How I Built This with Guy Raz - Casper: Philip Krim

Episode Date: June 28, 2021

In the early 2000's, Philip Krim launched an e-commerce business out of his college dorm, selling everything from window blinds to eczema cream to yes, mattresses. Years later, inspired by online successes like Warby Parker and Harry's, Philip and his partners launched Casper, a DTC company that designed its own mattresses, compressed them into boxes, and helped turn a mundane purchase into an Instagrammable adventure. Within months, sales began to take off; and soon, copycat brands crowded into the DTC mattress space, creating competition and buzz in a previously sleepy sector. (Pun unavoidable) Despite these challenges, Casper's valuation soared to $1 billion in 2019, only to shrink by half for its 2020 IPO. Today, Philip says he's focused on the future, with ambitions to build Casper into a one-stop-brand for all things sleep-related. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Airbnb.ca.com. 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 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. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Philip Krem helped transform the way we buy our beds by building Casper, a brand that makes it easier to choose a mattress and 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 Allbirds is now among dozens of DTC shoe brands. Same goes for mattresses. Today, there are at least 170 direct-to-consumer brands that sell mattresses online. It's a crowded and confusing marketplace. But when Philip Krimm 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 mattered 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. Casper'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 2020, Casper's market value has dropped by half. And while all of this has certainly rattled Philip Krem, 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. Philip 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 going to be kind of the entrepreneurial path. I thought it was going to be more kind of the finance path. I recall fondly playing the stock market when I was in. You know, fifth grade and, you know, during the dot-com mania and just being, you know, looking at the stock market quotes in the newspaper every day and, you know, probably have read the Wall Street Journal since elementary school. And so I started UT as a 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 e-commerce business, right?

right that's right um you know at the time i didn't say like oh i'm going to 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 drop shipping was i learned about html and how to you know, build websites using HTML. And so I figured out that if I built a website and could market the website online, others could do 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, 2002, 2003, 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 decide to sell? Yeah, 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, there were people online searching for products all day, every day. 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 in order. And then, you know, the manufacturer would charge my credit card and do the

fulfillment. And I would charge the customer's 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 it would be made to order eczema cream to help children with eczema, sofas or futons to how to play poker software all the way through to mattresses. So I've actually been around the mattress side of things since the early 2000s as well. But at the time, it was really just anything I could find where I could 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.

But just to be clear, this was not one website because 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 was a portfolio of different websites. So I would generally try to build a targeted website for the specific product or manufacturer that I was working with. And it's actually at the time, I think at the time, Wayfair was doing something similar. I mean, it's exactly how Wayfair started selling, you know, all kinds of brick-a-brac and then furniture. But they had had dozens, hundreds of different websites. And this is essentially what you were doing.

Was it pretty cheap to do all this? It was cheap enough where I could kind of do it using misappropriating some student loan money and, you know, starting it with credit cards. So, you know, it was something I did it all myself. I had no money, you know, was on scholarship for school. And so I was able to kind of just put it together with, you know, some sweat equity, I guess, and get it going. And then the nice thing about the model, which was true also for Casper when we started it, is just a, it's just a, it. It's a negative cash conversion, which is a fancy way of saying customers give you the money 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 of business. Philip, how did you find these companies?

I mean, you were so young and it's such a cool idea. But this is like 2002, 2003. Like how did you even find companies that were willing to work with you? Did you just, because 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 wish I remembered the specifics. I remember just trying to call up companies, but it was just trying to understand, like, who was willing to do the fulfillment and call up the company and see if you could convince them.

You know, oftentimes they didn't realize that I was a college. In the beginning. Yeah, college kid. You know, it's funny. I remember in my early 20s, I went to a. Celtics game in Boston with some of the guys that I had 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 beer until you're 25. And so I had to come back in de-handed. And it was like an acute reminder of my youth in business. All right. So you started this

company by yourself, but you did end up hiring employees, right? So over time, I had employees. and then my family also helped. So at one point, I had a conversation that didn't go exactly as planned, but I went to my parents saying how I thought I should take a break from school and work on the business because it was growing quickly, and I was enjoying it. And they shut that idea down immediately, but the compromise we worked out is that they would help me with the business.

And so ended up getting my family involved. And we, you know, at one point it had, you know, I don't remember our peak, but like 20, 30 employees involved. But this is after you graduate college, you had 20 or 30 employees, right? Not while you were still in school. Yeah, no. 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 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 because you had no expenses. That's right. Yeah. It was profitable from the beginning. And out of all of the things that you tried out, I guess you noticed that mattresses, like selling mattresses or foam mattresses, that was doing better than other things that you were selling? 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, temporepetic sleep number back then were growing their businesses to direct response advertising. And so I saw that the more these guys advertised on TV 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 products that competed, you know, memory foam products, adjustable air mattresses,

and we could be early in the industry, and it was very profitable because these guys weren't competing there. So why was it that the margins on mattresses were so high? What explains it? Yeah, so that's where 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 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 brands mattered here. And so brands also drove higher margins.

