đ§đ Inside Eight Sleep | Using AI to Sleep Better | Matteo Franceschetti
Building a profitable hardware company, opportunities in consumer health, the importance of sleep, and why founders leave Europe for the US
Hi everyone,
Early episode this week to slide in before Thanksgiving here in the US.
Iâve been paying more attention to all things consumer health the past few years. And Eight Sleep created one of the original, breakout consumer health products back in 2014.
Theyâve since built a business thatâs put up hundreds of millions in revenue. And were reportedly free cash flow positive in the first half of 2025!
This conversation with Eight Sleep Co-founder and CEO Matteo Franceschetti gets into the challenges of starting and scaling a hardware company, why hardware ultimately has stronger moats, and the fundraising mindset he adopted that eventually got Khosla Ventures and Founders Fund to invest.
We also get into the importance of sleep, their Sleep Butler that uses AI to help you sleep better, and the big opportunity building more consumer health products.
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Timestamps to jump in:
2:18 Three pillars of health: sleep, nutrition, fitness
4:02 Creating a sleep routine
6:59 Importance of body temperature in sleep
8:43 How Eight Sleep works
12:14 Using AI to help you sleep
18:35 The AWS outage
24:12 Itâs too hard to build in Europe
28:09 Why hardware has stronger moats
32:23 How to fundraise for a hardware company
35:30 The opportunity in Sleep tech
38:43 Hiring is easy when you have a mission
40:37 How to fight jet lag
43:03 Opportunities in womenâs health
45:54 Evolving from single purchase to subscription model
47:12 Matteoâs personal health stack
49:41 Racing sports cars
Referenced:
Careers at Eight Sleep
Compliant VC meme account
Find Matteo on X / Twitter and LinkedIn
Related Episodes
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Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Matteo, welcome to the show.
Matteo Franceschetti:
Thank you for having me. Iâm excited.
Turner Novak:
Yeah, Iâm excited too. I was just joking before we started recording that Iâve got terrible sleep the past couple nights, so I think itâs kind of ironic that weâre doing this episode right now while Iâm in the worst cognitive sleep state that Iâve probably been in in a while.
Matteo Franceschetti:
Iâm the perfect guest to be here today, so maybe I can give some tips.
Turner Novak:
Oh, yeah, I want to ask you for tips. But I guess, really quick for people who donât know what Eight Sleep is... Iâm hoping a lot of listeners are maybe generally familiar with it. But can you just kind of explain what it is, and we can kind of talk about a bunch of different topics from there?
Matteo Franceschetti:
Yeah, of course. We invented a technology that improves your sleep. Itâs a cover that you can install on top of any mattress, your own mattress. And it will change your body temperature hundreds of times per night to maximize your sleep performance. So each side of the bed can have a different temperature. So if you sleep with a partner, your partner will have a different temperature based on their needs. And by controlling this temperature during the whole night, weâll make sure you fall asleep faster, you get more deep sleep or more REM, and you wake up more refreshed.
Turner Novak:
And this may be kind of a rhetorical question for some people, but why is sleep so important?
Matteo Franceschetti:
When you look at health, health is based on three pillars. One is sleep, one is nutrition, and one is fitness. But at the end of the day, even there are three pillars, one is the true foundation, which is sleep. Because if you donât sleep, you will not have the energy to work out today, and you will probably crave junk food. So sleep comes first. After a good night of sleep, youâre ready to go to the gym, youâre ready to eat healthy, the right type of food. And itâs probably honestly even the simplest thing to take care of. If you can just go to sleep or make sure you sleep at least seven to nine hours and youâre just disciplined, itâs much easier than going to the gym every single day.
Turner Novak:
Yeah. Every person, no matter what, sleeps every day. Itâs not like you canât not sleep. You have to do it.
Matteo Franceschetti:
Yeah, but sometimes is an afterthought. Or we think, âOh, I have to do all this, this, and that.â And you just go to bed and you pretend to fall asleep and wake up fully refreshed after 7, 8, 9 hours. It really doesnât work like that for your body. And so, the example I usually give to people is, I donât have kids yet, but I have a lot of friends with kids. And when they have a kid, right? They have a certain discipline, a routine with their kid. They do the bath always at the same time, they put them to sleep at the same time, they wake them up at the same time. And then we become adults and we pretend to forget that, but our biological state is still the same.
Turner Novak:
Why do people forget it? Why do people not prioritize sleep as much as they should if itâs so important?
