Tuft and Needle

I read the news that Tuft and Needle had agreed to merge with Serta Simmons Bedding.  The terms of the deal were not disclosed but Tuft and Needle did $170M in revenue last year so it is not a big leap of faith to believe that they got something in the $800m and up range for their business.

What is so amazing about this is that the founders never brought in venture capital money and run a profitable business.  What does that say about all the capital being poured into businesses that spend to grow?  Tuft and Needle is 6 years old so think about that.

I have invested in countless founders who are undercapitalized yet they are succeeding by being scrappy and getting to profitability quickly.  Acquiring eyeballs (aka marketing) costs money but there are plenty of things you can do with little cash.  Obviously, Tuft and Needle figured that out.

Certainly, this is not for the VC books but I love these kinds of investments.  They did not raise a dime but the companies that have proved the model, built a brand and just need some cash to get them to the next step are solid for an angel.  It also confirms that you can still build a big business without VC capital and personally that makes me extremely happy because it pushes everyone to rethink their business.

Comments (Archived):

  1. Joe Lazarus

    Impressive, particularly given that they make fairly pricey physical products. I worked for a bootstrapped mobile game company that we sold to Hasbro at a $160M valuation. We were profitable quickly due to the digital nature of our business, an early hit game, and everything the app store provided. I’d love to know how Tuft and Needle operated in the early days, how they afforded their first batch of inventory, and whatnot.

    1. Gotham Gal

      I would too. I am sure it was a lot of sweat and freak outs.

  2. Rohan

    This is really nice to hear. Do you use their mattresses?We are big fans. They’ve done a really good job delivering a very good mattress at a decent price.

  3. awaldstein

    As someone who has bootstrapped businesses I both applaud this and am in total awe of this.Capitalizing a hard goods business and managing cash flow is a nightmare.I know this one personally.

  4. LE

    I will tell you a mattress market that nobody is selling to but that is out there. It’s selling mattresses in poor areas of certain cities for affordable prices.I know this because my ex wife’s uncle had a great business selling mattresses in the inner city. But they were not new mattresses. They were used mattresses. And in some cases they came with all sorts of ‘defects’ (I will not name those defects but you can guess). He would charge a price based on the amount of defects. And he earned himself a somewhat decent living doing this.That market (used mattresses) was created by the people that sold the new mattresses for those high prices. If they didn’t exist he wouldn’t have a business.I bet most people are not aware that this is going on either.But it did happen. (Will repeat also ‘ex father in law’ and in case you are guessing yes he was sleezy..)

    1. Gotham Gal

      Interesting. All these new brands are geared towards a new generation of wealth. The reality is if you really want to make a company figure out how to sell to an underserved large group

      1. LE

        This is exactly true!The thing is this. In order to figure out how to sell to an underserved group you need to spend time out in the world having experiences and seeing what people are doing and talking to people and more importantly loving everything about business. It has to excite you. And spend your time (important) where others are not going in places they don’t know about.You probably know how Staples got started? The founder had an interview at a place called Makro in Langhorne PA. (Suburb of Philly). I used to go to that store as a kid. It was a store dedicated to small business where you could buy bulk supplies pick them up etc. Back then (70’s) this was a new concept. Anyway Stemberg had an interview. While he was waiting he noticed all the activity in the office supplies section. That gave him the idea for Staples.Here is an article (I just pulled up) from 1989 about Staples:https://www.nytimes.com/198…(Actually I just scanned that story and plan to read it later it’s interesting especially since Staples was only 4 years old when it was written).

  5. LE

    I don’t get the foam mattress allure (I would not buy one) but I think it’s the perfect combo of selling to younger people who can sleep through a storm as well as obviously a certain kind of marketing that appeals to that particular market.One thing that always goes around is how pushy mattress store people are. I have never found that to be the case. But I think it fits with what people probably think is happening.Personally I like pushy salesmen. True. Some of the best deals I have ever received (when buying machinery or cars for that matter) came by way of aggressive high pressure salesmen. On the other hand I have found that non commission or low pressure sales people are much harder to get down on price. Nothing to me is better than a sales person (trying to sell me machinery or real estate) calling or emailing and giving me a chance to work them down further on the price.