Ran Reske On Raising $170 Million For Comfortable Sleep Products

Ran Reske’s journey from a childhood in Kenya to the world of venture capital and entrepreneurship is a captivating narrative of risk-taking, resilience, and the pursuit of a dream. Born in Israel and raised in Kenya, Ran’s diverse background set the stage for a unique entrepreneurial adventure.

Ran’s venture, Resident, has attracted funding from top-tier investors like Ion Crossover Partners, Baron Capital Group, and Nexus Capital Management.

In this episode, you will learn:

• Ran Reske’s multicultural upbringing, from Israel to Kenya, laid the foundation for his adaptable mindset and unique entrepreneurial journey.
• A degree in mechanical engineering equipped Ran with problem-solving skills that proved invaluable in his later ventures, showcasing the unexpected relevance of his academic background.
• Ran’s foray into investment banking not only taught him the intricacies of understanding businesses but instilled a crucial problem-solving approach that became instrumental in his entrepreneurial endeavors.
• Groupster’s journey, despite its challenges and ultimate setback, provided Ran with vital lessons in execution and the importance of sound unit economics in business.
• Ran’s transition to venture capital at Norwest Venture Partners expanded his understanding of consumer-focused investments, customer acquisition, and scaling strategies, setting the stage for his future entrepreneurial venture.
• Resident’s shift towards profitability over rapid growth in 2019 showcased Ran’s perspective on the venture as a retailer and the critical importance of sustainable unit economics for long-term success.
• The key to Resident’s success lies in fostering a shared vision among the team, with aspirations to dominate not just the mattress category but to become the leading player in the entire home goods market.

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About Ran Reske:

Ran Reske, based in Los Angeles, CA, US, is currently a Founder at Resident, bringing experience from previous roles at Norwest Venture Partners, Amdocs, and Pamplona Capital Management.

Ran Reske holds a 1997 – 2001 Lafayette College. With a robust skill set that includes Entrepreneurship, Due Diligence, Private Equity, Venture Capital, Financial Modeling, and more, Ran Reske contributes valuable insights to the industry.

Connect with Ran Reske:

• Zoominfo
• LinkedIn
• Crunchbase
• RocketReach

Read the Full Transcription of the Interview:

Alejandro Cremades: All righty hello and welcome to the deal maker show. So today. We have a really exciting founder. You know a founder that was born in startup nation. But we’re gonna be talking about building and scaling here. You know there’s a really exciting podcast. You know, episode that we have in front of us. We’re going to be talking about how they actually turn their business. Their venture business. You know pretty much you know, um into profitability how they think about people and then also retention as well as doing the hard work you know and some of the stuff that they learn from outsourcing some of the things that they were doing so without further ado. Welcome our guests today ro risky welcome to the show. So originally born in Israel but you moved quite a little bit. You know, growing up so give us a walk through memory lane. How was life growing up.

Ran Reske: Thanks, thanks for having me very excited.

Ran Reske: Yeah, life for me was ah was very interesting. So as you mentioned I was born in Israel but I actually grew up in Kenya in Africa um, we moved there when I was four years old and I went to the same school all the way from kindergarten to Twelfth grade I went to the. International school of Kenya which was an american-based school and that to me was normal growing up in Kenya because people keep asking me what was it like growing up in Kenya I said I don’t know I never grew up anywhere else. So I didn’t know what to compare it to. But yeah I was there all through all through school and then I went to to college in in Pennsylvania which was a small difference.

Alejandro Cremades: A small difference but they I mean talking all difference to mechanical engineering which you never use why mechanical engineering out of all things.

Ran Reske: Yeah, it’s interesting because you know when I was I was graduated when I was seventeen and a half years old I didn’t know what I wanted to be in life. My dad um, he had a degree in mechanical engineering. He worked as a civil engineer. He actually never worked as a mechanical engineer but I thought you know what I like math I like physics. Um, that’s something I should probably do I didn’t know what what I wanted to do um. But the interesting thing about engineering is that it actually because midway through the the degree I was like yeah I think I’m going to stop this I’m going to change to a different degree and I remember my parents saying no no, no, no, no, you’re going to finish. You’re going to get your engineering degree and then figure out what you want to do in life. But the interesting thing about mechanical engineering any engineering in general is it teaches you how to problem solve hey, there’s a problem. How do we? How do we go about and solve it and so at the time I didn’t I didn’t enjoy it. But I’m happy I I got to finish my degree in in engineering.

