Raising Finance

Why I invested in a mattress company

5 min read

23 May 2017

Former editor

Luke Hakes, investment director at Octopus Ventures, discusses what other British businesses can learn from mattress company eve Sleep’s growth story and why more businesses should be targeting that elusive IPO.

After just two years of trading, online mattress company, eve Sleep, became the first retail IPO of 2017. Not only has eve raised £35m in an initial public offering on AIM, with the business valued at a market cap of around £140m, it has also bucked the downward trend in IPOs the UK has been experiencing for the last five years.

(1) From an investor’s perspective, what makes companies like eve Sleep different?

Eve is a great example of a high growth business bringing technology and innovation together to disrupt a previously traditional market.

The achievements of this mattress company are based on exceptional execution of a product that people actually care about. The founders built a brand that resonated and then recruited a team that had the skill to accelerate and harness growth.

By building the business around a robust consumer-focused model – and outsourcing manufacture and fulfilment – eve kept the brand as simple and focused as possible in order to deliver the best product at the best price.

(2) Isn’t it unusual for an investment firm like Octopus to invest in a mattress company?

As investors who look for disruptive high growth businesses, it was clear that this was a company that was innovating its business model and go-to-market approach. For example, eve eschewed the traditional marketing route of talking about the usual medical benefits of a mattress and instead focused on the lifestyle.

(3) How can investors support startups with their growth plans?

In the example of eve Sleep, investment was key to its strategy. Given that the founders knew the business model and product would be profitable, and they were able to demonstrate this very early on, eve was in an excellent position to seek out investors.

As a result, the team came to the table with an attractive proposition for investors and were able to identify a very specific use for the investment – to build the brand, ecommerce expansion, and overseas growth.

It is important as an investor to work very closely with your portfolio management teams to expedite its fundraising strategy and hire key talent. As you would expect, with three rounds of investment in short order followed by the float the board was heavily involved.

(4) What were the defining moments in the growth of eve over the last two years?

As an investor, you will witness many defining moments with your portfolio businesses that will make you believe in each business even more. In its two years of trading, eve’s sales grew from zero to £12m last year. However, one particular defining moment for eve was when it exceeded its first-year numbers five times over the expected figure.

(5) How has eve managed to get to IPO so quickly?

From the get-go, it was evident from an investor perspective that we had found an unusually talented group of entrepreneurs with big vision, and ambition. Not only did they already have experience in the mattress sector through their former businesses, but their strategy was also an exciting combination of execution and brand focus. While most entrepreneurs think about brand after the product, eve’s branding strategy was brought to the forefront of its business agenda.

The right team was critical to bringing eve Sleep to IPO in just over two years. The speed of expansion, growth, and floatation, which is so unusual in the UK market, was built around an American-style funding strategy. To achieve this, Paul Pindar was brought onto the board and drove eve’s IPO strategy off the back of his success at Purple Bricks.

(6)What does the AIM listing mean for the mattress company going forward?

Eve is looking to continue to expand into further markets and extend its product range and retail partnerships. The AIM listing means eve will have the financial firepower to own Europe and enable it to take further market share across geographies, positioning eve as the only real pan-European player in the ecommerce sleep market.

It is easy to see how eve could soon own the sleep category and be the go-to brand for everything around sleep.