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.
In this blog post, we’ll delve into Ran’s fascinating life story, exploring his experiences in mechanical engineering, investment banking, the world of venture capital, and, ultimately, his venture into the direct-to-consumer mattress industry with Resident.
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A Mechanical Engineer’s Unconventional Path
Growing up in Kenya, Ran attended the International School of Kenya, an American-based school, experiencing a blend of cultures and perspectives. His early exposure to a variety of environments shaped his adaptable mindset.
Because of his father’s background in mechanical engineering, Ran chose the same path without a clear career goal.
The journey through college in Pennsylvania and the realization of the problem-solving skills gained through engineering would later become a valuable asset in his entrepreneurial pursuits.
Investment Banking and Lessons in Business
Venturing into investment banking after college, Ran acquired a unique set of skills in understanding businesses, reading financial statements, and grasping strategies.
Ran recalls that his father had a degree in mechanical engineering and worked as a civil engineer although he never worked as a mechanical engineer. While initially uncertain about his career path, the experience taught him the art of problem-solving.
The intense analytical environment laid the groundwork for Ran’s future endeavors, helping Ran navigate challenges and identify opportunities. As he recommends, anyone who’s looking to get into the world of business should do a few years of investment banking.
That’s because it teaches founders how to understand business, whether reading financial statements or formulating strategy.
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Groupster – A Lesson in Execution
In 2007, Ran founded Groupster, a group discount platform predating the Groupon era. Despite skepticism from venture capitalists, Ran embarked on the journey with determination. However, Groupster didn’t achieve the desired success.
Ran recalls using up all his investment banking bonuses to bootstrap the business. This setback became a valuable learning experience, emphasizing the importance of sound execution and unit economics in business.
Transition to Venture Capital
Undeterred by Groupster’s outcome, Ran transitioned to venture capital, joining Norwest Venture Partners in 2009.
At the time, the company was opening an office in Israel and had been making lots of investments in the country since it was a startup nation with high technology, IP, and innovative businesses.
Israel did not have a strong presence in consumer deals in those days. After being on the team from 2009 to 2012, the company offered Ran a job in the US to join the consumer focus team.
Ran’s move from Israel to Palo Alto in the United States marked a pivotal moment. During the seven years when he was at Norwest, Ran gained insights into the world of consumer-focused investments, honing his understanding of customer acquisition, unit economics, and scaling strategies.
Recipes for Success
Ran identifies three recipes for a startup’s success, the first being that the entrepreneur is confident in the business concept and its potential for success, regardless of the current business environment and the roadblocks they could encounter.
The second crucial factor is achieving the ideal product-market fit and understanding the ideal timing to execute it. It’s advisable to zero in on a product-market fit that exists instead of trying to create a product that people might need.
The third essential requirement is finding the right partners, just as he teamed with Eric Hutchinson, his co-founder at Resident. When looking at potential business ideas, they were focused on products with a high average order value and high customer acquisition rates.
The Genesis of Resident – A Mattress Revolution
In 2016, Ran co-founded Resident, a direct-to-consumer mattress and bedding holding company. The journey began with meticulously considering product categories, profitability, and market dynamics.
The team landed on mattresses due to their growing market and high potential for profitability. The launch of brands like Nectar and Dream Cloud marked Resident’s entry into the competitive direct-to-consumer space.
The company also has other brands addressing different niches in the market. Awara is designed for the organic space, Siena at the lower end, and a luxury mattress called Cloverlane.
As Ran explains, Resident sells to the mass market at slightly less than premium prices. The company does not hold inventory; its suppliers hold it and drop ship from them.
Navigating the Funding Landscape
Resident’s funding journey involved bootstrapping initially, followed by strategic funding rounds. Ran highlights the importance of negative working capital, a financial strategy that leverages suppliers and platforms like Google and Facebook to finance growth.
Sometime in 2018, Ran and Eric ran their first funding round. They won $10.5M from different investors and family offices in denominations of millions of dollars to friends writing checks for tens of thousands of dollars, like $25K to $50K.
While specific funding amounts are undisclosed, the company has reportedly raised significant capital, supporting its expansion and market presence. Currently, Crunchbase lists the amount raised at $169.2 million.
Storytelling is everything which is something that Ran Reske was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
Pivoting Towards Profitability
A critical shift occurred in 2019 when Resident, amid a macro-environment emphasizing profitability, decided to prioritize it over rapid growth. Ran’s perspective on the venture as a retailer reinforced the need for sustainable unit economics.
The company made strategic cuts in operating expenses, aligning its vision with long-term profitability rather than immediate expansion. Ran and Eric factored in contribution margins, gross sales, returns, cancellations, payment processing fees, and net sales.
They also added up the product costs, shipping, fulfillment, and marketing.
Ran explains that they built a sophisticated platform powered by data analytics to understand attribution and the money the company would spend today.
Employee Retention and Vision
Amidst financial adjustments, Resident prioritized employee retention, emphasizing fulfillment and happiness within the team. Ran underlines the significance of a shared vision, fostering a competitive spirit among the team.
The vision includes not only dominating the mattress category but aspiring to be the number one player in the entire home goods market.
Ran Reske’s entrepreneurial journey reflects a commitment to continuous learning, adaptability, and a resilient pursuit of goals. From engineering to investment banking, venture capital, and the direct-to-consumer industry, Ran’s experiences offer valuable insights for aspiring entrepreneurs.
As Resident continues to evolve, Ran’s story serves as an inspiration for those navigating the dynamic landscapes of business and innovation.
Listen to the full podcast episode to know more, including:
- 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.