Bootstrapping a $25 Million E-Commerce Company: Saatva Co-Founder Ricky Joshi (Part 2)

Sramana Mitra: Talk to me about the dysfunctions of the industry? Why does that industry warrant starting a new company?

Ricky Joshi: You basically had four manufacturers who controlled 81% of the market. Majority of them were public companies. The average margins of manufacturers is around 40%. On top of that, you have distribution companies that take a percentage of the profit. Then you have retailers, which are also public companies. At the end of the day, a mattress that costs $500 would go to retail for $3,500 or more because of so many parties involved. We cut all that out. We’re not branded manufacturers. Because of the structure of the industry, you end up in a situation where there’s benefit to collusion. Different retailers will request proprietary products. What ends up happening is they’ll just change the stitch and call it a proprietary product.

Sramana Mitra: When you were streamlining the whole process, what price point were you selling your mattresses at? A $500 mattress which would otherwise cost $3,500 in retail, what have you been able to do to that pricing?

Ricky Joshi: We bring it to market for $899.

Sramana Mitra: $899. Awesome! When you got started, did you bootstrap the company or did you raise venture capital? How did you get it off the ground?

Ricky Joshi: The only money that was put in was put in by the co-founding team. Ron, very luckily, had very strong relationships in the furniture industry to start with. We bootstrapped and we continue to bootstrap. We toyed around with raising but we found that the nice thing of being a transactional cash flow positive business is you can fund growth.

Sramana Mitra: It’s actually a lot better. When you force yourself to grow at venture scale, most companies fail to do so. As a result, it becomes a neither-here-nor-there situation. If you can grow organically and you don’t need capital to scale, you’d put yourself in a much better position psychologically.

Ricky Joshi: Honestly, there’s so much discipline at the company, I would stand by that everyday. It is because we bootstrapped and because we know where every dollar comes from that we have such discipline. We have so much data that we’re looking at everyday. When I look at my competitors who have lots of money and I see the mistakes they’re making, I couldn’t even believe it.

This segment is part 2 in the series : Bootstrapping a $25 Million E-Commerce Company: Saatva Co-Founder Ricky Joshi
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