Between the Lines

Casper’s S-1 Is the Story of a Good Company in a Bad Business

Casper will only win if its IPO goes so badly that it drives its competitors out of the marketplace forever

Byrne Hobart
Marker
Published in
10 min readJan 13, 2020

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Philip Krim, co-founder and CEO of Casper. Photo: Benjamin Lowy/Getty Images

AAnother venture-funded company is going public, so it’s time for another round of extremely value-added commentary like “This company is not making money” or “They grew a lot faster a few years ago when they were one-tenth as big” or “I looked at their related-parties transactions and accounting issues and found something I don’t strictly understand that sounds bad.”

Thanks for your efforts, everyone!

Let’s take a deep dive into the S-1: What kind of business is Casper? What kind of business does it want to be? And how will it get there?

The market

Casper is a mattress company. It sells pretty nice mattresses, mostly direct-to-consumer online. But that’s not especially exciting. Mattresses are an $81 billion business globally and about a $30 billion business in the U.S. So Casper is branding itself as a leader in the “sleep economy”—mattresses, sure, but also bedroom furniture, bedding, pajamas, pillows, lights, supplements, quantified-self stuff, etc. It even mentions CPAPs.

This is a good idea because the mattress business is tough. You’re selling a consumer durable with an arbitrary replacement cycle: They don’t really wear out and instead just get worse over time, so a new mattress is an easy purchase to defer. Casper cites research indicating that the mattress replacement cycle has shortened by 14% from 2007 to 2016. But how much of that is driven by people taking advantage of generous return policies from companies like, say, Casper? And how much is explained by the suspicious overlap between that period and New York’s bedbug epidemic?

DTC businesses are also tough because it’s hard to own a competitive advantage: Your competitors can copy your marketing advantage, your physical product distribution is mostly outsourced, and for existing categories like mattresses, price comparison is easy.

This bare-knuckles marketing brawl has led to some crazy stories. A few years ago, Casper sued several mattress…

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Byrne Hobart
Marker
Writer for

I write about technology (more logos than techne) and economics. Newsletter: https://diff.substack.com/