What s up guys! It s Jason here and welcome to my YouTube channel, Mattress Insight. You
know who Kylie Jenner is, right? Half-sister of Kim Kardashian, who besides being on the
reality show Keeping Up with the Kardashians, runs her own successful cosmetic line, and
makes or breaks start-ups --- yes, you heard right.
In March 2015, Jenner posted on Instagram that she had moved and Jenner commented about
how excited she was to try out the two Casper mattresses that had come compressed in stylish
dark blue and white striped boxes. The post garnered 899,000 likes on the app, brought
Casper to the forefront of start-up fame with a very stodgy product --- a mattress. To this
day, Casper claims it did not pay Jenner to spotlight the company. That post helped transform
Casper from a five person start-up to a unicorn that at one time, had the opportunity to turn
down a $1 billion dollar buyout offer from Target. As of July 2021, Casper is publicly
listed and worth about $300 million. The loss of $700 million in its valuation begs the
question, where did it all go wrong and how did they lose their unicorn status? Today
we ll talk about what happened to casper and is Casper mattress going out of business?
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us continue on with the Rise and Fall of Casper Mattresses.
Classic Start-up Beginnings
Imagine the television show FRIENDS meets start-up ambitions. That s what the beginnings
of Casper sound like, according to the founders themselves. Except for designer Jeff Chapin,
who had worked for design consultancy, IDEO, and Philip Krim, who already had experience
in the mattress start-up space, the other three founders are graduates of the Ivy League
Brown University. Most notably, one of the founders, Luke Sherwin, had already started
Brown University s largest campus business while a student - a sort of universitywide
Ebay. One of his very good friends, Neil Parikh s father, was a sleep doctor. All five co-founders
had a shared interest in making it big and disrupting an industry and actually brainstormed,
met, and connected while at a coworking space. Ultimately, as a result of Krim s expertise
in the mattress business and Parikh s connection to it as well, mattresses were chosen as low-hanging
fruit.
Casper actually made its debut in 2014. The founders did not name the company after America
s favorite friendly ghost. Instead, they named it after one of the co-founders former roommates,
who was both on the sleepy and laidback side. The mattress business at the time was an approximately
$14 billion industry. To make a name for themselves in an already crowded industry, Casper offered
customers a unique value proposition: buy our one-size-fits-all mattress that has been
created for optimum sleep quality and comfort, have it delivered for free to your home in
a stylish looking box, and if you don t end up liking it, you can return it within 100
days. That, combined with an abundance of advertising dollars invested in getting the
word out, led to Casper having $1 million of sales in its first month. Such success
led to a desire to truly scale the company, which then led to the infusion of about $70
million in venture capital money.
Solving a Problem & Marketing the Problem
Casper succeeded as a result of having a functionally and stylishly good product and marketing what
they perceived as a problem - poor sleep quality - as much as marketing the product itself.
Parikh himself admitted that the team realized they wanted to, invent an industry around
sleep. In the same way that hard seltzers have been remarketed as cool to millennials
because of savvy marketing and hipster pastel packaging, Casper spent about eight months
testing different mattresses to get one ideal mattress and then brainstormed how to deliver
it, just as deeply. The founders realized that their target audience of millennials
might just live in set-ups similar to Sherwin s, a walk-up. Assuming there was no elevator,
what could they do to make the packaging standout amidst the many brown boxes that are delivered
to homes daily? Based on those specifications, plus the fact that it would be cheaper to
ship through UPS, they decided on finding a way to compress the mattress into the size
of a mini refrigerator. The visual aspect of having a full-size mattress spring out
of a relatively small box made it perfect for the social media channels so many of us
are addicted to, as either viewers or content creators. YouTube and Instagram helped to
show the novelty of the mattress and lured the very millennials that the company had
hoped to attract.
Success & Challenges of Scaling
By 2017, Casper had courted much press and sales. In 2016, the company had $200 million
in sales, and that s just two years into their business. They were valued at around $550
million at the time. Its high-profile and slick marketing attracted the interest of
Target, who offered $1 billion to buyout the company. While that was 2x their valuation,
apparently both sides couldn t come to an agreement. They did, however, come to a sort
of compromise. While Casper s team was not willing to get acquired for that amount, they
did accept Target as their lead investor in their new round of funding. Casper ended up
receiving $75 million in Series C funding, having received a total of $170 million during
that round. Additional investment came from NBA players such as Kyrie Irving and Carmelo
Anthony, as well as celebrities including 50 Cent and Ashton Kutcher. In the end, Casper
also sold a lounger chair that it sold exclusively at Target.
With fresh cash, Casper expanded into brick-and-mortar stores, as well as interesting partnerships.
In 2017, Casper s brand name recognition landed it a partnership with American Airlines. The
company thus expanded its offerings with duvets, pillows, day blankets, lumbar pillows, slippers
and pajamas. In 2018, the company also opened an office and manufacturing facility in Canada,
joining its production houses, scattered across Taiwan and China overseas and North Carolina,
Georgia, and Southern California domestically. Casper also bet big on selling its mattresses
through brick-and-mortar stores after a positive reception to their pop-up locations in Los
Angeles circa 2015. By 2018, Casper had grown to 20 retail stores in North America and just
a year later, the company had 60 retail stores and 18 partnerships with prominent retailers
such as Costco, Target, and West Elm.