Matteo Franceschetti:
Because I think they are busy. I think they think itâs something they can compress. Obviously, sometimes you go out with friends, you want to have a couple of drinks, you go back home late, and you want to chill. And so, you tend to sacrifice your sleep. But at the end of the day, you shouldnât because you just need to be disciplined. And then, your body will adjust, and you will fall asleep at the same time, you will wake up at the same time, and probably your sleep will be more stable. Then, there are technologies like ours that can help you to take you to the next level. But even if you just nailed the basics, that should be enough to help you have a pretty solid sleep.
Turner Novak:
So low hanging fruit. Just for somebody who wants to listen to this and just immediately improve, itâs like stick to a schedule and make sure that you get, I donât know what you said, 7, 8, 9 hours of sleep. I think it depends, right? On kind of REM cycles and all that stuff.
Matteo Franceschetti:
Yeah. So the most important thing, even if you go to a sleep doctor because you have insomnia, the first thing they will fix is your routine. Go to bed at the same time, wake up at the same time. You just literally train your body to develop the melatonin and to develop the state of sleep at the right time, and to wake up naturally at the same time. Then, that is one. Second is to start preparing for bed. And so, we are actually running a study. And the study is proving that itâs not so much about using the phone or not before bed, but itâs the type of content that you consume before bed that really matters in this quality of your sleep.
So you need to start relaxing. You can keep using your phone. If youâre chatting with your best friend about an amazing trip you guys had three years ago, thatâs completely fine. If you are fighting with your boss about a certain topic, you might not sleep that well. So preparation, routine, temperature in the bedroom. Right? If you have our product is one thing, but even just setting the temperature somewhere between 68 and 72 degrees Fahrenheit in your bedroom, very important. And those usually are the basics.
Turner Novak:
And that seems to be one of the big features of the product is temperature control. Why is that so important, like temperature control and sleeping?
Matteo Franceschetti:
Yeah. So your body temperature already changes during your sleep. And so, what we are doing is not that we are reinventing the wheel. Weâre just helping your body to do what itâs supposed to do. And as soon as you fall asleep, your body temperature should drop, go as low as possible during deep sleep.
And then three, four hours before you wake up, it should start rising. Then at the same time, there is plenty of medical evidence that in deep sleep you need a different temperature from REM, for example, which are the two of the main phases of sleep phases.
And so based on our data, we are able to adjust the temperature. Again, hundreds of times per night based on your sleep stages, based on your movement, based on the temperature of the bedroom, and many other factors. We optimize everything for you. Itâs like having a sleep butler that keeps adjusting things while youâre unconscious.
Turner Novak:
Interesting. So itâs like, in theory, you could, I donât know, like have an actual person thatâs there changing the temperature of the room that youâre in or something like that, or like.
Matteo Franceschetti:
You know what? In the â70s or maybe in early 1900, you could literally have a human butler who was there adjusting the temperature, but they wouldnât know in real time your biometrics. So they will have to be a PhD sleep butler with some form of sensors to monitor your sleep stages, your heart rate, your respiration, and adjust things in real time.
Turner Novak:
And so the way it works is, so itâs a pad that goes on top of your mattress. How does it work that it knows what to do? What all goes into that?
Matteo Franceschetti:
Yeah, so itâs a very thin pad. It doesnât change the feeling of your mattress. And inside, there are sensors that are able to track your heart rate, your movement, your respiration. And based on that, we can infer sleep stages and sleep quality. And then there are micro tubes, and we circulate water at a different temperature for each side of the bed. So next to the bed there is what we call the hub, which is a small tower where we have our thermal engine. So itâs literally like having a Ferrari of sleep as there is this engine that sits next to your bed. Itâs extremely quiet.
Itâs impossible for you to know if itâs on or off. We tested that. And based on these different sleep stages and our AI, which is called Autopilot, we adjust in real time temperature to help you fall asleep, so you can fall asleep 15, 20% faster, and get more deep sleep, more REM. And overall what we see is that you can get up to 30% better sleep quality. The most beautiful thing for us is that a lot of our customers, they have a wearable. And they can see their own metrics on their own wearable, so itâs not just a sleep report in the metric.
Obviously, we have an app with all your sleep metrics, and your heart rate, and your respiration. But if you have an Oura, or a Whoop, or an Apple Watch, and you have your history, you will start seeing a change in your metrics before and after using our technology. Or if you travel and you come back and you compare the data, you will see your recovery was much poorer while you were traveling than when youâre back home.