Alejandro Cremades: So investment backing. You know, sounds like he was. You know the the way to go for you and I guess you know from investment backing to and and seeing you know all these companies companies that were doing well companies that were doing not so well were there any patterns or any exciting things that you saw about. The world of business.

Ran Reske: Yeah I mean again, anybody who’s looking to get into the world of business I strongly recommend if you can do do a few years of investment banking. Um, you’re probably you may not enjoy it so much the first few years as an analyst where you’re staying up to 3 4 a m creating books. Sometimes people actually never look at those books and only found that years later when I actually met with the investment banks. It’s funny whenever I meet with investment banks right now I make sure we go through the entire deck and I tell them please. Thank you thank the analyst who is working on this because I used to be that analyst who was up till forium working on those books. But. Investment banking is very interesting because it actually teaches you how to understand businesses whether it’s reading it through financial statements or understanding their strategy and so I thought it was a great segue into the business world to be honest I felt um. Like I always wanted to start my own business and I always had ants in my pants saying like okay I want to go do something um and it was always like okay is it going to be now. Maybe I’ll learn a little bit more maybe I’ll learn a little bit more. But in hindsight I’m happy I I did those those few years in investment banking.

Alejandro Cremades: And obviously you know this was right around the time where you kind of like wanted to get a little bit of a taste of doing something you know something of your own. So what? what? what was that idea in in how.

Ran Reske: Um.

Alejandro Cremades: Oh you see it didn’t unfold the way that you had hope for. But I’m sure that’s the saying goes you either succeed or you learn.

Ran Reske: Yeah, yeah, yeah, so I started a company in 2007 called Groupster and that was group discounts this is before Groupon had taken off and I met with a bunch of vcs because obviously I had to raise money for it. And they told me that this has got this. They’re like you seem like a smart guy but this has to be the dumbest idea I’ve ever heard. This isn’t good. This isn’t scalable. Um, what are you going to go business to business and why doesn’t I heard why doesn’t Google do it. Why doesn’t ebay. Do it. Ah, there was no amazon at the time it wasn’t it wasn’t as big as it was but I’m sure if it was they would tell me that Amazon is going to go do it and there’s no technology advantage here and I was like yeah absolutely there’s no technology. There’s execution I think I can out execute. Ah, long story short I used all my investment banking bonuses to bootstrap the business but unfortunately it never never really took off but again that was a good I view that as a good learning lesson of of how to think about business. How to think about unit economics or unit economics were actually broken at the time. And so in hindsight I was like oh man that was that was poor execution unit economics didn’t work. Of course the business wasn’t going to work.

Alejandro Cremades: I mean it didn’t work but you definitely wanted to keep going on the venture side of things you know you even joined their venture capital firm. So how was that the transition into Vc.

Ran Reske: Yeah, so so right after that in 2009 I joined a venture fund called norris menture partners they were opening up an office in Israel and I was fortunate to be um, be able to to join the what a fund. And um, ah to meet give me one second yeah one second I thought I thought I had everything quite.

Alejandro Cremades: Well edit this piece. Don’t worry. Let’s it. Let’s just let’s just it.

Alejandro Cremades: What what cut What kind of talk is it What kind my God it’s it sounds like it I mean I hear that bark and I will definitely run. You know if a.

Ran Reske: It’s ah it’s a big dog. It’s a sheep of doodle.

Ran Reske: Um, but once you yeah, you’ll you’ll hear the bark and you’ll run once you see the dog. You’ll be like wow this is so fluffy. Um, um so yeah, so I joined Nora’s venture partners a very fortunate.

