Alex Ma and Jason Da Rosa are childhood friends who are now business partners. After going to different countries for college – Alex to the UK; Jason to the US – and then having successful careers in banking, both found themselves back in their native Hong Kong at around the same time. That’s when they reconnected – just as they were both looking for something beyond corporate life.
“My parents are here, I grew up here, I’d always wanted to come back,” says Da Rosa, who returned to the city of over 7 million with his wife, who’s American. “As we were looking at places to move into, at furniture and homes, one of the things we looked at was mattresses. I was so shocked at how expensive they were here.”
So he wanted to figure out why.
“It turns out because rents – the cost of prime retail space in Hong Kong – are so high, they need to mark up the cost of mattresses so much,” Da Rosa explains. The rates, even with a recent cooling off, can be as high as US$2 million per year for a small-ish, 700-square-foot (63 square meter) shop.
His friend Ma saw the same sky-high price tags as he resettled and bought things for his new Hong Kong home too.
“I started to think of this as an opportunity,” Da Rosa adds.
It’s a lot like Casper, Leesa, Purple, and a number of other such brands that have popped up – and blown up – in the US: a retail business devoted to mattresses that behaves like a tech startup. Casper, perhaps the biggest of the bunch, is worth US$750 million as it plots an IPO.
To the friends, it seemed like “a perfect fit” to do this business online, explains Da Rosa.
“We wanted to really start something of our own – that we have control of,” adds Ma. “That can give us a challenge to really manage everything ourselves.” He was a corporate banker at HSBC, while his biz partner is a former investment banker on Wall Street who later moved into the venture capital arena.
Like with the other mattress startups, being able to use some new compression tech to stuff the foam mattress into a fairly small box opened a lot of new avenues for the Skyler duo. During the design process, they also made a few Asia-specific tweaks, such as ensuring the mattress took into account the humid climate.
Aside from pricey mattresses, the late-starter entrepreneurs saw a few other factors that made Hong Kong a great fit for their new venture.
“The other problem we found in Hong Kong specifically is most people live in apartment buildings,” Da Rosa continues. “A lot of the apartment buildings have very small lifts” – ya know, elevators – “which means that if you want to get a large-size mattress – say, a queen or a king-size – most stores wouldn’t sell it to you because it’s too big and it can’t fit in the lift.”
Remember, apartments look like this in Hong Kong:
“In other cases, they have you buy two single ones and then you’d be stuck with this gap in the middle. Or, if you insisted you want a big-size mattress, then you’d have to pay a hefty fee to get it carried up the stairs. Each flight of stairs would cost a certain amount of money. So if you’re on the, you know, 30th floor, it would cost you several thousand dollars,” he adds, referencing Hong Kong currency. HK$3,000, for example, is US$385. And think about the guy who has to carry a king-size mattress up a hot and humid emergency staircase.
For now, Ma and Da Rosa are keeping their startup focused on Hong Kong. The next step is to add pillows to the lineup. Then they’ll ponder overseas expansion – but they’re both tight-lipped on where that will be.
“When you’re solving a problem, it takes on a life of its own,” Da Rosa says of the startup’s early growth. Without revealing figures, he claims Skyler has been profitable from the first month, and has already doubled the revenue it was pulling in since a few months after its February launch. Indeed, the startup is constantly selling out of its mattresses.
Although Hong Kong’s astronomic retail rents were a factor in the duo creating an online-only business, they’ve found it useful to venture into the offline world in a few ways. The startup has a showroom in a busy part of Hong Kong where people can try the mattresses, plus the co-founders often spend their days on the street with a promotional booth, showing how a new mattress can be delivered in a relatively small box.
The two men are far from alone in building a globally-minded business from Hong Kong – despite its small size, Hong Kong startups have been raising hundreds of millions of dollars each year. In many cases, they’ve been able to tap into a relatively wealthy local consumer base where people are very willing to buy anything online, then expand to larger markets – like “Uber for vans” startup Lalamove and classy clothing brand Grana.