Sealy, Serda Simmons. These brands have been around for 100 plus years. And that allows you to take margin over time. Okay. So you graduate from college around 2006. And I guess at that point, you really jump into this business full time. And you call it the Merrick Group. Is that right?

That's right. So I ended up taking five years to graduate from Texas because I was balancing school with running the company. I grew up on Merrick Drive, so decided to start the Merrick Group. Sounds like a private equity group or like an investment firm or like a VC firm, the Merrick Group. This was your street that you grew up on. That's right, from first grade into college. And did you stick with a bunch of different things, blinds and futons and different products, or did you then focus mainly on mattresses, selling mattresses?

Over time, it got more and more focused on mattresses. So, yes, we ended up exclusively in 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 2008, 2008, 2009. What were you guys doing? I think we were in the kind of $10 to $15 million per year revenue range. Wow. And were you guys, were you profitable? You know, we had our ups and downs.

Towards the end, the business got very tough from a profitability standpoint. And 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. 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 unique visitors and cost per clicks go up very steadily. And so over time, it just got harder.

We realized we didn't have kind of enough of a moat around the business to have, you know, a defensible way to run the business profitably. And it's all lessons learned, you know, learned a ton in the early days and all the way through when things got tougher. You stepped down as the CEO of that company in 2009. So you're still really young and you go to work on some other ventures, which we'll talk about in a sec. but I know you eventually sold, that company was sold, the Merrick Group was sold in 2013, right? That's right. It wasn't sold in like, you know, a big exit. It was sold to manufacturers. Right. And it was a really way just to kind of maintain continuity when we didn't see a path to kind of continue to operate it profitably. Right. And again, I like to say this on the show is 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. There's a lot of complexity that goes into when you hear things like exited or sold. And it's not always the best situation. Like I said, we were kind of forced to that point because we never raised outside capital. It was just funding from myself and my family. And again, I had been around kind of the family entrepreneurial journey and understood the ups and downs of that. But it's different when you're living it yourself. So I totally agree with your point, though, like stories. And headlines are often misleading. I'm assuming in this case, you didn't walk away from this sale with lots of money. No, I didn't walk away with any money. Meantime, you have a lot of experience under your belt now. It's 2009. Just a couple years out of 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 about this. That's right. So towards the tail end of when I was running mayor group, what I saw and what started to emerge then was really mobile advertising. And so the idea that I wanted to work on was if I could help make the mobile searches and mobile traffic as easy as possible for local businesses, I thought that would be really interesting. And so that led to starting vocalized mobile, which was basically click to call search for local businesses. What does click to call search mean? So at the time, if you searched Houston tow truck driver, 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. But our idea was to make the technology super easy and do it in more of a 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 tried to make it as easy as possible for a local advertiser to embrace mobile advertising, which was still pretty nascent at that point. And are you working at like a we work type of thing? Or like a like what are you running your business out of? I was a we work tenant.

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 ultimately set up kind of a call center to sell to local businesses that was based in Atlanta. So I would go down there, and that's where we had some employees. But 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. There were like two core challenges that 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. It's still very nascent. And then, you know, what I saw was just selling to small businesses is really challenging. These are businesses, which I appreciated. Every dollar matters. These are businesses, they're family businesses where, you know, if something doesn't work, you know, they're making less money personally. And so, you know, a lot of times 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 it just, you know, was difficult and not something I enjoyed. And this is why so many companies only work with huge businesses, right? It's like that, is it the Pareto principle, the 80-20 rule, right? Which is like 80% of your business comes from 20% of your customers. Right. 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 there was a lot of churn. And again, you would just see these budgets, they would afford an advertising campaign this month and not be able to afford it next month. And it's just a grind. Yeah. So from what I've read, you never got this project vocalized to profitability. But I mean, but you worked at this thing for, I think for about three years, right? Yeah, that sounds right.

Yeah, I mean, did you, you're 30, where you were kind of looking around at your friend cohort who maybe traditional jobs or went to law school and were now lawyers or went to finance and we're now on Wall Street and had these sort of well-paying jobs? And I don't know, did you feel like, oh, maybe I got to figure this out. Like, were you getting a little anxious? Yeah, I would say that's fair. It was probably less on the traditional side. Like I had my friends that were like bankers and saw what they were doing and. did not, was not envious of that. More I was interested in just like 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 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 didn't know what I was going to do. I had learned a ton, but, you know, I had never had a traditional job. I never knew what a, traditional kind of company gig looked like. But of course, like, still had the entrepreneurial itch and I was working on vocalize. But I just knew it was going to be a tough gig. And so maybe, you know, back to your point, started thinking about what I would want to do next.