Alejandro Cremades: Ah, it’s amazing. Go stop all right in Mason so keep good. Keep going.

Ran Reske: Northris venture partners as they were opening up an office in Israel. They’re making a lot of investments in Israel and then they decided that hey it’s time for us to actually have feet on the ground in Israel now in Israel um, at the time it was startup nation a lot of ideas. Mostly technology high high technology businesses. They weren’t really focused on scaling businesses as mostly hey, let’s try to sell the technology. We’re mostly looking at investing in b two b businesses businesses with strong technology strong I p and I was more interested in consumer. Um, and at the time Israel did not have a strong presence in consumer deals and so the team after I was there for quite a while from 2009 to 2012 they said hey if you’re interested in consumer. Um, why don’t you come to move to the us and join our consumer focus team. They have a team just focused on consumer deals and I told my wife what do you think he said good good news. The bags are already packed. We can. We can go as soon as we’re ready. And so end of 2012. We moved to. We moved to Palo Alto and I joined the the group that just focused on consumer deals and for me that was that was a good learning um to really understand hey how how are these businesses thinking about.

Ran Reske: Ah, customer acquisition. How are they thinking about unit economics. How are they scaling? Um, and it’s it’s it’s pretty interesting I mean you know 2013 Fourteen Fifteen those were the days of scale scale as much as you can and who cares about the unit economics. And I thought to myself I was like okay, great. We’re going to keep scaling and scaling and scaling. But what what happens if we run out of money or what happens if new investors don’t want to invest then what happens and so that was always like a naha moment for me that hey these unit economics are not actually working. And and that’s something that when when I start my business. That’s something that I’m going to do now it it is important to mention that I’ve always had this startup bug in me where I’ve always said hey I want to do I want to do something of my own and. Think for for the other entrepreneurs that are out there. This is ah this is obviously a positive and a negative because you’re never as an entrepreneur you’re never satisfied with not doing something of your own at the same time. Negative part of all this is it’s hard.

Alejandro Cremades: Now being there with Norway I mean you were there for close to 7 years ah what were the 3 biggest things that you got about the ingredients of why companies would be incredibly successful or perhaps the ones that will fail.

Ran Reske: Um, so I’ll give you the biggest one and to me it’s it’s around the entrepreneurs themselves the ones that are dreamers. Um, and you know as entrepreneurs. It’s always is a glass half full or half empty. The ones that are successful. That’s not even a question. The glass is not only half full. It’s overflowing and you Mr Investor who doesn’t realize that you’re the one who can’t see but for me as the entrepreneur the glass is so overflowing. Of course it’s going to be successful. And ah, the entrepreneurs that I thought were were the I mean were able to get their businesses to be big successes were the ones that hey didn’t matter what happened environment was up environment was down roadblocks. They would go around them through them. Whatever it is they they were just able to to be successful. The the other thing is um I realized around product market fit sometimes people have an idea and it may be that timing is too early. And you’re essentially just running an uphill battle. Um, we’ll we’ll talk about residents in a second but for us and when we started selling the mattresses. We essentially hit product market fit day one.

Ran Reske: It was just people were buying it and there was demand in the market and everything was working well and so we didn’t feel like we were running an uphill battle trying to to force something on somebody. It was it was already there and again I I tell people hey. Um, my my opinion is try to find product Market fit that already exists instead of trying to to create something that you think people need but they don’t think that they need.

Alejandro Cremades: Yeah, no I hear you on that now. What was that moment where you realize I think it’s my time to take a step at it again.

Ran Reske: Um, you know you’re always you’re always looking for for the right partners. Um, and for me, it was um, it was at a norwest sponsored event. Um, and I met my current I mean I’d I’d known Eric for a while. But it was at that event when I was like hey Eric how are you doing? What’s new and he was like oh yeah, I’m leaving my current company right now and I was like well what are you going to do and he goes I don’t know and I was like hey let’s do something together now now is the time. Um, and so again. I think I think to be successful. There’s a lot of luck that needs to happen and for me the luck was finding um a partner like Eric in that we just get along so so well and you know the timing kind of worked out that I was looking for an opportunity. And that opportunity kind of came in that he was just leaving his job so we we talk about? Okay, what are we gonna do? What are we gonna do. Okay, we say we agree we’re gonna start a business together. What is it that we’re going to do um.

