How He Turned -$100k Into $575 Million Selling Mattresses

Hey there! Long time no see. I know that’s on me. Launching a new company takes a lot out of you, but we’re back and stronger than ever! 🚀 

This week, I sat down with Neil Parikh, who Co-Founded Casper into a $575M exit. Here’s how he did it.

Founder Neil Parikh shares the story:

I went to medical school at Brown, and I thought I was going to be a doctor. But the thing about medical school at that time was that they were not looking for innovative students. It’s mostly memorizing stuff, doing your homework, and taking a test. It's like the army. And that didn't resonate very well with me.

So I told my parents, ‘Hey, I'm going to take a year off. I'm going to move to New York City, and I'm going to figure something else out.’

First of all, they had a heart attack. My parents called me and turned blue in the face. They were very upset because they thought I might never go back to medical school. Which I didn't. So I moved to New York with some of my friends who had just graduated from undergrad. We ended up starting a series of companies, one of them being Consigned. And we were actually in an accelerator program in New York City at a coworking space where I happened to sit next to somebody who became my friend named Phillip. One day, I heard him talking about how he used to sell mattresses online from his dorm room.

And I'm like, ‘That's a dumb idea. Who's ever going to buy a mattress on the internet? Don't you have to try it before you buy it?’

But my dad was actually a sleep doctor. And I guess I've been thinking about the consumer applications of what could happen in healthcare and e-commerce. We realized together that there was a moment in time when all these industries could be disruptive. We saw Warby Parker and Harry's, and we said, ‘That's funny; mattresses are like a terrible industry. You have to negotiate the price.’

But when we go buy this water, you don't say, ‘No, I'm going to pay 80 cents for it.’ 

So we said, ‘What if we could totally improve the experience? But more importantly than that, what if we could build the Nike of sleep, where we could figure out how to create products, services, and other things that could help?’

Then, over time, we expanded into many other categories, and the co-founding journey evolved with that.

Q: You go to raise money from investors, but their reaction is not what you expected. What happened?

It's so funny because we were like, ‘This is a genius idea. Of course, it's going to work.’ 

Then we start pitching investors, and one by one, it's like dominoes falling, but in a bad way. Everybody's like, ‘Yeah, nobody's ever going to buy a mattress on the internet. The economics are never going to work.’ 

We probably had 50 meetings of all no's before we got to our first yes.

Q: Earlier, I saw this picture, which I think is pretty important from when you were trying to get investors. What story does that picture share?

Okay, so this is what happened. One of the investors we met was Ben Lerer (Managing Partner at Lerer Hippeau). Ben had actually been thinking about this category for a while and had tried starting this company in a different way, but it hadn't worked. So when we met, he was the first person who said, ‘I get it.’ 

So we're super excited. He's like, ‘I want to invest. And I'm going to write a $400,000 check.’ 

This was the biggest deal in the entire world. When we found out, I literally kissed the ground because we had no money essentially before this.

But Ben's one stipulation was, ‘Can I try the bed before I say yes because I want to make sure it's good?’

Now, here's the thing. We didn't really have a lot of production beds, but he's an investor. We’re like, ‘Yeah, of course.’ 

So we overnight a bed from our factory, we rent a U-Haul, put the mattress inside, drive to his house, and we go up into his Soho loft, and we see his wife there.

We're like, ‘Hey, we're here to install the mattress.’ And she thinks we’re the mattress delivery guys.

So she's like, ‘All right, cool. Yeah, it's in the back. You can go do it.’ 

So we go put the mattress in, and as I'm swinging the mattress around, we knock over one of his lamps.

I'm like, ‘This is a disaster!’ 

We finally installed the mattress. But what we didn't realize was that we didn't have a place to store it. So, basically, we threw away his old mattress. We prayed that he would like it because if he didn't and he wanted his old bed back, we had no other options. We kind of didn't sleep that night, hoping that he and his wife would have a good experience.

Luckily, the next day or two, we got an email that just said, ‘AMAZING!’ 

Then we knew the round was going to happen, but those were probably the most stressful few days of our lives.

Q: How did you sell $1 Million of mattresses in 30 days? What was that inflection point?

I think it was aggressively using earned media and then following up with paid media. Earned media is often about credibility, about figuring out how to get in front of people when they're not in the mindset to buy something. Paid media is often about finding people who are currently in the market.

Now, the thing about mattresses is not that many people wake up in the morning and go, ‘Oh yeah, today's a good day to buy a mattress.’ 

Usually, there's something happening in your life. You're moving into somebody's house, out of somebody's house, you're going to college, you're moving out of your parent’s house. There's usually some life event that's happening. So, a lot of what we spent our time on was thinking through how we could figure out how to tap into those life events and make sure that we're present right there when we need to.

Now, the amazing thing about having an expensive product (~$1,000) is you only have to sell a thousand beds.

Okay, ‘Are there a thousand people that we can find that could buy our product in a month?’

Now that I look back on it, it's not that impossible to think about, right? If I called up 50 people every day, could I sell a thousand in a month? Maybe. And so, I think actually it wasn't so implausible, but to be fair, a lot of things had to go right at the same time.

Q: What were some of the marketing strategies you used to tap into those life events?

So, over time, it was a lot of marketing partnerships, right? In our first year, we partnered with Uber. In New York City, there was a little Casper button, and you could call a Casper van that would show up at your house. Inside that van, we'd built a little bedroom where you could go try out the product. Instead of opening our own showrooms at the beginning, you could get a showroom on demand.

We also partnered with people who were delivering mailers to your house. We figured out that right when you're about to move, you change your address. That's probably a good time to message you because you're going to be in the market. We partnered with colleges and figured out how to get things to you.

I think a lot of marketing is about arbitrage. It's how you can figure out how to get your message to people whom other people are ignoring. So, in the early days, we'd advertise on these radio shows that nobody had ever heard of. What we realized is that these radio hosts, when they would talk about how amazing Casper was to their audience in Oregon or places that were outside of New York City, would crush it. Their sell-through rates would be incredible. And while a lot of our competitors were just advertising in the traditional New York and San Francisco, we realized there are so many people outside of the core demographic that you expect that could buy your product.

I think you have to be creative and figure out how to do things differently. I mean, look, how many marketing campaigns can the average person ever remember?

I bet it's less than one handful. What that means is that breaking through the noise is really hard. What we realized was that nobody was advertising on the New York City subways. And if you ride the subway back then, the only ads you would see are for these dermatologists who pop your pimples and really weird stuff. There were no cool brands advertising on the subways. So we met the person who does the advertising, and we said, ‘You know what, maybe this can be interesting.’ 

You have a captive audience. They have to sit opposite this advertising for a meaningful amount of time. And maybe we can be a little bit controversial.

So we started launching puzzles, which we actually put on either word games or other puzzles that people could solve. And what happened?

They weren't really necessarily always about our product, but everybody would start talking about them because they'd go, ‘Oh man, did you solve that puzzle for that game?’ 

We turned an advertising unit, which was kind of bad, into one that was much cooler and ended up having a captive audience that then people would actually start talking about natively.

The extension was a lot further than we expected.

For the full story of Casper, you can listen to my full interview with Neil Parikh on Apple Podcasts, Spotify, or by clicking the image below.

Have a productive week!

Shamus

Founder of Dealroom Media