Okay. So at some point, while you were still working on the startup, I guess you were accepted into an accelerator program in New York. And it was at that program where you would eventually meet the guys who you would become your co-founders for Casper, right? That's right. It was Gabe, Luke, and Neil. They were working on a business. They were friends from Brown University. Their business had an e-commerce component to it, so I understood some parts of what they were trying to do. What were they trying to sell? So they were trying to help bloggers and content creators monetize their traffic by selling curated e-commerce goods. So it was kind of like trying to operate a marketplace on blogger's

websites. And meantime, you just kind of get to know these guys. This is Neil Parake, Gabe Flatman, and Luke Sherwin, right? That's right. Yep. And I mean, how do you guys start talking about mattresses about your background? You know, 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. This was also when jawbones and fitbits 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 Harries was doing and the razors, yeah, bonobos. Yep. And 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 goes back to the sense 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 know about mattresses, you sold mattresses. Maybe we should, do you want to, like, join, should we join together and do something around mattresses? Like, how did that conversation even start? Well, you know, 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 entail?

And, 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 we're like, yeah, this seems like pretty reasonable. Like, we're probably missing something. And so we then went and sat down with Jeff Rader, 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 contemplative and asking great questions. And he was like, no, I think this could work. And, like, for us, that was like validation from the highest authority.

We were like, okay, this is amazing. And we were still hesitant because we were still working on our respective businesses. And we're like, okay, now what? 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, 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. When we come back in just a moment, why a lot of investors push back on

Philip's 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 came in a tube, I think they still do, and I like cut it open and then just let it settle for 24 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 2000s. What was the problem that you knew existed? So you could go do that if you wanted to go spend, you know, a few hundred dollars and get something that would last you generally not very long. Hey, that IKEA mattress was great in my early 20s. Okay, keep going. When you're in your early 20s, you could sleep on pretty much anything. And so that's a great solution if you're on a budget and in your early 20s. And then other than that, you were kind of relegating.

to going into a store. Like really mattresses weren't popular online. And when you talk about going into a store, it just was the worst consumer experience in existence. Like at that point in time, we were living in New York, and so Sleepy's was the predominant retailer back then. And these stores felt like they hadn't been renovated in a long time,

and it just was, to us, we said, worse than buying a used car. And at this point in time, like used cars had been improved thanks to the internet, and you could get information and transparency. But 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 any kind of quality standards of a mattress.

The manufacturers change 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 it very well could be that Macy's is selling ABC mattress and Sleepy's Zee. 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 compare them.

You know, even at this point in time, you asked most people, and we did this 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 temporepetic. But at that point in time, there was nothing that we as consumers, you know, in our 20s and early 30s 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 was the problem we wanted to solve. All right. All four of you decide you're going to go for it. You have the meeting with this guy who co-founded or founded Harry's Razors, and you're thinking, okay, we've got his blessing. We're going to start this thing. Presumably you have to start doing some research about the direct consumer opportunity and what people want. And so how do you start doing that research? Well, 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 this case, like our website, has to be really easy to use, interesting, frictionless, and make the whole experience as easy as possible. And the third, 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, Jeff Chapin. He was like an industrial designer? That's right.

So this is definitely an example of just being very fortuitous. But so we said, okay, we need a product designer. Who among us know a product designer 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 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, IDEO had clients that were in 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. Actually, most people don't realize we actually incorporated the business as Providence Mattress Company. In Providence because those guys went to Brown and then Jeff. They went to Brown and Jeff's design studio was in Providence. So we brought Jeff on to go build a better mattress and start to iterate and test that.

And we hired kind of our first agency partner, which was 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 who would build the mattress that we designed, find. the packaging suppliers. Right. And so we went to kind of go put all these pieces together. There's a lot of moving parts here. I think there were five.

I mean, now you've got five co-founders, right? The three guys who you met at the incubator, you and now Jeff Chapin. And I guess everybody agreed that you were going to, you'd be the CEO, right? That's right. I was the one with CEO experience. So you become the CEO. But even with, you know, when you pick a seven, five different people, it's a lot of moving parts. How did you guys divide and conquer? How did you decide who did what?

So it was it was kind of a natural division. I mean, we said let's divide and conquer. So Gabe was self-taught on coding and so he was our CTO. If you met Luke is naturally 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 kind of 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 so you basically went to go start raising money for this because this is not a drop ship company.

