How Bruno bootstrapped its product business

Bruno sleep
Francois Badenhorst
Deputy editor
BusinessZone and UK Business Forums
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We get the word ‘mattress’ from the Arabic ‘Matrah’. The word filtered into Europe during the Crusades when, in the process of sacking Jerusalem, Europeans adopted Arabic sleeping habits.

Literally translated, ‘Matrah’ means ‘the thing thrown down’. It wasn’t a mattress as we understand it, it was an altogether more haphazard affair, consisting of scattered cushions. It’s a long stretch from the comparatively luxurious mattresses we enjoy today. Still, though, the mattress was never a glamorous item.

Zoom forward to now, you might be surprised to see the aggressive advertising of a coterie of ‘mattress startups’ with names like Casper, Simba and Eve. The ads - you might have seen them plastered all over the Tube or your Facebook feed - have a futuristic vibe, marketing the good old ‘matrah’ as a piece of bleeding edge tech.

These mattress firms are acting like tech startups behind the scenes, too. Casper has attracted a multi-million pound investment from none other than Leonardo DiCaprio. Meanwhile, EVE, a British company, launched the first retail IPO of the year recently, launching on London’s junior markets despite posting a £12m loss in 2016.

In many respects, some companies in the mattress market are attempting to emulate - on a far smaller scale, of course - the trajectory of companies like Amazon and Ebay. Both companies launched as a part of a constellation of ecommerce platforms and spent gigantic sums to, essentially, buy market share.

EVE, for instance, admitted that with their aggressive marketing, the cost of acquisition per mattress is around £250. At one point, EVE explains in its admissions document, their CPA swelled even further, reaching £350, thanks to an expensive TV ad campaign. Their mattresses start at £399.

It’s not quite Snap Inc. - but it’s certainly a million miles away from the archetypal mattress salesman. This aggressive approach is something we’ve covered extensively on BusinessZone, too. The mattress industry has become the latest arena in the battle of investment vs. bootstrapping.  

There is one other mattress startup that has decided to take a leaner route. Bruno, based in Berlin, was founded two years ago by Felix Baer and Andreas Bauer. The company hasn’t received a cent of investment and it has revenues approaching £6m with a slim headcount of 15.

“We started with nothing,” Bruno’s co-founder Baer tells BusinessZone. “At the start, Andreas and I were packing the mattresses on our own. A few orders a day. Then in 2015, we pulled in £3m revenues, followed by 2016 where we made £6m. This year we won’t double it again. We will grow it but not double. We’ll stabilise and grow it by 30%.”

It was really tough to satisfy our first orders. We had to build a website, we had to get our product ready and shipped.

Bruno’s decision to do things solo is an economic one, according to Baer. Through speaking with a few VCs, he realised the allure of a big VC cheque would come with conditions he doesn’t feel are right for the company. “If we got investment, we would spend it on advertisement and certain forms of ads that we don’t see as value-creating.” As Baer sees it, it’s the old problem of good money after bad.

Baer isn’t against investment in principle. “It depends on the product you have. If you have a good way to invest the money it's fine,” he says. “Take Tesla - they couldn’t have built that business without financing. It’s just not possible because they needed to spend so much money on R&D. However, if it's just about putting all the money into marketing? I have doubts whether it's sustainable.

“It’s a question of what’s your model and what’s your business. If you’ve got a subscription model and you need lots of money to get your first customer but you’ll benefit from it for the next five years - then it's fine. If it’s a one-off sale - something like a mattress - where the buyer will only maybe buy again in a decade - hmm, I’m not so sure.”

Investment isn’t necessarily out of the question for Bruno, either, for example, if the business decided to build its own production facilities (manufacture of the mattresses are currently outsourced to factories in Germany) or if they moved into physical retail.

Marketplaces are different from what we do. That’s a natural monopoly. It doesn’t make sense to have 20 Amazons. They achieve efficiency through size. But I don’t see these efficiencies through size in our market.

For now, though, Bier feels the company is better off without it. The decision to bootstrap does come with its difficulties, however. “It was really tough to satisfy our first orders. We had to build a website, we had to get our product ready and shipped. That took us longer than if were to have had an investment. We had to wait for customers to pay so we could order new stock. If we’d had a return rate that was super high we would’ve gone bust.”

But it’s not just at the start. In the last 18 months, Bruno has been in competition with companies that spend far more on marketing. Because Bruno needs to remain profitable, it loses some of the sales it would’ve gotten. “That’s why our growth has probably slowed,” Baer says.

He is not worried about it. The mattress industry, as he sees it, isn’t a winner-takes-all market. He doesn’t envision a time where the industry will be dominated by one Amazon-like company. “Marketplaces are different from what we do. That’s a natural monopoly. It doesn’t make sense to have 20 Amazons. They achieve efficiency through size. But I don’t see these efficiencies through size in our market.

“Sure, you need some critical size. But you can achieve that quite quickly. I’ve seen that if you produce 1000 mattresses or 10000 mattresses, the price doesn’t drop dramatically. It’s the same economics from about a 1000 mattresses upwards. It’s not a winner-takes-all market, definitely not.”

There will be some losers in the mattress market, he predicts. “But I’m sure there will be three, four, five companies who do survive.

“We’re not ready to lose our independence. We don’t want the pressure to grow. Obviously, we want to grow - but we want to grow in a way that we see as the best for our business.”

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12th Jun 2017 09:58

I think too many people go down the investment route, rather than self funding, well done to these guys

Thanks (1)
to Anders Bohea
13th Jun 2017 09:19

Hi Anders,

Thanks for the comment. Is it a choice you've had to make too? I'm fascinated by investment/bootstrap dichotomy.

Cheers,
FB

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