Turner Novak:
Thatâs been one of my things that I was almost scared about with Eight Sleep is, because I run into this when Iâm traveling, is have a really good pillow. Probably right before Covid, we bought one of those $2,000 mattresses that is very nice. And then when you travel, you go to a hotel, and itâs like shitty mattress, the sheets are itchy. You know? Maybe the hotel room is bad temperature, all that stuff. But you run into that scary problem of like, âOh, man. My home bed is so good that I literally cannot sleep if Iâm not at home.â
Matteo Franceschetti:
Yeah. Well, itâs true that at the end of the day you spend most of the time at home hopefully. And so, it is to maximize at least all the nights that youâre at home. And then in the future, maybe there will be other technologies that we can offer to our users for when they travel.
Turner Novak:
Is that possible to build something like that?
Matteo Franceschetti:
Yeah, we have some ideas. You know in startups, itâs always the matter of bandwidth and priorities. So we could build it in six months from now if we wanted. The question is you do that or you do something else. Itâs just the trade-off.
Turner Novak:
Yeah. Well, I think I saw... Donât you do some hotel partnerships where certain hotels have Eight Sleep covers already?
Matteo Franceschetti:
Yeah, we had the partnership with Equinox Hotel in New York. And we are talking to multiple hotels, so that it could be another easy way where, at some point, there will be some hotels that have just affiliated and they have an Eight Sleep in their main suites.
Turner Novak:
Okay. And you mentioned that youâre able to use AI to do this stuff. I mean, what are you actually doing there? Itâs using LLMs to do something? Whatâs actually happening?
Matteo Franceschetti:
We have been using hardcore AI for now many years. Now, five plus. Because at the end of the day, the key of what we do... Thereâs two key components. On one side, there is the hardware with all the sensors. And the other one is our cloud computing where we stream the data to the cloud. We run our AI, so extremely advanced models that can detect, first, all the different parameters, all the different biometrics. And second, now they are also able to triangulate and take action for you. And so, letâs say, that you had the late meal, or letâs say, that you train really late, we will automatically adjust the temperature based on how your bodyâs responding.
Or if you had alcohol, and we see a heart rate that is accelerated. So this goes back to the butler, the sleep butler with PhD level. There is a PhD sleep agent that on the cloud is monitoring in real time all the information you give us, plus your biometrics, and it keeps tweaking things to maximize your sleep performance. Then in parallel, when you wake up in the morning, these PhD sleep agent also reviews all your data, and it comes back to you with insights. And so, there is also where we can show the power of our AI.
Because what we started noticing is our models are reaching a point where are becoming smarter than us, and they can triangulate certain types of data, and come up with certain potential risks or certain health conditions we were not even thinking of. Thatâs the power of reaching the scale that we have reached, where youâre able to feed this data into the models, and the models can literally save lives. I received an email recently from a customer who say, âYou guys literally saved my life. My metrics were upside down. I went straight to ER. They found a problem. I had an immediate surgery, and that saved my life.â
Turner Novak:
Wow. So how does it actually work? Is it depending on how your weight is distributed on the pad and like heat? Do you need to have your skin touching it in order for it to measure it? It kind of seems like pretty tricky to get all that to work.
Matteo Franceschetti:
So there are sensors more or less at the chest level, so behind your back. At the end of the day, you should almost imagine that the Pod, our technology, from a sensor standpoint is almost like if you had the doctor with a stethoscope on your back during the night. We also detect snoring, but we donât use microphone. Everything is based on vibrations. Itâs literally the same technology of a stethoscope, but imagine Tesla making a 5.0 stethoscope that shares to the cloud where there is the most advanced AI, the information, and the AI comes back to you with everything you need to know about your health and your longevity.
Turner Novak:
So with all the data that you have in your collecting, just on aggregate over all these people, what is kind of the most interesting or surprising thing that youâve kind of come across? It literally can be anything, but Iâm assuming thereâs some interesting stuff.
Matteo Franceschetti:
Well, now is so cool because with AI, we are really unlocking the next frontier of longevity. And so right now, there are hundreds of materials, digital twins replicating my health, my sleep, and my health policies for the next 10 and 20 years. And they are stimulating different behaviors. And based on that, we can understand what I should be doing or not to make sure that Iâm the healthiest in 10 years from now and 20 years from now.
Then at the same time, AI by correlating different data and behavior can have a prediction about the risk that I develop Alzheimerâs or diabetes, and all these kind of things. And the more data weâre able to feed into the model, the more the model will be accurate. And so, soon you should expect that you can upload the data also from other sources. It could be blood work, it could be DNA. And all that will just make this model more accurate at predicting my health 10, 20, 30 years down the line
Turner Novak:
Yeah. A lot of people kind of say like, âHow do you build a successful AI company right now?â You need to capture a new data source that no one else has data and build this proprietary data stream. I mean, it kind of seems like youâve done that with the pads. I mean, Iâm assuming you can make a blanket. I know thereâs an app component. Iâm assuming you could make some sort of wearable device. You could probably build a lot of these different things over time to capture a lot of different data that is previously not being captured, I would assume.