This is a big idea. You need some money for this. So where did you, I mean, that summer, did you start to look for money? I would say that summer and fall, yeah, we started to look for money, summer and fall of 2013. And was it relatively, I mean, was the reception pretty good? Were you going to like VC firms? We were going to anyone that we could get a meeting with. And the reception was terrible, like icy, icy cold.

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 going to sell them ever so often. Every six to eight years? Every six to eight years. But actually, the average household's in market every two to three years because the average household has two to three mattresses. All right, but that's a question I would ask you at the time. I'd say, well, you know, I mean, it's like a car.

Totally reasonable. Yeah. It's a good question, but I don't, I don't, you can make a lot of money selling mattresses. It's, you don't need frequency. Right. 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 didn't resonate with you. people. And so we were told no dozens and dozens and dozens of times. Right. Now, normally when you meet with 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 tells you what they actually think. And this is why fundraising is always so emotional. But we thought these guys loved us. We thought people wanted to invest in us. And the idea, everyone was very polite. Everyone was very enthusiastic even. Yeah, enthusiastic. And then just one after the other was no

not interested not a good time you know all the traditional venture and angel excuses yeah and so it was tough 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 you know anchor investor 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 going to come together you know maybe we're missing something and so it just creates a lot of self-doubt and a big rollercoaster of emotions And when you went to meet with these investors, you said, did you like bring a box and say, this is the box that we're going to compress the mattress in? It's going to come to your home in a box.

You'll order it on the internet and it'll come to your home. Were you showing them that? Well, we would sometimes bring like foam samples with us so you could feel what the bed was going to be made out of and understand the construction a little bit more. But the 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 Lear Hippo Ventures. And Ben had invested in Warre Parker and had invested in some other 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 got to try one of

these things out. So we delivered the four of us. Neil, Luke, gave. and myself delivered a bed to his apartment in Soho. And, you know, he slept on that for years and ultimately led our seed round. And that's, he's the reason why Casper is in existence today. I think you guys raised like a little over a million dollars for your seed round, right? Is that right? It ended up being 1.85 million. So more of them, considerably more than that.

And he, and so when he kind of signed off on the, or decided to invest, that's when you get the waterfall. You get other people who want to join because they think, well, this guy is doing it, and I'll do it too. That's right. Ben was is a big name in seed investing. And so using his initial check into Casper was how we were able to build momentum to fill the round. And what was going to make your mattress different? Because you could buy memory foam. You could buy latex. What were you going to make it out of?

So ours was an all-foam mattress with memory foam on top. But what we had worked on for months was just how do we construct it to be super comfortable? And this goes back to, you know, Jeff as a brilliant industrial designer. It's all about user-tested design. And so we would bring our friends over to an apartment to lay on different prototypes and get feedback. What's the right level of bounciness? And what bed sleeps the coolest throughout the night? And, you know, what bed feels kind of universally the right firmness knowing that

that firmness was very subjective. And so we went through dozens of different prototypes to get to the Casper mattress that we launched with. And it was what? It was a combination of memory foam and latex? That's right. It was a combination of memory foam and latex to get the right amount of balance and sink and heat absorption and the feel that we were going for through user testing.

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

But we had all of these different kinds of foams, and 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, different properties, whether it was heat or ergonomics, things like that, and just constantly iterating to try to build the perfect mattress. When did you guys know? 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 you all had different, some of you had different views? No, there were tons of discussions, tons of debates, very debate-focused group of founders. Ultimately, though, we said we're going to pick a date and we're going to launch on that date wherever we are. Wherever we are on the branding, wherever we are on the website design, wherever we are on the product roadmap, we're going to launch. And so I think it was early 2014. We said April 22nd. That's going to be our date.

What that date? I think 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 time. So, you know, I said we're not going to let the date slip. That's what we told our investors. We're going to do it. So you had 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, that was your, that's it you branded it. Like, that was the thing that you branded. It was a compressed mattress in a box. And apparently nobody was doing it that way. That's right. To my knowledge, we were the first to ever brand the unboxing experience. And so we put the stripes on the box on the exterior and we put a tray on the interior. We designed kind of an instruction manual on how to unbox it. We actually included a cutting tool so you could cut open the mattress that was basically shrink wrapped 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 vintage bedtime stories and include that. And so we made it a thing.

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 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 that, I think, is one of the biggest drivers that just created, you know, we're a catalyst to creating Casper in our early days. By the way, 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 that relatively easy? It's, I wouldn't say it's easy. because I'm sure whoever invented it wouldn't like that,

but it really is just a question of pressure per square inch, and if you put enough PSI onto some big steel plates, you can compress a lot of things, including a mattress. Yeah. And 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 a name? Is it connected to the ghost, friendly ghost?

