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Bootstrapping to $100M+ from Arizona: JT Marino, CEO of Tuft & Needle (Part 4)

Posted on Monday, Sep 18th 2017

Sramana Mitra: How do you compete with these hundred different competitors?

JT Marino: We built the company our way. We cannot compete the same way they do. If we want to compete like a Casper, we cannot beat them dollar per dollar in ad spend. We have to be very careful how we purchase our marketing. We have to be very ruthless with measuring our return on ad spend.

If it’s not profitable, it just doesn’t work. We have to constantly move and reevaluate where we’re spending our money. We started opening stores and we have to be more scrappy where we measure all these things carefully. Our goal is to make sure that customers know who we are.

Sramana Mitra: When did you start opening stores and how many stores do you have now?

JT Marino: We’ll have five stores by the end of the year. We started opening stores two years ago. Our first store was in our office. Our second store is in San Francisco. Our third one is in Scottsdale.

Sramana Mitra: Why did you think you needed to open stores?

JT Marino: Our customers were asking for it. There’s only a percentage of the market that buys mattresses online. Logically it follows that there’s a large percentage of the market that buys in stores. We wanted to experiment to see if that would open the door to this larger market. That was the whole concept behind opening stores to figure that out.

Sramana Mitra: I’m not convinced about this. The reason these mattress companies are growing so fast is because there’s a shift in the purchase pattern. There’s a large percentage of the market that is moving from offline to online. If I had to assess what the trends of this market is, it’s that psychographic of people who want to buy online.

My last question is, you said you’ve been very effective in building a very stable team in Phoenix. Talk to me about that. How many people do you have? What functions do they cover? What are the dynamics of that?

JT Marino: We are currently at 150 people. We’ve been very careful about curating our culture. This year, we won Entrepreneur Magazine’s Top Culture for large businesses. I really believe that’s because of the way we treat each other. When we hire, we look for very specific values which align with the values of the company. As far as how the company is broken up, we have a dedicated culture team. We call it Team Experience.

Their goal is to help build and foster collaboration with people. The way that we manage performance is based on mastery. People’s performance and pay scale depends on their learning which is a very growth-minded mentality. It turns us into a teaching culture. We are mostly a flat culture. Everybody is reachable to everybody.

We capped our head count at 150. We kept that on for a while. We just had to reorient how some teams work and find other ways to gain more leverage because we are so concerned that if we get too large, we lose a bit of the magic that’s behind the culture.

Sramana Mitra: You have remained bootstrapped, and that’s by choice?

JT Marino: Yes, we wanted to be able to have control over the experience for our customers. We don’t want prioritize shareholder values over the customer. If raising our prices would mean that we would make a lot more money or even raise conversion rate, that’s not necessarily the reason we would do it.

Discounting is another one that’s been very important for us. It might be great for short-term revenue but maybe not for long-term brand value. Our big concern is that we don’t want our company to land in the hands of an industry that is notorious of taking advantage of people. If we wanted to raise capital, it would be done in a way that it’s operated by a credo and operated by a governance.

Sramana Mitra: Do you use any inventory financing?

JT Marino: No, we don’t.

Sramana Mitra: Great. Thank you for your time.

This segment is part 4 in the series : Bootstrapping to $100M+ from Arizona: JT Marino, CEO of Tuft & Needle
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