Matteo Franceschetti:
I always think of data in two buckets, particularly right now with this AI wave. On one side, you want to have your own data as a company because you donât want to rely on external data, otherwise you donât have a moat, and you will be commoditized soon. Then, the second bucket is this data needs to be used in terms of intelligence for the benefit of the customer. And thatâs all that we do. So we give back. So essentially, we create an AI layer in the middle where there is the data that is being fed into the model.
We are AI experts in terms of health and longevity applied to your data, and we give the data back to you. We donât do anything else with the data except giving back to you and following all the standards in terms of security, and privacy, and all that. But that is what really makes me really proud, because itâs almost a modern form of medicine. And that is where we want to extend your life, help you live a longer and healthier life, and to be able to give back to your loved ones.
Turner Novak:
Yeah, and one really interesting thing that you mentioned there was relying on external parties and third parties. I know recently weâre recording this the day after the great AWS outage. I think this episodeâs coming out on, itâs either Thanksgiving or Black Friday. I know we were going to do a little Thanksgiving promo, like a Black Friday promo related to the episode. But when we were recording this, youâre fresh off, like, AWS went down across, I donât know, a large portion of the internet. What happened on your guysâ end and how did you fix it?
Matteo Franceschetti:
Yeah, there were some devices that were impacted. And so some functionalities, they didnât work for some hours as they were expected. And so, we took two actions. The first one was, we worked all night long to make sure that all the functionalities were restored. And so, everything is working properly right now. And so, there is no disruption at all. That was the P0. Then the P1, which is what we are currently working on, and we work on that the whole night is also to make sure that this doesnât happen ever again. And there are a couple of ways to do that.
One, we have a fallback solution where you will be able to just control through Bluetooth the device. And so if there is no Wi-Fi or if there is an outage from our cloud providers like AWS, you will still be able to fully control your device like if nothing happened. And so, there will be no disruption for the sleep of our users moving forward. And Iâm really proud of how the team responded because this is something that usually requires several months. But between hard work and AI and the latest tools, we expect to release something by the end of today or tomorrow the latest.
Turner Novak:
Interesting. So by the time people are hearing this, theyâve been shipped and released. I think weâre going to throw this up on Twitter for people, but people listening to the full podcast. I guess that goes to show how fast you can actually move. Some people donât realize how fast you can move on things. What was the reason that happened? Iâm assuming you guys didnât get much sleep last night.
Matteo Franceschetti:
No, we didnât. I mean, this is something that almost never happens. Right? It never happens for a prolonged period of time. So even if a cloud provider might not be available for half an hour or an hour, then that wouldnât impact our device. So here, it was extended for multiple hours. And the key is just to build multiple backup solutions instead than just you. And so, we are adding more solutions to make sure that this is not going to happen again. And again, last night, everything worked properly. Everything was restored, and we fixed it.
Turner Novak:
Nice. Thatâs always good. I know that Eight Sleep, you have this sleep score that kind of ranks or sort of shows you how well your sleep was, Iâm assuming. What were sleep scores like internally at the company the past two days?
Matteo Franceschetti:
It was pretty bad even because our engineers that code the outage very soon, they were still up at 2:00 AM two days ago working, and they code that. And that is why we were able to also start showing in the app the message that there was an outage. And then since then, essentially, we kept working nonstop. And we will keep working nonstop until when we ship these backup solution with Bluetooth control that can make sure that if there is an outage, nothing happens to your device, and more than do your sleep.
Turner Novak:
Yeah. I mean, thatâs pretty quick turnaround. I guess, what else are you guys cooking in terms of product roadmap over the next couple of months, couple of years, decade? How do you just think about what kind of opportunities you have?
Matteo Franceschetti:
We think always in two buckets. One, there is hardware. And weâre working on a lot of new products that will come out fairly soon. And Iâm really excited, so weâll keep doubling down on sleep enhancement, that is our bread and butter, but with more functionalities. So we spoke about temperature. But another feature we have is we can raise your head if youâre snoring, and you will stop snoring. So we sell you a base that goes underneath the bed. And as we detect snoring, we immediately raise your head, and that will mitigate the snoring. And a lot of our customers absolutely love that feature. So you should imagine more things that will control with the sleep butler, the sleep agent. You can think of light, and noise, and air quality, and oxygen. Everything that we can optimize while youâre asleep, weâll do it.