No connection to the ghost. We were all working out of wherever we could from time to time, and so we would often work out of Luke's apartment in Brooklyn. And 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 6'5-German guy 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.

And it was always a funny sight to us. And so, again, we kind of gave ourselves a deadline on the branding. we had a list of a million names and when we ended up voting on the name that we all liked the most, Casper won the day because I think we all got a good laugh out of Casper's the visualization of Casper sleeping on a twin mattress

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

And what happens? Like you just, 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 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, 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 I think that first day I read that you sold like 40 mattresses or something,

which is pretty good, right? It was for a tiny little company. Yeah, I mean, 40 mattresses is like $30,000 worth of business. I mean, again, that was like what we were forecasting, to do in month six or seven. And we did it in our first day. And where, I mean, did you have the mattresses on hand, or were they at the manufacturer? Where were they? So at this point, we had moved into our first office. The office was a second story walkup in NoHo in New York City, I think it was 1,600 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 U-Haul truck that we had rented that had maybe one or two dozen mattresses that we were keeping out in Brooklyn. We thought we would pull inventory from there and ship it as they would sell. But within two days, we were out of all of the inventory we had. Wow.

And just to be clear, the mattresses were being manufactured to your specifications, but essentially white labeled by a manufacturer somewhere. I think it was in Georgia, right, at the time? Yeah, so we had found a contract manufacturer

who makes beds for other brands. We had convinced them 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. 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. own fulfillment, if need be. So apparently your first year target was to reach about $1.8 million worth of mattress sales. And apparently you hit that in two months, which is a great milestone, but also a huge problem because you were not shipping mattresses that fast enough. There was huge delays, right? There were huge delays to the point where we thought this was like an existential risk to the business. I mean, people were just super upset with. 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 felt like the whole business could implode at this point. So we were trying to brainstorm everything we could to keep these customers just having faith in us 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, 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 them, which we weren't.

But 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 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 manufacturer to produce more. But, you know, a big manufacturer, they want to go make a run of 500 beds, a thousand beds.

And we're like, no, we just need to ship out, you know, a dozen beds today, a dozen beds tomorrow, or whatever it is to try to catch up. And it was just, it was really tough to build our way out of the hole. Why? Was it, was it, was the bottleneck the manufacturer? I'm presumably they're making vets for lots of other people. And you guys are like, come on, make more of ours. But presumably they just couldn't make enough, quickly enough.

That's right. It was the manufacturer. And it was really, one, it was tough to find a manufacturer to work with us in the first place. And then two, we're still a tiny customer in the grand scheme of things. And so 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, 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 kind of flip a switch.

I imagine that with that rapid success, it started, you started to attract more potential interest from investors that year in 2014. because I think you did would go on to raise, to Series A in 2014, you raised like $13 million 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 of the common objections we heard from investors was, you know, just too early. Come see us when you're live 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 28 days.

You know, I think that was fairly unprecedented. And so that, that caused a lot of interest into the business. You know, we went from, you know, the ugly stepchild to the bell at the ball very quickly. And it was all new to us. And so, you know, 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, you know, it's kind of like marriage but without the divorce option for your series A investor. So we wanted to pick the best partner we could. And that also just meant thinking about like, what do we want to go do with this business? Do we really want to swing for the fences?

Do we want to run it as more of a lifestyle business? And it was a crazy time that was awesome and, you know, different and overwhelming. But we ended up with a great partner. And that partner, by the way, I think was NEA, which is a huge venture firm. Huge venture firm, the largest venture firm by kind of assets under management. And we said, let's go try to build the biggest business we can. And if we're going to fail, let's fail because we're too ambitious and aiming too big. So what does that mean to go big?

Yeah. So the way we talked about and continued 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. 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 the money and start

to build a product pipeline, start to build a distribution pipeline. We knew we weren't going to be just digital. So we started doing pop-ups. We wanted to build a global brand in business. So eventually we launched in Europe. And so that's where we just started to think about what does this business look like down the road and let's see how fast we can get there. Your value proposition was it was going to 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 we're not we're not building a value play. You're not going to 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 going to play games with how we price everything. We're going to price it fairly. And so no matter where you buy a cash per product, you pay the same price. And from a margin standpoint, there were just less hands in the cookie jar, if you will, on our products. So we didn't need as high of margins. Because you don't have brick and mortar stores and you don't have retailers, you're direct-to-consum.

or you're not right? That's right. So we were more efficient. So we just didn't need it as high of margin dollars. We still have a high margin business, and it's a high margin category. So, you know, you look today, we're north of a 50% gross profit margin business, which is good and strong, and that's enough to build a defensible business. And to your question on, like, just, you know, how many people are buying mattresses,

it turns out that every year about 20 million mattresses in the U.S. are sold. And those 20 million mattresses mean that $16, 17, 18 billion in the U.S. is spent on mattresses. All right. So one of the things that was part of your ambition to create a brand rather than just a mattress company, right? Because it was going to be all kinds of sleep products. It was going to be sheets and pillows and different kinds of. of mattresses was, I think, a year after you launched, you guys basically built a media company called Van Winkle.