Alejandro Cremades: So what happened next.

Ran Reske: So what? what space do we like? So we both like the the commerce space why because people are always going to buy. Um, okay, so we like the commerce space ecommerce specifically it’s kind of growing what categories and so we really kind of turn this into a consulting project as opposed to um. I know some people start businesses based out for their passion for us. This is like hey what’s what’s out there. What? what should we be doing so we were looking at um, a few different a few different categories but 1 of the one of the things specifically that we looked at. Was we wanted the business to be profitable on first purchase. Um, and so the unit unit economics had to make sense. Um for the business to be profitable on first purchase and so that means that you have to have a high average order value. Because your customer acquisition has to be high enough on that first purchase and so we were looking at a few different categories and then we kind of landed on the on the mattress category. The truth is is that first I kind of like the pillow space because I don’t know how familiar you are with the with the my pillow guy. Um, and I was like I’ve seen this products that’s all marketing and I was like I think we could beat that guy and so I reached out to this um to this this gentleman who was importing pillows and mattresses at the time from China.

Ran Reske: Can’t you can’t import mattresses from China anymore. But at the time he was doing it. Um, and I reached out to him and I said hey we’re we’re interested in in the pillows and he goes. Why aren’t you interested in the pillows I have such a great mattress for you and the unit economics make more sense and essentially he convinced me so I told ek hey um. I think we’re going to be selling mattresses and that’s ah, that’s essentially kind of how how we landed on the mattresses. Everything about it made sense. It was a growing category There were a lot of players in the space at the time I think when we started people said that there’s something like the hundred um d to c. Players in the mattress category and we said that’s great. That means that there’s product market fit people want it and so now it’s up to execution and and we feel comfortable competing around execution.

Alejandro Cremades: So for people listening to get it. What ended up being the business model of resident. How do you guys make money there.

Ran Reske: Ah, so resident. We are a direct-to-consumer um mattress and betting related holding company. We have a number of brands. Our largest is nectar and dream cloud. And then we have other brands addressing different niches in the market. We have a war which is in the organic space we have um Siena which is slightly in the low end. We recently launched a luxury mattress called Clover Lane and essentially we’re selling. Um. In the we’re selling to the mass market um slightly less than premium prices but mass market masstige call it products.

Alejandro Cremades: So for this, you guys have raised quite a bit of money to how much money have you guys raised to date.

Ran Reske: Um, so we we don’t really share the amount of money that we raise but I could talk a little bit about our our funding rounds we initially bootstrapped the business. Um and the interesting thing that we did around our business was negative working capital.

Ran Reske: And for those who who don’t know what negative working capital means is that essentially you get somebody else to finance your growth and so we were able to find um, when would you start spending enough with with Google and Facebook. Um. they’ll give you terms they’ll give you 30 day terms so you’re spending marketing dollars today. The customers are paying you today and then you’re paying Google and Facebook in thirty days so you get terms from there then we’re able to get terms from our suppliers. And they said okay, we’ll send so in the beginning when we started the business. We actually did not hold any inventory. All our suppliers held our inventory and their drop ship from us and then um, they would give us terms as well in the beginning it was like maybe ten days fifteen days but still. As as you’re scaling the business year you’re doing well the problem with negative working capital is that if you’re scaling everything everything works well, the problem is if you’re not if you’re not scaling and you’re not profitable. That’s where where things that’s s where you have problems so in. So we we launched a business end of 2016 in 2018. We did our first our first funding round. Um, and that was from friends and families and some more friends of theirs and some of their family members and it was a big big.

Ran Reske: It was a ten and a half million dollar round but it was with a lot of a lot of different investors anywhere from millions of dollars family offices to friends writing checks for tens of thousands of dollars 25 $50000 um

Alejandro Cremades: That’s amazing I was just going to say there do that day I mean obviously I know that you are not not sharing this. You know obviously it’s been reported by crunchbase I think it’s like about 169000000 but again I don’t want you to confirm or anything that’s at least what it’s out there.