This is on the hardware side. On the software side, we have an internal data already of a new page where we really maximize the power of AI. And so, this sleep agent will have its own page, and it will be able to share in real time insights that change during the day based on the data that we collect. Instead of just giving you a wall with, I donât know, 20, 30 metrics which we have in the sleep report, it will be this butler that will be able to report to you only what matters. What happened during the night is there is a certain trend, a summary of the night, and also certain recommended behaviors, or changes that the agent can do to your bed for the following night to maximize your sleep.
Turner Novak:
Interesting. I like that you call it a butler and not an AI agent because, I donât know, it just makes it a little bit more human. Makes it a little bit more easy to identify with as a consumer.
Matteo Franceschetti:
Yeah, thank you.
Turner Novak:
And so, I guess I want to ask you kind of going back to the earlier days of the company. But also, I think personally, are you originally from Italy? Did you grow up in Italy?
Matteo Franceschetti:
Yeah, born and raised in Italy. I moved here just 14 years ago now.
Turner Novak:
Oh, wow. Okay. Very not planned, but Iâve actually invested in two companies with... One of them is actually based in Milan. Italian founders. And then, one, sheâs half Italian, half Venezuelan, and is in San Francisco. But I never thought Iâd be investing in a bunch of Italian founders. But I guess, thereâs actually a lot. I mean, they seem to be pretty good. All the ones Iâve met, theyâre crushing it, so.
Matteo Franceschetti:
Thank you. The quality in Europe, I mean, the top 1% in Europe is incredible, as good as the US. Itâs obviously much harder there. I did a startup there.
Turner Novak:
Oh, really?
Matteo Franceschetti:
Yeah, but itâs very hard to raise money, so we had to be profitable since from the beginning. And that is how we made it happen. Otherwise, it would have been impossible for us. And so, the VC fundraising landscape is much more difficult. And that is why the ones that they make it, particularly if they remain in Italy, they are really world-class because it was so impossible or so hard for them, that if they made it happen itâs just because they are insanely good.
Turner Novak:
Yeah. Have you seen that one account on Twitter? Itâs called Compliant VC, and itâs this parody account of a VC in Europe. And he just tweets about how European startups are way better than San Francisco startups, because in Europe, they support the government, and they follow regulations and they help us increase tax revenue and stuff. And you know, heâll make a joke about how like, âWow, I just met a founder building in Berlin. I canât wait to spend six months doing my diligence. And then, a three months regulatory review. And then in nine months when I wire them the money, theyâre going to get ready to build or something.â Itâs just extreme, over the top. Itâs kind of like that over there. Right? Itâs kind of not an exaggeration at the same time.
Matteo Franceschetti:
Yeah, yeah. Everything, all the procedure. I used to be a lawyer, so I understand the legal landscape. And even just incorporating a company, first, is fairly expensive. Itâs probably in the $5,000 at least. And then, itâs fairly slow. You need to go to a notary. There are a lot of formalities that you need to follow that here donât exist. And so like everything in life, there are good and there is the positive and the negative side of the coin.
Turner Novak:
Yeah, I think we can keep moving on past this. But I think one crazy story someone told me, I think itâs in Germany. In order to close a funding round, you have to have somebody like a notary actually read every page of the documents out loud to everyone who signed or something like that, and it takes a day. And you just sit there listening from read them out loud. Thereâs got to be a better way. Thatâs just a little bit ridiculous.
Hopefully, weâre able to figure out. We need Docusign for European, figuring out how to get their doc signed faster. So then, was there a certain point then when you decided, âOkay.â I think you said you sold your first company in Italy. And then, did you move to San Francisco thinking, âI want to go to the US and build a startup.â? Or how did that all kind of play out?
Matteo Franceschetti:
So we sold that company that it was in solar and renewable energy. Then I moved to New York, and we did something extremely similar here in the US. And then, all the assets were acquired by Panasonic or a company owned by Panasonic. And then during that time, I started being an angel investor. And so, I started being connected with people in tech. And after that exit is when I came up with the idea of Eight Sleep together with my co-founders.
Turner Novak:
And I think probably building this thing and getting the first kind of prototypes out was probably a challenge Iâm assuming. Had you done anything like that before? Had you ever built a hardware product?
Matteo Franceschetti:
No, and I think the biggest challenge was not even the prototype because Max, my co-founder and CTO, heâs a hacker, and he was able to build it fairly fast. I think we lacked the full understanding of how complicated it is to go from a basic prototype to something that you can really manufacture at scale, and there where we were really blind. And so, we built the first prototype. It was working and it was not cool. Weâre able to raise a bit of money from family and friends. We do a crowdfunding campaign. I think at the time, it was the 16th or 17th largest in the world. I was told 8,000 in pre-orders. We go through YC, but then manufacturing is not happening, and I had to move to China.