And from what I understand, this was a media company that was going to write, it wasn't going to promote casper mattresses or sell them, it was just going to write about sleep and about things related to sleep. Is that right? It's right. I think media company is a generous moniker, but the idea was that. that buying a mattress is an infrequent purchase with consumers. So what is a way that we can, as Casper, stay in more frequent conversation

and build more frequency of a relationship with customers? And we said content could be a way to do that. And so we went out and we started Van Winkles. We hired an editor to help us create content around sleep. And it wasn't about selling mattresses. It was just, let's put it out into the world to our customers and 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 over time. I mean, it's a really interesting idea, right?

Because 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. A lot of investment firms, and Dr. Jason Orowitz is essentially doing a version of this. And it seems to me that you actually – that one of the things you thought was that this media arm could become self-sustainable. It could self-sustaining. It could become profitable through ads. It was a thought on where the business could go, which is either that 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 bring in ads and other advertising partners in addition to Casper, and we think of it as just like any other editorial venture. And so we definitely thought that was one place it could go over. time. I know that you had Van Winkle going for a few years before you shuttered it and shut it down. And I wonder 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 winkle's we saw some of the meditation apps coming to market and people were using them for sleep. And we talked about like how do people use content as part of their sleep routine? And we missed that opportunity. And I think, you know, the folks like Calm 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 going to be a lot of innovation when it comes to people evolving. their sleep routine, including content, and we would love to play in that. Philip, did you assume that Casper would be like a millennial brand, you know, that it would, and was that how you kind of pitched it and did it, was it, 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, 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 just knew that that was something we were going to have to overcome.

Yeah. 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 just try to build the business by going kind of community to community and thinking about the groups that we wanted to resonate with. As you started to really take off, something happens fairly quickly in the story of Casper,

which is competitors. You've got a great business. Direct-to-consumer compressed mattresses, comparatively low overhead because you're selling direct. and then you've got brands coming up, Purple, Lisa, and others. That happened fairly quickly after you guys launched. It did, and it was way bigger of an onslaught of competition than I think certainly I could have ever imagined. And I think this is one of the things looking back that, you know, was a mistake on my part. I was kind of dismissive of competition in the early days.

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 really just take everything we were trying to be innovative with. And 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.

I think the proliferation of mattress startup certainly got very competitive very quickly. And 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 2015, 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 think, an armed race of trying to think about how you're going to 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 this ecosystem. So that's why we started opening up stores. Today we have 70 retail stores

opened 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 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 one thing that I'm curious about is that mattresses like cosmetics and some other

categories tend to be made in central facilities where factories that make products for many different companies, right, according to their specifications. And I'm assuming that as more competitors came into the space, they were also making mattresses 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'm thinking if I'm running the company, I would get a little anxious or nervous about people who were making mattresses in the same factories where ours were being made and that IP not being carefully protected. I wouldn't say I got anxious about like other people, creating mattresses in the same facilities because 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 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 it does get in the weeds to your point. It doesn't stand out as much because, you know, at the end of the, 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 just has to work well. And I think about it with like, you know, razor blades. Like you would know very specifically if you're using a razor blade that's high quality and probably expensive and, you know, recent versus a low quality,

inexpensive razor blade. And 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 focus more on the brand and less on the product.

But 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 websites that claim to have honest reviews, they're hugely influential in what mattresses people buy. Like, 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 to you, to Casper. And you guys actually sued some of these sites saying that they were being unfair. But I wonder, 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 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 us, 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 litigated about. And I think today we have a better ecosystem for consumers in the industry because you see more disclosures. And look, you're in a high-stakes business, right? I mean, you are in a competitive,

high-stakes business environment. So there is going to be a war footing in some sense. I mean, it's not It's, it's, that's just the reality. There's a story out there that 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 acquire Sleepopolis. And then the story is that the review of a Casper mattress on Sleepopolis 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's a story. and you got some flack for that from some media outlets for doing that. That's right. I think the narrative that that media outlet took was not fair or accurate.

