This Sofa Startup Has Been Fighting Murphy’s Law Since Day 1. Now It’s Ending the Year With $3 Million in Sales
What do you do when Murphy’s law is determined to target your business?
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"The machine is on fire."
Five words you would dread to hear from your manufacturing partner, especially when trapped on a bus going from New York to Philadelphia. Your mind starts racing. What's the extent of the damage? How much is this going to cost? How long will it delay production? What do I do?
Kabeer Chopra, co-founder and co-CEO of sofa startup Burrow, shifts uncomfortably as he retells the story. "In my head I'm like 'Oh my god,'" he says. At the time, he and his co-founder and co-CEO, Stephen Kuhl, built their modular couches at a factory in the outskirts of Mexico City. The language barrier did not help.
"It ended up being fine," says Kuhl. "They could've said, 'Hey a small part of the machine caught on fire--the fire is out--we just need to replace a part.' But all they said was 'Hey, the machine is on fire' and we're picturing the factory burning down."
That incident is only one from a long list of mishaps that have plagued the burgeoning startup's young history. There was also the time when the shipping boxes didn't arrive and Kuhl, who was in Mexico then, ended up buying cardboard sheets and spent all night making the boxes by hand. Or when a container of couches went missing, or was it the one with just the parts? The two co-founders shrug as they point out that everything that could go wrong, has.
Still, business is good. New York-based Burrow is on track to close 2017 with $3 million in sales, at a current run rate of $7 million, after officially incorporating the business in April. Of course, the startup has been around for longer than that.
Kuhl and Chopra came up with the idea while studying their MBAs at Wharton during the fall of 2015. The class? "Introduction to entrepreneurship." The pair quickly bonded over shared sofa horror stories.
Chopra spent over $1,000 on a couch he learned would take 12 weeks to ship, so he opted for a bright orange one the store could have ready in three weeks instead. He lived two blocks away, he says, but it would cost him an additional double-zero figure to have it delivered. He ended up hauling it himself. Kuhl, on the other hand, opted for a low-cost alternative from a popular retailer and was dismayed when it broke apart after only two-weeks use.
"In both cases the actual experience of buying the couch and using it is tainted," says Chopra. "You never feel like 'Oh, this is such a cool purchase and I actually like it.'"
That led them to focus not only on building a better couch but also improving the end-to-end experience for the customer. They wanted to create an affordable but high-quality sofa that could be assembled in a matter of minutes, without any tools, and compact enough so it could be delivered directly to your door, at a fraction of the cost.
Eventually they settled on a modular structure that allows a customer to get an armchair and transform it to a 3-seater sofa by buying a loveseat later on. Or say split a 4-seater couch into a loveseat and two chairs, or four individual chairs, should you want to. The prices range from $495 for a single seater to $1,395 for a "king" sofa. Burrow uses a patent-pending latching system to secure the parts, upholsters its sofas with a stain-resistant fabric, and provides a hidden USB charging port for the tech enthusiasts. Not to mention, shipping is free and they promise to deliver it in a week.
In April 2016, they were accepted to the accelerator program at Y Combinator in Mountain View, California, and received a $120,000 cash injection (they had previously raised $330,000 from friends and family). The only problem was that U.S. manufacturers wanted nothing to do with their product.
"We talked to a bunch of manufacturers and explained the idea," says Kuhl. "The reaction was 'if people are going to put it together themselves, it must be low-quality, therefore why are you talking to us about using high-quality materials?'"
There were plenty of comparisons to Ikea, too. "We're not copying Ikea," would reply Kuhl. "We're going to use high-quality stuff and make a really nice brand and [provide] better customer service."
Two months later, in June 2016, they were manufacturing the first couple prototypes in the factory in Mexico (one of their classmates at Wharton introduced them to the owner). By August, they started taking pre-orders and in November, after being featured in a New York Times article, they had to stop because the demand was too high.
Delay after delay, the delivery date kept changing; a curse many startups don't survive. Finally, in January this year, the first orders were sent out and by April they finished shipping all of them. Along the way, and several other misfires, they realized the factory in Mexico was not going to be a long-term solution. Lucky for them, a Mississippi-based manufacturing facility -- a women-owned business called Chapter 3 -- said yes.
Now, the 30-year-old co-founders are determined to grow their 10-person business.
Recently, they added a chaise and an ottoman to their offerings, and the plan is to gradually introduce more furnishings. This month, Burrow closed a $4.5 million seed round, led by Red & Blue Ventures, and including funds from Twitch.tv founder Justin Kan and Michael Seibel from YC.
There's a long road ahead of them. Greycork, another sofa startup with a similar high-quality, low-cost concept, just went belly up. Its founder says the economics didn't make sense. Additionally, the U.S. furniture market sales have weakened over time, according to the latest report by think tank group Fung Global Retail.
Among the good news is that people are increasingly buying their furniture online, and they're looking for low-cost, compact and multifunctional pieces. Besides, if the Burrow team has proven anything, is that they can rise above the ashes, in some cases, quite literally.