So I go to my wife who is actually one of the co-founders, and I say, âManufacturing is not happening. I have to move to China.â And she says, âWhen do you go?â And I say, âTomorrow.â And she said, âWhen do you come back?â âOnce I have fixed it.â Four months later, but I fixed it. And so, the people we hired back then are still people we have with us today. But consumer hardware, itâs really, really hard particularly in the early days, because shit happens, and you end up burning more money than what you expected. Having good unit economics is really hard. Having repeated purchases is really hard. And the speed of iteration particularly on hardware is extremely difficult.
Turner Novak:
Yeah, itâs really slow.
Matteo Franceschetti:
If you miss one generation of the product, you probably need to wait another 12 months if youâre really fast. And so, then it means you need to survive for the 12 months. And so the first probably three, four years, they were the toughest. And then as things now really started taking off, particularly with the Pod, our technology, things were incredible. The key thing in consumer hardware, you really need to have product market fit, or youâre not going to make it. If people love your product, then you have the chances to make it. But if itâs a nice-to-have, then youâre in trouble.
Turner Novak:
So you really have to build and create a new thing, like a new product that people truly love. But itâs probably difficult because you canât just go Vibe code an app or whatever, and like, âOh, it looks like people are using this.â You actually have to go and build this thing. How do you know what to build and what to do?
Matteo Franceschetti:
I step back for a second, and then I answer, which in the early days is obviously a disadvantage because youâre slower and is more risky. But if you really cross the chasm, at that point, you have an incredible moat and much more defense stability. So once you reach our stage, youâre in a better position because you already went to a pain that very few people can overcome. Then, we started with the idea of the cover that was just tracking your sleep.
And then as I was doing customer discovery and talking to people about the product, everyone said, âLook, that is cool, but does it cool?â And, âMy partner wants it warm, I want it cold. Does it do that?â And literally, hundred percent of the people I was talking to, they were asking for that. And so after we shipped the 8,000 units in pre-orders, we were able to raise money from Khosla Ventures with Keith Rabois and Vinod, because they were bullish on the idea. And that is when we built the Pod, which is our current technology. And it went from zero to multiple hundreds of millions in a matter of four years, five years.
Turner Novak:
Interesting. So I guess it might be interesting to kind of talk about the fundraising journey. Because I think a lot of founders building consumer hardware like this, they probably run into a lot of the things that youâve run into. How did you raise money for this? It sounds like initially was the first round it was people that you knew really well. And then, it sounds like you did the crowdfunding round after that.
Matteo Franceschetti:
Yeah. I would say particularly the first three rounds, they were really hard. So first, we had the family and friends. It was probably a million. Then, we got rejected by YC twice. But the third time, we got in. And after demo day, we raised 6 million in a day. That was probably the easiest time to raise in the history of the company, because YC Arbor was still very hot. There were investors from all over the world, so it was the right time. Then what happens is that investors start to realize, because there it was immediately after Nest got acquired by Google. And so, there was a hype around hardware. A year later, everyone hated hardware, because a lot of companies, they were in trouble.
Crowdfunding was not working. A lot of companies sold six to 7 million on crowdfunding, and they were going bust. And so, investors didnât want to touch consumer hardware. Particularly, there was no subscription, which we didnât have at the time. We were able to do a small A. Then, we did a B or A1, whatever was the name, convincing Khosla Ventures. And there itâs just because Keith and Vinod, they have always been very bullish on sleep. And so, they knew there would be a company that could dominate the trillion-dollar industry. It was just a matter of finding the right founders. So they gave us the money, and I think we raised around 9 million.
Then, the next round was Founders Fund, but it was never easy. Then, we had Valor Equity Partners, first investor in Tesla. And then, recently we raised the hundred million. So overall we raised, I think, somewhere between 250 and 300 million in that range. But each round was very difficult. Itâs not that we had an insane amount of people begging to invest. But where we were luck is that at the end of the day, the people that invested were always some of the best. And the reason was that it was easier for me to convince them that we were the right team than convincing them that weâll be a massive company in sleep.
All these people, right? Keith, Vinod, Trey Stevens, whoâs the founder of Anduril, Antonio Gracias, first board member of Tesla and one of the closest people to Twitter. I didnât have to convince them that there will be a trillion-dollar company in sleep. I just had to convince them that we could be that company because we are going to work hard and we are the right people. Well, instead was a lot of other people, it was much harder because they had to be convinced about the business opportunity in general. And so we ended up with some of the best investors in Silicon Valley, if not the best because of this unique angle.