So the story I just said is not true? No, so the narrative that was behind the story. Again, there are good operators in this ecosystem and there are bad operators in this ecosystem. And in our view, Jack Media was a good operator. They wanted to buy this site, and we talked to them about financing that acquisition so that they could operate it. And they had complete, independent editorial control, and they were in their business. We were just a financing partner for them. And today 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, litigation is always a last resort. But if the NAD, if the advertising standards that the law says and that the independent advertising bureaus are saying are not being upheld and that's misrepresented to consumers, we again just felt it was an obligation upon us to take action to let the good actors build their business. And there's a great business to be built on the content side and on the advertorial side of the mattress industry and of the sleep category. long as you do it with proper disclosures, which is what's going on. And so, again, it's the

narrative behind it, I think, that was a little off. I know that around 2017, you started to enter into conversations with Target. Target, from what I understand, started to look at you as a potential acquisition. And you guys started to talk pretty deeply. And, actually, and Now, knowing what I know about acquisition talks, they're very intense. You've got to open up all your books. It's you've got to stay totally secret. You can't talk about it with anybody. It's, I mean, you sort of entered this process with Target.

So I wouldn't say we got as far as you're alluding to in the process. Target had taken 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 wanted to make a bigger push into sleep into the mattress side of things. They had a big betting business. They wanted to do more in their pillow business. Brian Cornell, 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 sat down. You know, we talked, you know, amongst our board. and 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 take a minority position in Casper,

and if they want to help us, more importantly than the investment, if they want to help us commercially, and the investment will help catalyze that, then great, that's the win-win. And that's what we ended up doing. So now with Target as a strategic kind of investor, your mattresses are in Target stores still today, right? That's right. All right. So Casper, you hit a huge milestone in March of 2019. You raised around. You brought in another $100 million. And I think you at a $1.1 billion valuation. And I mean, that's huge. But it also, I imagine, increases pressure, right? Because you've got to now show that that's really worth that money. What did you, did you already in March of 2019 believe that you were going to take the company public within a year?

March of 2019, 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? So we were definitely working on that in early 2019. I mean, this is what happens, right? When an investor makes an investment in a company, they are expecting that there's going to be some kind of exit. Either it's going to be acquired or it's going to go public because the investor needs a return. And you guys first went to investors in 2013. So you're now looking at seven years later and, you know, the clock is ticking.

And is that why you decided that going public was the right decision? You know, we actually really didn't feel pressure from investors. 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 raised, you know, as you said, another $100 million in March of 2019. 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 kind of get up. public than anything? But going public means that you have to reveal everything. Going public means 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, 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 all of a sudden, you kind of lay it out there, right? I mean, you're not, it's all out in the open. That's right. It's all out in the open. But we weren't afraid of that. Like, 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 lifecycle to invest capital to help us grow our foundation, to help us ultimately become a very large and profitable business. And that's very common for companies early in their life cycle. And if you look at other companies that went public in 2019, 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 were going public and not profitable. and Casper continues to have a story that I think will ultimately prove to resonate in the public markets. We've had a choppy time since we've been public, but I think that's as much timing as it is anything else.

This is a little bit of a sensitive topic because I don't want it to come across as sounding like I'm, you know, going after you or criticizing you. I don't want to make you feel, I'm not trying to make you feel bad. I'm 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 in 2019. You go public in 2020 and investors essentially value the company at the end of that IPO at $500 million, half or less than half of what your valuation was when you raised money. And, you know, today, it's about a little over $300 million and it's the market cap valuation. And so what is the story you tell yourself about that?

How do you process that? That is the reality. And I would say, you know, uncomfortable saying it's not good. You know, the last thing I personally would ever want to do is lose an investor who, you know, I think, of it is investing in me as much as it is investing in the company. The last thing I would ever want to do is lose an investor money. And so it doesn't feel good at all. And it's not good. And so it is a very motivating factor to me to get our stock price up and to have our investors make money. That said, 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, I think, visible high-profile company to go public post-WeWork, which meant there was a ton of negative sentiment around companies that were investing capital into their business and around the startup side of things. And we were really one of the last visible companies to go public pre-pandemic, which just means that people immediately started to focus elsewhere, as they should. But, you know, you live with the timing. that you have in life. And so, you know, it's going to take time to work our way out of where we are.

But it's definitely a reality that we're dealing with and that I feel a lot of responsibility for. How do you handle it as a leader? Because you are the CEOs, all the firepower, right, is aimed towards you. That's just how to happen. You choose to be the leader. You've got to absorb the firepower. But you also have to diffuse it, diffuse it somehow and deal with it. How do you deal with? you know, articles like in, you know, Quartz wrote an article about your IPO and it was critical. And I think Forbes had an article said, don't buy Casper. 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 going to prove them, right? Yeah, I'm not one of these people that uses it as a way to get super fired up. and like that's not what motivates me.

