Sramana Mitra: How long did it take you to get up to a point where banks were willing to give you lines of credit for inventory?
Eric Shannon: We never had a problem. I never got a no when I asked. By the time I asked, we were well in the seven figures in revenue. I was getting offers before that. The two that I can think of off the top of my head was once I started getting sales, we had a company called Kabbage.
Sramana Mitra: I know Kabbage very well. We’ve covered them extensively. In the kind of work that you do, Kabbage is perfect.
Eric Shannon: They’re very expensive. That might have been the first thing that I did. The second thing I did before I went to a bank was Amazon lending. They’re very aggressive. Once you get sales and they’re confident you can pay them back, they’ll start emailing you every single month begging you to take money. It’s not cheap but I wouldn’t say they’re expensive. We didn’t have a bank line of credit until maybe two years ago. Because we were bootstrapped and I never really took on debt to grow the company, we weren’t really a credit risk.
Sramana Mitra: The reason I ask you is banks need a certain amount of threshold. Companies like Kabbage are particularly aggressive. They charge a bit more but they’re also willing to work with you at much earlier stages of development than some of the more general small business banks.
Eric Shannon: What’s nice about companies like Kabbage is they just plug into all your sales channel and they see exactly what kind of sales your’e doing.
Sramana Mitra: What is the competition?
Eric Shannon: Interesting question. There are two different types of competition. There are a couple of companies that have been around a long time that make higher end beds. One of them is Orvis. They make a dog bed that has a very loyal following. It’s a pretty good bed. It’s decent.
There’s a couple of other companies. There’s one based out of Kansas city. From what I understand, they’re made by people who came from the mattress industry. For the most part, the competition is the junk that is sold in pet stores. It makes it difficult in a good way.
We did a survey a long time ago asking people what they expect to pay for a high-quality dog bed. It was a multiple choice answer and the most common answer was $50. Our beds are between $200 to $400. As you can imagine, there’s a lot of sticker shock when people see our pricing. That’s our competition. When you put the beds side by side, there’s no comparison whatsoever. Ours is a mattress whereas a typical dog bed is just a sack full of stuffing, which is fine if you’re a Chihuahua. If you’re a 90-pound Labrador, it’s a massive quality of life difference.
People don’t know the difference that there is a better option available. The last group of competitors is knockoffs. If you go to Alibaba, you’ll find a bunch of Chinese factories that are direct clones of our beds.
Sramana Mitra: How do you deal with that?
Eric Shannon: We just ignore it, because they’re not really infringing a patent. We don’t do anything about it, because we know they’re not as good. They’re using Chinese foams. They’re okay. They’re better than pet store beds. It is frustrating to see it out there, especially when we have people on Facebook saying, “How are your beds different than something else?”