Turner Novak:
So itâs like a trick for fundraising. Itâs just figure out the people who actually believe what youâre doing, and thatâs half the battle. Because I mean, Iâll have conversations with friends and theyâll say, âWhat do you think about that Eight Sleep company? Itâs just a mattress. Thereâs no way thatâs a venture-backed company.â Like, I donât know. I mean, is it just a mattress? I donât know. I donât think so. I think thereâs actually a pretty big opportunity there. You spend a third of your life sleeping. For a lot of people, I mean, your biggest purchases may be your home, your car.
Mattresses are pretty expensive products that people spend a lot of money on. And I think especially today, weâre kind of at a point where people will spend each incremental dollar of income they have, they will spend it on a luxury good or something that improves their life. And we just spent the last 30 minutes talking about how important sleep is. So itâs like, would somebody pay a couple of thousand dollars a year or a month or whatever it is to be healthier and get more sleep? I donât know. I kind of think the answer is probably. Some people would.
Matteo Franceschetti:
If you can get up to 30% better sleep, and youâre paying a dollar or two per night, would you pay that? I think the answer is yes. The main thing is if you look at mattresses, which again, we are not a mattress because we are a device that goes on top of the mattress, but I call them dumb mattresses. And so, we go to bed at night and we pretend to fall asleep and wake up eight hours later fully refreshed. First eight hours is the equivalent of a trip from Miami to Milan every single day. No? Because we are unconscious, we donât realize how long that time is, but itâs literally flying from New York to Milan every single day. That flight is a pretty long flight. So you can optimize it for $2 a day or a dollar a day, I would consider it.
Turner Novak:
Yeah. You think people pay a thousand bucks to get first class on a flight like that.
Matteo Franceschetti:
Yeah, for one trip. Right here, itâs three times per month. And second is, these mattresses, the latest technology for mattresses was memory foam, which was invented around 1966, in the â60s, from the NASA for space. Okay? That is the latest freaking innovation we had in sleep. And we all sleep on these pieces of dumb foam. We have iPhones, we have OpenAI, Elon Musk is taking me to Mars, but we still spend 30, 40 years of our life on a piece of dumb foam that does nothing for us, and that to me is the part that doesnât make sense. And so for a small amount, I understand our product is still fairly premium. And over time, weâll make it more affordable to more people. But the fact that we need technology to enhance our sleep for our health and our happiness and our longevity, I donât think is debatable.
Turner Novak:
So then when you were hiring people and trying to convince people to join you, I donât know how easy that was. But I would assume thereâs a lot of people that are like, âHardware, sleep. Is this a real problem? I want to go join a B2B SaaS.â Whatever company was hot at the time. Was it hard to get people to join? Did you have a thing that worked really well for hiring people, maybe in the early days, and then today?
Matteo Franceschetti:
It was much easier than what you would expect because of our mission, right? At the end of the day, again, we are a healthcare company. Weâre substantially a wearable company. We just have a different form factor. And so people from Apple Watch or from other wearables companies, they all are giants. Because actually, we are the only wearable that does something for you. We donât report the data. We have obviously butler, which based on the data, can do things for you. But now, the most interesting thing is the number one way to recruit is these people already have our product, and they love it so much.
So theyâre already in tech, theyâre already doing hardware, I donât know, at Apple. Or theyâre doing software at, I donât know, Meta, whatever. You pick the top company, they have the product, they love it, they see we are hiring, they want to join us. And that is the best way because they already know the product. Then on our side, because we are so hardcore and we work so hard, then itâs just a matter of alignment. If you join Eight Sleep, youâre on a mission, youâre going to work. We need to move as fast as possible to deliver better sleep to millions of people.
Turner Novak:
Yeah, the mission alignmentâs interesting. Iâll try and help a portfolio company hire, and theyâre just doing some boring compliance thing or something. Iâll try to convince my friend, and theyâre like, âI donât want to do that. That seems lame.â And so, one thing I thought was kind of interesting on the website, you didnât mention it earlier. But on the website, it said you launched supplement products. And then, you also have a jet lag supplement. Is that pretty new-ish?
Matteo Franceschetti:
Yeah, we launched them recently. I travel 250 days a year, because I travel across all our offices. A headquarters in New York, San Francisco, China, Milan, and Boston. And so, I developed the product with Peter Attia, which is one of the greatest doctors. He has a very famous book in terms of longevity. And so, we developed these supplements. There is a line of supplements that they help you just to relax and calm down at night. And they donât create any form of dependency, so you can take them literally every single night.