Like, let's go prove these guys wrong. And that's not what you would hear at Casper either. Like, you know, I don't use it to rile up the troops, if you will. And largely, I also don't dismiss it. So I'm not like just head in the sand and like not understand what's going on. But I don't sit there and read these. I don't get overly focused on it. I don't internalize it.

Like I won't lose sleep if someone were to write something like that 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'm just wired that way. I don't meditate. I, you know, I don't take like my aggression out in a workout class or anything like that. I try not to let the highs get to me and I try not to let the lows get to me and I just try to stay pretty balanced. And I think that is felt at Casper. So, you know, I try to keep the company for. focused on that. Let's 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. I want to ask you about something that you guys actually really pioneered in the mattress industry. Because initially, when you sold them, I think it was like 40 days. You get, it was a 40-day-old trial period. But you

up to 200 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 great. lazy because I think you don't even require people to use a mattress cover, but if someone's using it for 90 days and sends it back for the money back guarantee, I have to assume 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 give you a credit. Oh, okay, you get you get a credit to buy another product. No, no, you get a full refund. Full refund. So take your cash and do whatever you want with it. So you just eat that. Yep. Just cost to doing business. Because you can't, right, a mattress like you sleep on it, and we know how much skin and sweat is inside of a mattress.

Just look at a science website you'll find out if you're curious. You can't, the secondary market for mattresses, I can't imagine it's that hot. It just seems like a crazy thing to offer people, 100 days. You know, 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 30 seconds in a store and then saying, okay, I want to spend a third of my life on this for the next 10 years was equally crazy to us. Totally crazy. And so, you know, if that is one end of the crazy spectrum, the other is 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 take it back. And fortunately, you know, few. You customers do, but we just want you to find something that you sleep great on. You have about 420 employees now, something like that? It's about 350 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 moved on some way. I mean, they may be involved, but 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 would you go? I mean, I know you earlier mentioned you're good friends with everybody, but do you sort of wonder like, hey, wait, why are you? Why is everyone, what's going on here? No, I don't. I think these things like just take their natural progression. And some of my co-founders are younger than me and earlier in their careers and wanted to move on to new challenges and, you know, totally accepting of that. And I think early on we said, 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 one of the founders wants to go on to do something else, like let's just prepare for it and talk about it and do right by, you know, the rest of the team. And that's kind of how it played out. When you started selling mattresses in your dorm room at UT in 2002, three, could you have a I imagine running a public mattress company in, I mean, more than a mattress company, but could you have imagined running a public company that is centered around mattresses, direct-to-consumer mattresses? No, would be the short answer.

Certainly not anything that specific. But I will say, like, growing up, like, business was what I was fascinated by. And my sister would tell you, like, 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, fake letters and checks and things like that. Like, business has always been what I've been, like, really passionate and curious about. And so I do think I always dreamed of, like, what would it be like to run a public company, be a public company CEO? And so this was definitely on my bucket list. Like, did I think I would get here this way and at this age and with this kind of company?

No. but definitely something I aspired to since I was little. When you think about where you've gotten to as a founder and a CEO, how much of that do you think is because of how hard you worked and how much of it do you think it's due to just being lucky and meeting the right people at the right time and the right kind of things breaking your way? That's a tough question.

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 company, running a startup. It's like being in a boxing match and you're just constantly hitting the face. And I think that's 100% true. And having traits that were ingrained to me since I was little, like perseverance and persistence. And to be able to absorb that and work through it and absorb the ups and downs, I'm lucky that I'm in the position to have that chance and to be where we are at this point in the journey.

So definitely, I think, bias towards the luck side of things. But know 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. Just one more question for you. You've got a two-year-old at home, right? I do. Do you let him jump on your bed? I'm a bit more encouraging of it than my wife is.

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 jump on the springs and you destroy the springs. Well, so the newer models of Casper were 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 with one from your...

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 H-I-B-T-NPR.org. If you want to follow us on Twitter, we're at How I Built This or at Guy Raz. Our Instagram is at How I Built This NPR, and mine is

at guy.org. This episode was produced by James Delahousie with music composed by Rumtine Ereblewe. It was edited by Neva Grant with research help from Dareth Gales. Our production staff includes Casey Herman, Rachel Faulkner, J.C. Howard, Julia Carney, Farah Safari, Liz Metzger, Janet Ujong Lee, and Annalise Ober. Our intern is Harrison V.J. Choi, and Jeff Rogers is our executive producer. I'm Guy Raz, and you've been listening to How I Built This. This is NPR.