“We don’t need external capital”: How Sleeping Duck bootstrapped its way to 500% revenue growth, and “tens of millions” a year

Having bootstrapped for the best part of six years, mattress startup Sleeping Duck is now seeing revenues in the tens of millions, following acclaim from CHOICE and a 500% sales spike.

Founded in 2014 by engineering students Selvam Sinnappan and Winston Wijeyeratne, Sleeping Duck provides customisable mattresses that can be adjusted, chopped and changed based on the sleeper’s preferred firmness.

While Wijeyeratne studied aerospace engineering and Sinnappan studied civil engineering, both experienced less than enjoyable mattress-shopping experiences, and became ticked off enough to do something about it.

Some mattresses are $200 and some are $10,000, and nobody really knows why, Wijeyeratne tells SmartCompany.

“There’s really no transparency as to what’s in the mattresses and why you would pay more for one than another,” he adds.

While it might seem like an odd leap from engineering to mattress design, the founders were able to put their expertise to work in ways you might not have thought.

A big part of aerospace engineering is in material design, and figuring out what the right materials are for various jobs, Wijeyeratne says.

They also had a solid understanding of what those materials cost, and how much something would actually cost to manufacture.

“The answer is, nothing costs $10,000.”

In 2017, the co-founders appeared on Channel 10’s Shark Tank, ultimately turning down an offer of $500,000 from Steve Baxter. And the business has been growing off the back of its own sales ever since.

A $200 million business?

Adir Shiffman, serial entrepreneur and executive chairman of sports-tech company Catapult, joined Sleeping Duck as chairman in 2017.

“It’s pretty obvious why this industry is going to be disrupted,” he tells SmartCompany.

While Shiffman admits the founders’ fortunes “waxed and waned” in the early days, he says by 2018 they had straightened out some of their processes and commercial systems, and laid the groundwork for high growth.

In the same year, the Sleeping Duck Pro became CHOICE’s best-rated Australian mattress, and in 2019, it became the first company to achieve that award two years running.

That was the validation the company needed, Shiffman says.

“We started seeing this tremendous growth curve accelerate towards the end of 2018 and into 2019,” he explains.

In the first half of the 2019 financial year, growth was “probably close to 500%”, he adds.

“This is now a business that turns over tens of millions of dollars a year.”

And, crucially, it’s also profitable, meaning the founders haven’t had to take outside investment.

Over the past six months, however, the team has been getting inbound enquiries from large investors, Shiffman says.

“We don’t need external capital … but the types of valuations these investors are talking about are in the $150 million to $200 million range.”

That valuation is purely on the basis of earnings, he adds.

For now, Sleeping Duck isn’t actively looking for capital, but it’s not swearing off it altogether.

“We can keep growing at this rate or faster, just on the back of cash in the bank generated from operations,” Shiffman says.

What they would be more interested in is a partner who could assist with some of the business’ broader goals — such as going global.

“That’s much more interesting for us than a big cheque being written, which frankly we don’t have a huge amount of use for.”

Stiff competition

Sleeping Duck may have found a niche in the mattress market, but they’re not the only one. Other startup-style sleep disruptors have also entered the space, some with significant marketing budgets.

For Wijeyeratne and Sinnappan, coming from an engineering and product background means they haven’t always felt comfortable shouting about the business. That’s been the trickiest part of running the business, the founder says.

“We were really product-focused … to our detriment, we were not really focused on the marketing,” he says.

“For us as engineers, to try to figure out how you tell our story, I think that for us was the biggest challenge.”

Still, Wijeyeratne doesn’t let that competition phase him.

The founders have kept their heads down and focused on building something they’re proud of, he explains. And so for them, getting the CHOICE award was all the more significant.

“It was validating. We had literally put in thousands of hours of R&D work into developing every single piece of the product,” he explains.

“The customers we had, they knew the product was good, we knew it was good. Now, finally, this is a good way to get it out to the mass market.”

Shiffman, however, is a little more candid about the competition.

“There’s been a whole heap of parties that have tried to come into this space, pretending they’re very sophisticated technology companies and running at losses and all of that,” he says.

“In fact, this is an industry, historically, that has been very profitable.”

That said, the other startup-style online mattress companies are not Sleeping Duck’s main competition, he says.

“Almost every mattress today in Australia is still sold through a retail store,” Shiffman explains.

“That’s where the real competition is.”

The challenge is to persuade the market that they should be buying a mattress online, rather than in a shop. And so having competitors who are marketing aggressively and gaining traction in the market arguably works in Sleeping Duck’s favour.

“That normalises this way of purchasing in the customers’ mind.”

Shiffman predicts that in a decade or so, the mattress industry will be unrecognisable.

“People who are teenagers today … they would be flabbergasted that 10 years ago almost everybody walked into a store to buy these things.”

NOW READ: Bring on the competition, says founder of neobank Xinja

NOW READ: From banking to bedding, superannuation to shoes, startups are flipping marketing on its head