On the heels of Lyft’s $24 billion initial public offering–and what could be $100+ billion valuations later this year when Uber and WeWork go public–$20billsfor$15.com filed its S-1 on Friday. In its filing the 2 year old company–which bills itself as the first “disruptive currency” brand–said it would seek to raise $200 billion to fund its massive growth. If successful, that would give the New York-based start-up an implied $1 trillion valuation, making it by far the biggest IPO ever.
The company, which was started by former Tufts University roommates Hogan Levine and Niraj Shaw in early 2017, has previously gone through three funding rounds, the most recent led by Softbank and Benchmark Capital. But the company continues to experience significant losses on what it calls its pathway to become “the Amazon of cash.” As the filings reveal, despite recently restricting orders to $100 and still only operating in the United States, in its most recent quarter $20billsfor$15.com racked up revenues of over $500 million with operating losses of just over $150 million.
In describing the company’s origins, Levine (known as “Jumbo” to his friends) remembers the time he and Niraj were having lunch in Carmichael Dining Hall during their senior year having just taken advantage of Tufts’ world-famous, but decidedly over-priced, salad bar. “You know what Wayfair (“Wayfair” is what Levine calls Shaw owing to how similar his co-founder’s name is to the CEO of the cash hemorrhaging home furnishings brand). Money just costs too damn much! And then Wayfair goes ‘truer words were never spoken brother!’ (Editor’s note: Levine and Shaw are not actually brothers). From there, you know, the business plan practically wrote itself.”
Neither of the founders would give the other credit for creating the company’s signature product line of selling $20 bills for $15, but both immediately knew they were on to something. “Everyone we talked to told us the idea was genius” said Levine “and they couldn’t wait for us to launch.” Despite early consumer enthusiasm, an initial run at a so-called “friends and family” investment round was a failure. “I literally went to everyone who came to my bar mitzvah and got turned down by every single one of them,” Levine said with obvious and deep frustration that would likely take 3-5 years of therapy to work through. “I remember one of my uncles saying to me ‘what are you some kind of idiot? The more you sell the more you lose, and that’s before overhead! You’re just another Uber, Lyft and WeWork wannabe.’ And when I replied ‘exactly’ he stormed out of the room muttering to himself.”
Shortly after graduation the two moved to New York City and set up shop in the Williamsburg section of Brooklyn in a small office above a SoulCycle. While the company has since taken 600,000 square feet of new office space in Hudson Yards, they never forget their roots. “The noise was unbelievable” recalls Shaw, “but Jumbo and I said if we can just get a few people to believe in our vision of selling $20 bills for $15 we knew brighter days lay ahead.”
Undaunted, the pair launched the $20billsfor$15.com site in the Spring of 2017 and became an instant hit. Soon the brand’s “money costs too much” radio ads became a satellite radio staple, helping fuel its hockey stick-like growth. But the nascent enterprise soon found themselves struggling to keep up with demand. “It seems like we were running down the street to the ATM like every 20 minutes to fulfill orders” recalled Shaw. “But we just remembered the page from our pitch deck showing that our addressable market was literally infinite and that kept us going.”
Fresh from a $25 million seed round from Maveron and Forerunner, the company enlisted noted management consultancy McKinsey’s help to develop a scalable supply chain strategy. By the end of 2017 the first of $20billsfor$15.com’s totally automated distribution warehouses opened, located across the street from the Bureau of Engraving and Printing’s Fort Worth, Texas facility. “This was really a game-changer for the brand” notes Levine. “We were running ourselves ragged having employees constantly going to the Chase by our office and maxing out their debit cards. Now, each morning we receive truckloads of fresh $20 bills and our robots take them from container to FedEx envelope in under 90 seconds.”
While the investment in distribution infrastructure worked out, the company’s foray into artificial intelligence has not gone according to plan. Taking a page from brands like Stitch Fix, $20billsfor$15 hired nearly 50 data scientists to use machine learning and other advanced predictive analytic techniques to better target consumers that would be interested in getting a $20 bill for $15. As CMO Natalia Kontentizking observed “after months of running different models and pressure testing different assumptions we learned that, with the exception of die hard Donald Trump supporters, everyone was a great prospect.”
Despite its early success $20billsfor$15.com has its share of detractors. Some claim the company’s negative gross margins are unsustainable. Others argue it needs to get more aggressively into private label. But noted retail mentalist Stephen Douglass takes issues with that criticism. “The future of shopping is about authentic, immersive experiences that are repeatable, not antiquated concepts like cash flow or EBITDA. What could be more experiential than getting a crisp $20 at a steep discount? Rinse and repeat is what I say, eh?”
The company has its fans on Wall Street, which has long-favored rapidly growing companies with no discernible path to profitability. Over a Blue Apron supplied lunch of harissa chicken on a bed of saffron infused quinoa, long-term Wall Street analyst Ryan Scozzi told us he’s impressed by the company’s highly reliable earnings forecasting. “They sell $200 million, they lose $50 million. They sell $2 billion, they lose $500mm. I like investments I can understand.”
For now Levine, Shaw and team are enjoying the ride but eagerly await the IPO, which is tentatively scheduled for April 30th. As Shaw sums it up “brother, we just so need that cash. So much cash.”