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Casper Will Go Public, Offering the Latest New and Exciting Way to Lose Money

A guest tries a Casper mattress at an event in 2015. Photo: Kris Connor/Getty Images

Don’t call Casper a mattress company. Casper, which filed paperwork to go public on Friday, says it is “a pioneer of the Sleep Economy.”

“As the wellness equation increasingly evolves to include sleep, the business of sleep is growing and evolving into what we call the Sleep Economy,” says the company’s S-1 IPO filing. “We are helping to accelerate this transformation. Our mission is to awaken the potential of a well-rested world, and we want Casper to become the top-of-mind brand for best-in-class products and experiences that improve how we sleep.”

Last year, Casper lost $93 million on revenues of $358 million.

I still don’t understand how mattresses, which seem like the definition of a mature industry, became such a popular business model for hot, venture-funded startups. Even if people are listening more to Arianna Huffington about the importance of sleep and making sure to set their electronic devices to Sleep Mode, American homes are still going to contain approximately the same number of mattresses that they always did. Mattress production, marketing and retailing innovations can be (and are being) routinely copied, with dozens of companies viciously undercutting each other on prices and promotion. And it’s not like the legacy companies in the mattress space are bereft of quality products; I sleep, for example, on a very comfortable Sealy.

But Casper says it is changing the mattress business paradigm — sorry, the sleep business paradigm — by offering a suite of products and services covering the whole “Sleep Arc,” from bedtime to wake up. Here’s the key pitch from the S-1 (emphasis mine):

As consumers become educated around the serious potential health consequences of poor sleep, they are poised to spend more on sleep products in the same way that they have increased spending in other areas of health and wellness. However, unlike other categories of health and wellness, historically there were no powerful brands that provided holistic solutions to the Sleep Economy. Instead, the Sleep Economy has traditionally been characterized by a fragmented set of providers across different products, services, and use cases.

Our approach is to offer products and services across the entirety of the Sleep Arc under one brand. Our offerings encompass traditional sleep categories for consumers, such as mattresses, soft goods, and bedroom furniture, and are increasingly focused on non-traditional categories, including products that promote the ideal ambience for sleep, such as lighting, sound, scents, temperature, and humidity; sleep technology, such as tracking devices, medical machines, bedside clocks, and connected devices; sleep supplements, such as sprays, pills, and vitamins; and sleep services, such as digital apps, meditation, sleep programming, and counseling. Beyond the daily sleep needs of adults, we aim to meet a range of use cases with unique product and service needs, such as for travel, children and babies, and pets. We believe we are the first company that understands and serves the Sleep Economy in a holistic way.

So basically, they intend to be the Apple of sleep. Casper will be the trusted name for helping you sleep better; customers will be willing to pay a premium for Casper; Casper will make big profits. Unfortunately for Casper, that does not actually seem to be happening.

What is the evidence that members of the public are now inclined to increase their spending on sleep products? The filing points to research from the Better Sleep Council, a trade association, which found consumer expectations about what they would have to pay for “a quality mattress” rose 19 percent from 2007 to 2016. But all that means is customer expectations kept pace with inflation, which also totaled 19 percent from 2007 to 2016.

And far from establishing itself as the Only Trusted Name in Sleep, Casper faces intense competition from dozens of companies for the attention of a public that has grown accustomed to the idea that mattresses will constantly be on sale and returnable for a full refund after 30 or even 100 days.

There are some VC-funded business models where it is unclear whether the business can be viable after private investors stop subsidizing losses. Maybe the only way to hold a ridesharing business together in certain markets is to pay the drivers more than the customers are paying for each ride. Mattresses, I will accept, are a product with real and robust consumer demand that somebody will be able to make a profit by selling.

But if your business lacks the potential to be transformative — if you’re just another mattress company within a crowded mattress industry — I don’t understand what business you have going public before you have turned a profit. Yes, someone is going to make money selling mattresses. What evidence do we have that it’s going to be Casper?

Casper Is Going Public, Offering Latest Way to Lose Money