Casper IPO
By 2019, whispers of a Casper IPO made the rounds on the Internet. It became less of
a question of, will it happen, rather than when will it happen. As with many other companies
who finally decided to go public, Casper did so primarily because they needed a cash infusion.
In 2019, it had $55 million in cash, but only $6 million of working capital and that year,
had gone through in excess of $100 million. On top of that, it had $41 million of debt.
Other reasons did factor in, though. Namely, the stock market was perfectly positioned
to theoretically welcome a Casper IPO. One - because Casper s rival, another mattress
company named Purple Innovation, had gone public at a higher than expected stock price.
This meant that Casper had a fighting chance of being similarly valued during its IPO.
In reality the high valuation that Purple Innovation received was actually emblematic
of a bull market.
In its public filing statement, Casper clearly outlined its growth strategy, which relied
on building itself as a lifestyle, rather than a mattress brand. The reality stands
that a mattress is a rather large expense and most consumers do not buy a new mattress
even annually. In reality, insiders in the mattress industry typically recommend mattresses
be replaced about every seven years. You should be able to do the math on that one. With such
long lag times between when customers could potentially think of replacing their beloved
Casper mattress with another Casper mattress, the company needed to expand their offerings.
In its prospectus, it thus positioned itself as a wellness brand that specializes in sleep.
That isn t exclusive to mattresses, but also includes glow lights, pillows and pillow cases,
dog beds, and bed frames.
Unfortunately for Casper, it s IPO was not as well-received as their leadership team
may have hoped. Perhaps indicative of the overall reception to Casper s IPO was the
New York Times headline that declared, Casper, the Mattress Start-Up, Goes Through With Lackluster
I.P.O. Despite positioning itself as the foremost leader of a $432 billion sleep economy, Casper
actually ended up reducing its value to less than $500 million, with its stock opening
at $14.50 a share and then ending the trading day at a lackluster $13.50 a share.
To put in perspective just how much Casper has declined since its $1 billion valuation
at one point, it s best to remember that they went public in February of 2020. By June of
2020, it faced a class-action lawsuit by a group of investors who accused the company
of failing to disclose information that was pertinent to retail investors making informed
decisions. One prime example is that Casper had failed to mention that its profit margins
were growing slimmer and the company was selling, a glut of old and outdated mattress inventory
at bargain prices, despite its upscale image.
While Casper has chugged along and has recovered from its March 2020 low of around $3 a stock
and now stands at more than double the price, at around $7, it still faces underlying issues.
The company has not released any new products that indicate it is a lifestyle brand. Rather,
it has released more of the same: updated mattresses, bed sheets, and continues to post
trendy looking images on social media. Casper performed well in the last quarter, having
risen 40% since the start of 2021. This is largely due to the fact that overall home
goods have seen a significant lift because of COVID, with more people working from and
spending more time at home. The increase in time spent at home has in turn led to more
people investing in their home, whether by upgrading to high-end Casper mattresses, or
by kitchen appliances from Wayfair. But with more people getting vaccinated in the United
States, will that growth factor be enough to sustain Casper s long-term growth?
Besides that, Casper has a plethora of copycat competitors and faces a very high cost of
acquisition in terms of marketing dollars. Between 2015-18, as Casper prospered, other
entrepreneurs rushed in and latched onto the mattress-in-a-box trend. Just how bad was
it? In that three year time period, an average of one new such company launched per week.
Casper faces a total of around 175 competitors. Not all of them are trendy, millennial start-ups
like Leesa or GhostBed. Even older mattress companies like Sealy are in on the game, having
produced a comparable mattress named Cocoon by Sealy.
And that brings us to today. Indeed, while Casper s marketing is distinctive and recognizable
immediately, it also comes at an expense. During its IPO, Casper s CEO addressed this
point by emphasizing that the team intended to reduce heavy spending in some areas by
opening more of its own stores, as well as creating more retail partnerships. Having
more physical locations would help the company reduce its ballooning marketing budget. However,
contrary to what Krim says, in its prospectus, it clearly outlines that, If our operations
are to continue to grow, of which there can be no assurance, we will be required to expand
our sales and marketing. Given that, how would Casper feasibly scale while reducing marketing
acquisition costs? Using 2019 as a benchmark, sales and marketing expenses took up a whopping
37% of revenue. This has worked to acquire first-time customers for a big-time purchase,
such as a mattress, but in its prospectus, Casper also notes that only 16% of its customers
return for a second purchase. It s a big problem for a company that markets itself as a lifestyle
brand.
Without an acquisition in sight, or even rumors of an acquisition, Casper looks to be going
solo for the near future. The company has already weathered some of the turbulence that
has come with COVID-19 by cutting costs, completely shutting down its European operations and
subsequently letting go of 78 employees in 2021. The goal? To achieve profitability.
It s no longer growth at all costs, including going into debt. While this could be a sign
that Casper is making changes for a better future, it s still 50-50 if it s enough to
turn the ship around. One thing s for sure though, it s a long way back up to that $1
billion valuation. So with that said, thank you so much for watching
my video. There was a significant amount of research and production that went into making
this video possible. As this is a brand-new YouTube channel I just started this year - if
you enjoy videos like this, please click the subscribe button and hit that notification
bell! I respond to all comments! If you haven t seen already, check out my video on the
Rise of Coinbase or the Rise and Fall of American Education. As always, stay happy and healthy
and stay tuned for another episode of Company Insight next week.