By Dennis Phelps, IVP General Partner & James Newell, IVP Vice President
“A well-spent day brings happy sleep.” – Leonardo da Vinci
“Yeah, but so does a Casper.” – IVP
Today, IVP announces a $30 million investment in Casper, the NY-based start up that is upending the sleep industry. IVP served as the lead investor in the company’s $55 million growth financing, and we couldn’t be more excited about helping our new partners build the next truly great consumer brand in restfulness. If you’re one of the tens of millions of Americans who struggle to get enough sleep each night, you should be excited too.
For those of you who don’t know IVP, we’re a later-stage venture capital firm based in Menlo Park, CA. We’ve been investing in technology start ups since 1980, and we have a long history of backing exceptional consumer companies such as Dropbox, Dropcam, Netflix, Twitter, Snapchat, Supercell, and The Honest Company.
So why is a leading Silicon Valley venture firm so excited about a NY-based start up that sells mattresses online?
A Considered Purchase
There are few things in life as personal or intimate as the bed one lays in every evening, and even fewer that have as much of a direct impact on one’s mental and physical heath as a good night’s sleep. For most of us, a mattress “investment” is one that lasts 5-7 years or more, and it’s where we spend 1/3 of our time. That’s why the decision to buy a new mattress is one of the larger considered purchases a household will make each decade. Sure, a mattress isn’t as expensive as a car or boat, but a good one can cost more than many large home appliances and consumers deserve so much more than they are getting from the legacy mattress companies.
A California King-Sized Market
The US mattress industry generates over $15 billion per year in retail sales. Outside the US, the international markets are nearly three times larger in aggregate…. and that’s just mattresses. If you add the sales of bedding supplies, humidifiers, noise machines, ear plugs, eye masks, sleep supplements and the like, the market for sleep-related products is truly massive.
The Princess and the Pea
Despite its immense scale, the US sleep industry has experienced little innovation during the last several decades, or even centuries for that matter. The common innerspring coil mattress that most of us grew up with was originally designed to work in horse drawn carriages in the year 1871… 1871!!! That was the year that Orville Wright was born, and the United States consisted of only 37 states. Think about that for a second. Over that same time period, we’ve invented or discovered the light bulb, Penicillin, airplanes, nuclear fission, space shuttles, iPhones and Teslas, but the vast majority of “modern” Americans still sleep on a padded coil of springs.
It’s All About the Latex
Perhaps the greatest innovation in recent years has been the introduction of combination latex and memory dual foam mattresses. Produced with technology originally introduced by Dunlop in 1926 and initially sold only to British royalty, vulcanized rubber latex foam mattresses have long been more popular in Europe than in the US. This core innovation was vastly improved upon a mere seven decades later in 1992 when the first mattress incorporated “memory” foam, an advanced polyurethane material developed by NASA in the 1970s. Today, these “dual” foam mattresses are widely perceived by educated consumers as more comfortable than innerspring mattresses due to their “soft yet supportive” construction, better motion isolation and insulated temperature control characteristics. Over the last two decades, dual foam mattresses have grown popular with consumers suffering from insomnia, back pain and numerous other health problems, as well as those who just prefer a more comfortable night’s sleep. However, until Casper arrived, these newer “space age” mattresses were generally priced outside the reach of many consumers.
Cutting Out the Middleman
Throughout the US, in each local geography, there are typically a very small number of companies that control a large percentage of the retail distribution of mattresses, and they often use pushy sales and marketing tactics that result in consumer confusion that better serves the interests of the mattress industry than families. Until the arrival of Casper, the mattress industry’s multi-tiered distribution structure also resulted in highly marked-up retail prices for dual foam mattresses that kept them out of homes of many consumers. At IVP, we’ve witnessed first hand the advantages produced by direct-to-consumer brands such as The Honest Company and Warby Parker that control the customer experience from production all the way through to delivery (and beyond) in a way that was impossible before the advent of the Internet and modern-age logistics networks.
Buying a Mattress Can Be…. Fun?
Think about the last time you had to buy a mattress. Were you looking forward to the shopping experience? How comfortable were you when you walked into the showroom? With your salesperson? With the delivery process? If you were as frustrated as we were, try for comparison curling up on your couch under your favorite blanket and visiting casper.com. Watch the video of how they make the mattresses. Read about the 100-day no-questions-asked return policy that will send someone to your home to pick up your new mattress if you aren’t satisfied. Then click on over to YouTube and witness first hand what others experienced when a Casper box the size of large suitcase is delivered to their home and they opened it up… We can’t remember the last time we heard a mattress delivery described as “magical” or “fun”… Order a Casper and you will never look back!
Catching the Incumbents Sleeping
Casper has orchestrated one of the best consumer launches we’ve seen in IVP’s 35-year history. The company was incorporated just two short years ago, and they sold their first mattress in April 2014. Today, Casper is rapidly approaching a $100 million run-rate and is truly the talk of the mattress industry. In case you’ve been too tired to notice, the Casper mattress has been lauded by everyone from Consumer Reports to Men’s Journal, and the unboxing videos we mentioned above have generated enough views to make a YouTube celebrity jealous… and the company’s momentum is just now starting to build.
Delivering a Box of Foam Awesomeness Right to Your Door
What do you get when you bring together a seasoned entrepreneur who previously started a mattress business in his dorm room with a brilliant cross-functional team of designers, operators, supply chain experts, and technologists? You get the founding team at Casper, who are perfectly suited to disrupt an industry that consumers have been reluctantly participating in for decades. Philip, Jeff, Neil, Luke and Gabe founded Casper with a vision to build a digital-first, direct-to-consumer brand around sleep products, and they are well on their way to becoming synonymous with a better night’s sleep. Every single night, they are literally changing thousands of people’s lives for the better. And every single day, they are changing expectations for what we all should expect from a mattresses company.