

When was the last time anyone was excited about buying a mattress, let alone selling one? Casper broke this age-old cliché, and found a way to make mattress purchasing… exciting.

After finding itself around a $100,000 in debt when it was launched in 2014, it is a $1.1 billion unicorn by 2020, and now, it’s going public

“Privately held mattress maker Casper Sleep on Friday filed the regulatory paperwork to take the company public on the New York Stock Exchange under the ticker symbol ‘CSPR,’” CNBC confirmed. 

The company has raised $339.7 million to date from multiple rounds of funding, and is hoping to raise $100 million from its initial public offering. The company said that as of December 31st, it employed 597 people full time and 234 people part time, with 60 brick and mortar stores already opened. It wants to operate more than 200 stores in the next few years in North America.

“Casper, founded in 2014, became one of the leading brands in the so-called “bed-in-a-box” industry thanks to its pioneering status in the niche and savvy marketing,” Bloomberg explains. “Since then, a slew of competitors have emerged in the U.S. and abroad. From 2016 to September 2019, it spent $422.8 million on marketing, the filing shows.”

Indeed, influencer marketing and social media buzz helped catapult the startup from a budding business to an international brand. 

“Oh my God, when Kylie Jenner posted about Casper I think it broke our website,” says Neil Parikh, one of Caspers co-founders, about Jenner’s March 2015 Instagram post, which garnered more than 870,000 likes.

While the concept of selling mattresses online did befuddle many prospective investors, Casper were able to push through. 

“At the beginning, we met with dozens of investors who all said, ‘No one is ever going to buy a mattress online. This is a dumb idea, don’t do it,’” Parikh, who is now Casper’s chief strategy officer, told CNBC Make It.

6 years and $1.1 billion later, it seems Parikh and co. were right after all. 

Furthermore, and following on from their IPO, they will expand their product offerings. 

Beds, IPOs and beyond
Currently, the company has 1.4 million customers, and “the company’s S-1 filing showed that while its net revenues grew to $357.9 million in 2018 from $250.9 million in 2017, net losses also increased to $92.1 million in 2018 from $73.4 million in 2017,” Business Insider reported. “For the first nine months of 2019, net revenues reached $312.3 million and net losses were $67.4 million.”

Still, the company still sells mattresses and associated accessories for the most part, and it is looking to change that. 

As per the filing, the company said: 

“Our offerings […] are increasingly focused on non-traditional categories, including products that promote the ideal ambience for sleep, such as lighting, sound, scents, temperature, and humidity; sleep technology, such as tracking devices, medical machines, bedside clocks, and connected devices; sleep supplements, such as sprays, pills, and vitamins; and sleep services, such as digital apps, meditation, sleep programming, and counseling.”

These proposed products will all serve to help Casper reach its goal of becoming the “Nike of sleep.”

Casper’s expanding product range makes sense from a business perspective, since “buying a mattress is not a recurring purchase,” says Jacob Matthews, an analyst with the research firm CB Insights, as reported by The New York Times. “As Casper thinks about expanding, opportunities to bring the customer back into the brand ecosystem, whether it’s for an experience or a product, are going to be key.”

Naysayers and challenges still exist 

Some industry experts look at Casper and see another loss-making startup touting innovation. 

“It’s another company that loses more money as it grows and realizes it needs a new business model in order to compete in a crowded market,” Michigan Ross School of Business professor Erik Gordon told CNBC. “Buyers are not going to go wild for it.”

“While Casper lists the common risks most companies have to disclose, such as the big one of never turning a profit, it also lists risks that are specific to direct-to-consumer brands, such as the risks, costs and potential regulation of using social media for marketing,” Crunchbase explains

“Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties,” the company wrote in their S-1 filing.

Beyond this, Casper Sleep has the geopolitically challenged global economy to worry about, though it seems confident, going ahead with its IPO filing.