Ran Reske: And yeah.

Alejandro Cremades: But the question here is as part of the business I mean when you go into the venture you know mode like this like you were going. You know you’re always going to go and push for growth I think that things have changed quite a bit in that regard. You know nowadays with a macro environment. You know where it’s more like profitability versus growth. And before you know it was like growth above everything else now. 1 thing that is very interesting is that you guys anticipated that early in 2019 and I don’t know what triggered that but you ended up pushing for profitability. At that point you know against the current which was growth above everything else at that point. So. What push you know for that to happen and and then also how was that transition into really making sure that you were able to get the company profitable.

Ran Reske: Yeah, So so you you bring up an excellent point in that you know for the venture Community. It’s always about growth and don’t Worry. We’ll figure out profitability later but when you stop when you stop for a second you say? Okay, what if what if we’re not a venture. Um. Ah, venture Company. What if we were the the store the corner store right? So think about this would anybody ever invest in the corner store if it was losing Money. No chance whatsoever. Um, and so for us it was kind of like this mindset wait a sec. We’re a store. Just because we’re selling online doesn’t change doesn’t change the fact that we’re we’re a retailer and so for us to exist. We have to be profitable, a business cannot exist if it’s not profitable or call it. A retailer cannot exist. It was and that was kind of the switch in our head and so we said hey. No matter what happens we have to figure our um unit economics out and make sure that we are profitable no matter what and so when you when you think about unit Economics I Mean the way we think about it is around contribution Margins. So You have your gross sales. And then underneath that you have your returns cancellations maybe payment processing fees. Um, and that gives you your net sales and then you have your cogs including the product costs themselves the shipping the fulfillment all of that all of those costs as well and then you have your marketing.

Ran Reske: All those costs together. You have to be able to it has to be you have to be making money because otherwise why are you even selling one unit if after all these things are not making any money and so for us it was hey no matter what happens this is something that we needed to do. And so we we’re we’re very very sophisticated in our marketing I mean in our data analytics making sure that we understand attribution as much as as you can I mean attribution is kind of a black hole. You’re never fully going to understand exactly where the user came from. But we know, um we built a pretty sophisticated platform to understand hey money that we’re going to spend today because mattress is a considered purchase. It takes time for the for the customer to actually um, make the purchase but we understand money that we spent today when are we going to realize it. And we feel we feel confident in in that spend and so once we figured out our unit economics. It was around. Okay, let’s make sure that our operating expenses are where they need to be to make sure that we are profitable. And so in 2019 as you mentioned when we decided hey no matter what happens we’re going to be profitable. We had to we had to cut our operating expenses and unfortunately as part of that that means that meant that we we did a we did a rif a reduction in force. Um.

Ran Reske: And again, if if if I were to go back in time I would I would have done it differently because all those entrepreneurs um and executives who who’ve had to do a reduction in force. It’s always around well. I can’t cut anymore because if I if I have to cut more then it’s really going to affect my business and so the mistake that we made was unfortunately we had we did it 3 times because the first time wasn’t deep enough second time wasn’t deep enough. The third time wasn’t deep enough but the third time we kind of got to where we needed to go. And then when you think about employee morale. It’s not pleasant to for those that are staying. Obviously it’s not pleasant to go through that 3 times be like oh am I next am I going to be the next one um to be cut and so if we go back in time we would have been like okay, how deep could we go. And then you go a little bit deeper and that’s probably where where where you should go. But I mean having spoken to to different executives. It’s always like well I can’t cut these people because if I do my whole business is going to go under I would challenge those executives to be like. Really really dig deep and see hey if you need to make cuts how deep can you go.

Alejandro Cremades: Now 1 thing that you guys say have been able to really manage well is employee retention and I guess that you know all of that you know getting also the investors on board I mean it all rallies around vision right? like the future that you’re living into so. In that regard if you were to go to sleep tonight Iran and you wake up in a world where the vision of resident is fully realized how does that world look like.

