What Casper’s IPO Prospectus Tells Us About Its Business

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Casper, the direct-to-consumer mattress startup, has filed to go public on the New York Stock Exchange and list its shares under the symbol “CSPR.” While I thoroughly enjoyed all the jokes such as “Casper isn’t spooked by IPO woes” and “Could investors ghost the Casper IPO,” what I took away is that marketing really is a core component of the business.

The company has spent $423 million in marketing since 2016. For every $1 it spent on marketing, it brought in $3 in revenue. More than 73% of its gross profit last year went to sales and marketing costs.

Casper has dominated marketing. (The word is mentioned 170 times in its prospectus.) It has spent a significant amount of capital on promotions such as napmobiles, a cruise around Manhattan, and a hotline that helped people fall asleep. I once even attended an extravagant, formal Casper-sponsored dinner … for famous dogs.

In 2017, Casper CEO Philip Krim told me the company’s tried to take a non-traditional approach to marketing. “The best thing we can do is have people see one of our ads and think, ‘Oh, that’s fun and tongue-in-cheek,” he said.

But what the prospectus tells us is that Casper’s marketing strategy is somewhat of a double-edged sword. The company relies heavily on influencer marketing to spread the word about its mattresses. Under the risk factors section of its S-1, Casper notes that “the use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties.”

In other words, Casper has used people with robust social media followings to test and market its mattresses, but many of the influencers are acting independently. Casper does not regularly monitor what the influencers post, and if the company was to be held responsible for the content of those posts, they “could be forced to alter our practices, which could have material adverse effect on our business, financial condition, and results of operations.”

Some other notes from the IPO prospectus:

— Casper is not yet profitable. It generated $358 million in 2018 revenues, and posted $92 million in losses over the same period.

— It generated $312 million in revenue in the first 9 months of 2019. (That’s below its previously projected revenue goal of $556 million for 2019.)

— Casper slowed its operating cash consumption in 2019 to $29.7 million in the first three quarters of the year, compared to $44.9 million over the same period of the previous year.

In the private markets, Casper raised a total of nearly $340 million in funding from investors including IVP, Lerer Hippeau, Target and New Enterprise Associates. It was last valued at $1.1 billion.

Casper’s biggest challenge is to create a suite of sleep products that keep customers coming back. Right now, only 16% of Casper’s customers who have bought a product through the company’s website or stores have returned to purchase another product. I was speaking with some friends yesterday who recently bought a Casper mattress, and they said, “This is going to last us years before we go back to buy another one.”

Although it’s describing itself as “the pioneer of the sleep economy,” the truth is that a lot of people still see Casper as primarily a mattress company. They don’t immediately think about Casper’s glow light, weighted blanket, or nightstand, which are part of its suite of products. Ironically enough, there’s always more marketing to do.

NOT REALLY AWAY: After Steph Korey came under fire for her management style in an article published by The Verge, she apologized and stepped aside. Now, a month later, The New York Times reports that she isn’t going anywhere after all.

Korey will return to her role, this time as co-CEO alongside Stuart Haselden, who had been recruited from Lululemon.

The members of Away’s board reportedly say they feel as if they fell victim to management by Twitter mob, as the Times puts it. Away is disputing The Verge‘s reporting and has brought on the lawyer Elizabeth M. Locke—you may remember her from the defamation case against Rolling Stone for a story about a supposed gang rape at the University of Virginia, which she won. It’s not clear whether Away plans to sue.

“Frankly, we let some inaccurate reporting influence the timeline of a transition plan that we had,” Korey told The New York Times. “All of us said, ‘It’s not right.’”

Josh Wolfe, co-founder of venture capital firm Lux Capital, spoke out on Twitter about the situation. He said this may be the start of “pushback to unfair backlash,” adding, “Many boards and CEOs will have to balance carefully the distinction between acting swiftly and diligently because the FACTS say so versus acting swiftly because an amplified MOB says so…”

Read more.

Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com

VENTURE DEALS

- Allbirds, a San Francisco-based maker of everyday wool shoes, is raising up to $75 million in Series D funding, according to Fast Company. The round is being led by Baillie Gifford and Fidelity. Read more.

- Bigfoot Biomedical, a Milpitas, Calif.-based developer of automated insulin delivery systems for people with Type 1 Diabetes, raised $45 million in Series C funding. Abbott led the round, and was joined by investors including Quadrant Capital Advisors, Senvest Capital, Janus Henderson, and Cormorant Asset Management.

- ToursByLocals, a Canada-based online marketplace for private tours, raised $33 million in funding, from Tritium Partners.

- Lightnet, a Bangkok-based blockchain remittance company, raised $31.2 million in Series A funding. Investors include UOB Venture Management, Seven Bank, Uni-President Asset Holdings, HashKey Capital, Hopeshine Ventures, Signum Capital, Du Capital and Hanwha Investment and Securities.

- DrChrono Inc, a Sunnyvale, Cali.-based developer of a health record platform for medical practices, raised $20 million in funding, from ORIX Growth Capital.

- Jolt, a London-based edtech offering a flexible business school alternative, raised $14.1 million in funding. Balderton Capital led the round.

- Sensome, a Paris-based manufacturer of connected medical devices, raised $9 million in funding from Kurma Partners, Idinvest Partners, BNP Paribas Développement, Paris-Saclay Seed Fund, and Asahi Intecc Co.

PRIVATE EQUITY DEALS

- Arcapita acquired a controlling interest in Waste Harmonics, a Victor, N.Y.-based provider of outsourced waste management consolidation services. Financial terms weren't disclosed.

- Cobepa S.A. made an investment in Precision Orthopedics, a Maryland-based provider of integrated orthopedic surgical care services. Financial terms weren't disclosed.

IPOs

- Saudi Aramco, the Saudi state oil giant, raised an additional $3.8 billion from exercising its greenshoe option for a total raise of $29.4 billion from its IPO. Read more.

- Schrodinger Inc., a New York-based predictive molecule-discovery software platform maker for biopharmaceuticals, filed for an $100 million IPO. The firm posted revenue of $66.7 million and loss of $28.4 million in 2018. The Bill & Melinda Gates Foundation and David E. Shaw back the firm. It plans to list on the Nasdaq as “SDGR.” “Read more.”

- Dr. Sulaiman Al Habib Medical Group, one of Saudi Arabia’s largest private healthcare operators, is ramping up for an IPO next month, Bloomberg reports citing sources. Read more.

EXITS

- WindRose Health Investors sold Trust Healthcare Consulting Services, a Springfield, Mo.-based provider of outsourced coding and health information management consulting services, to The Carlyle Group and Cannae Holdings. Financial terms weren't disclosed.

- KPS Capital Partners agreed to purchase the IKG business, a Channelview, Texas-based manufacturer of steel and aluminum bar grating products, from Harsco Corporation (“Harsco”, NYSE: HSC) for $85 million.