JT Marino: We shut the site down and quit our jobs. We officially launched Tuft & Needle in October of 2012. The primary differentiation for us was that we were direct to consumer. We had just one model. This was very contrarian to the entire industry. There’s no company that makes one model. There’s firm, medium firm, medium soft. We wanted to just make one. Is it possible that most people actually need the same stuff?
We take that formula and offer that at a fair price, which was easy to do by going direct. We don’t have to have as big a margin because we’re not selling it to a store that marks it up again. We can operate at a much better price. We’re simplifying the process. We’re able to collect feedback from our customers that allows us to iterate on that product like we did with software and products from our career. The product gets better and better over time. We started with $6,000. We needed the money just to open up the bank account.
We both had enough savings to last us about three months. In our first month, without the overhead of paying ourselves, we were profitable. We started paying ourselves four months later. In 2013, we did over $1 million in sales. In 2014, we did just about $9 million in sales. We crossed $40 million in 2015. In 2016, we broke over $100 million. It’s been growing like crazy. We had to do a lot of interesting things to be scrappy and save cost.
Two years after we started, we had our first copycat company. They’re very highly funded. Six months later, there were two more. It’s interesting because we have to survive in a very competitive environment, but even with all of these added weights and difficulties, we’ve chosen not to raise capital.
Sramana Mitra: You also have companies that have been around longer than you and are also not funded. We’ve already done the story on Saatva that went from zero to $168 million in six years, which is venture-scale growth without venture funding. Let’s go back to the first year that you were selling that you crossed a million dollars. What was the customer acquisition strategy? What was the product strategy? Talk me through the various operational levers.
JT Marino: My responsibilities were on the product development and supply chain side. My co-founder was more on the marketing and finance side. We were primarily using Google AdWords to get the buzz started and get it jump started.
As far as product development was concerned, I drove factory to factory trying to convince them to work with me. Unlike Saatva where you have a founder who’s been in the mattress industry for a long time versus someone like us who has not been, it’s very difficult to get them to work with you. We actually only found one factory.