Ran Reske: Um, so so so you mentioned 2 things right? 1 employees um and vision right? I mean as as founders as executives. Essentially you are um. You’ve been granted the ability to affect somebody’s life your your employees for that matter. Um, and they are trusting you to um, all all the things that you told them when you’re trying to convince them to join your company. You want to make you want to realize it for them. So the first things first is that they should be enjoying every day I mean I talk to our employees all the time and I say hey if you’re not if you don’t feel like you’re fulfilled if you don’t feel like you’re happy. If being here is not. What you imagined it to be then life is short right? You should you should go find somewhere else because that’s us the most important thing is for you to be fulfilled and say and we’re very fortunate in that nobody nobody really leaves the company. We had only one senior exec. Ah, leave out of out of his his own will but everybody else has has really stayed with the company or unfortunately we’ve had to let some people go along the way but it wasn’t it wasn’t their decision. It was our decision. Um, so so in terms of the vision is to continue to be.

Ran Reske: Um, a place where people feel fulfilled people feel like hey they’re really really able to to get what they wanted out of out of their career in terms of the business where where I like to get business is you know I’m a competitive. Our team is full of competitors. We want to be number 1 um, we want to be number 1 in in our mattress category. We want to be number 1 in the entire home goods category. That’s that’s much call it longer vision. But I mean that’s kind of where where we see the business going. We want. Everybody in the country to to be sleeping on our products we want everybody to be using our go into other categories in the home and really being being that that number 1 player. And again, it’s it’s you know it’s ambitious goals. But if we don’t have ambitious goals and what what are we doing here.

Alejandro Cremades: That’s right, that’s right? So obviously now we’re talking about the future but I want to talk about the past with a lens of reflection. So let’s say I put you into a time machine run and I bring you back in time maybe to that moment that you’re right there you know at the Vc firm. Ah, Norworth’s norwest venture partners and you are thinking about Maybe it’s time to do something of your own and you’re able to sit right there in front of your younger self and give that younger self one piece of a advice before launching a business. What would that be and why given what you know now.

Ran Reske: Um, so there’s never the right time and this is this is because it’s always I was always like you know I have I have three kids now at the time when I launched I had two kids. It was always hey do it should I take this risk. But what if it doesn’t work out. Um. Is now the right time and so I remember I spoke I spoke with my dad about this and he goes um, if you’re looking for an excuse not to start the business I can probably give you 2000 excuses not to start the business at the at the end of the day. There’s never the right time. Ah, the markets are always going to be up. They’re always going to be down. You can wait a few more years. But if you really want to start a business now is the right time today right now because starting a business you have to actually start it. Um. And the best way to learn about how to how to grow business is to do it. Do it yourself. I mean you can read as many books as you like you can talk to mentors and I advise different startups but I’m not living it. The entrepreneurs are living it and. They’re going to meet be making the mistakes and that’s the only real way to to learn in my opinion is to is to actually do and so if I were to go back in time I would have done it sooner.

Alejandro Cremades: That’s amazing. So for the people that are listening run. You know I will love to reach out and say hi. What is the best way for them to do so.

Ran Reske: Um, ah, Linkedin Linkedin is is is definitely the best way. Um, my my Linkedin just looked me up on Linkedin Run Rescue R E And R E S K E and I am responsive on Linkedin and you know what. I actually made a lot of good connections on Linkedin and we started. We found our first manufacturing partner on Linkedin. Believe it or not and we found some great employees through Linkedin and actually we found our our current Cfo on Linkedin. And so I think Linkedin is is a fantastic platform and a fantastic resource and guess what a lot of people haven’t responded to my messages on Linkedin as well. But I think I think you have to put yourself out there and try and. And who knows you might you might get a good response from somebody and they might change your business.

Alejandro Cremades: Absolutely well easy enough for all the people that are listening well rund. Thank you so much for being on the deal maker show today. It has been an honor to have you with us.

Ran Reske: Thank you so much. This is fine.

*****

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