And then there is a jet lag supplement, and that is specific for jet lag and is amazing. I wasnât biased. But people should try it, because that is very affordable. And substantially when you travel based on the delta in terms of time zone, you take more or less capsules, and itâs going to put you asleep, and you donât feel the jet lag anymore. So it doesnât matter if I travel to Europe, if I travel to Middle East, whatever, now I have my plan in our app. There is a whole jet lag protocol that uses all these supplements, and you will not feel jet lag anymore.
Turner Novak:
So how does it work? Does it release like a melatonin or something or change your heart rate or temperature to just help you fall asleep based on the new time zone youâre going to?
Matteo Franceschetti:
Yeah, there are two ingredients. One of the two is melatonin as you were saying. And so, you take three capsule. If itâs the first night, or two capsule. The second night, or one capsule. The third night, you adjust the dosage. And based on that, once you take it within an hour, you will feel super sleepy. You fall asleep. You want to take it at the right time, so whatever is your usual bedtime, it doesnât matter. Letâs say you land in the Middle East and you usually go to sleep at 10:00 PM. At 10:00 PM, you take the three capsule the first night. You go through the whole night and you readjust quickly. And then in the app, we also give you a protocol of things you could do in the morning, like sunlight or exercise a little bit, when you should eat. And so, we have really transition you to the new time zone.
Turner Novak:
Yeah. Iâve done a little bit of research around, you want to eat about 12 hours before you want to wake up. You donât want to eat three hours before bed. Thatâs like a self-control thing. You need to tell the person, give them the instructions, and they got to stick to it. So just generally thinking then, is there an opportunity to do things really just to womenâs health, because it kind of feels like an underexplored area? Have you done much there yet?
Matteo Franceschetti:
Not yet. That is part of our focus. Weâre working on that as we speak. And you will start seeing more and more results early next year. And the reason is this, we have seen a lot of demand from women, particularly women going through menopause, because they have hot flashes. And with our product, we can cool them down when they have hot flashes in the middle of the night, and we can help them to stay asleep or go back to sleep. And so, literally every woman on earth who is going through menopause with hot flashes, if they can afford our product, they will see a meaningful benefit from it. Just because, again, we can cool you down in a matter of minutes while youâre sweating.
Then as a derivative, we have seen a lot of interest from women also during their pregnancy, because their biometrics and their temperature changes are during the different trimesters. And so, we are working on programs also for women during that period to help them, particularly also with the base, which is designed for snoring, but in reality, a lot of people use it also for just comfort. We even see women using our base to be able to feed the baby after they gave birth just because itâs easier in the middle of the night to raise themselves with the base, and then feed the baby. And so, there are all these very interesting features that humanize the product and solve a lot of micro problems for women. And we believe we can do an amazing job for them.
Turner Novak:
Yeah, and thatâs interesting too because I donât know what the specific number is, but I believe women control 70% of all consumer spending, like every household. I think about me and my wife, itâs usually, I sometimes have input, but sheâs usually the one whoâs really driving a lot of our decisions. So I feel like thatâs a pretty big market that you guys can unlock.
Matteo Franceschetti:
Yeah. And what we love is we are a painkiller and not a vitamin, and that is all always what excites me. Another thing we didnât expect is for people with cancer going through chemo, and they have hot flashes. I didnât know and we didnât expect. And so, now we see a lot of these people buying our product because they have hot flashes while theyâre going through the therapy of now chemo. So those are the things that make me really proud, because some of these people write me and they say, âI wasnât able to sleep for months. Now, I can finally sleep again. Thank you very much.â That is the best message you can receive as a CEO.
Turner Novak:
Yeah. And so, one thing you mentioned just from a business model perspective, you mentioned initially you did not have a subscription product. So people would just buy it, and then maybe they might come back to get a new generation of the product. But then at some point, you layered in a subscription. How did that kind of work over time?
Matteo Franceschetti:
Well, as we started applying more and more intelligence, as what we were saying before, right? So now, we run a lot of computational activities on the cloud, and that has a cost, and that is how we can provide more advanced biometrics, more biometrics in general, and also come back to you with insights. And then, these 24/7 sleep butler that in real time can adjust things. And so, there is really a computational cost.
When people say, âOh, why this device has a subscription?â Is deliver all the value that we deliver, itâs because of that. And I think the value is proven in our retention, which is insane. Literally almost very, very, very few of our customers stop the subscription after one year, two years, or three years. And the reason is, hopefully we are proving that we can deliver so much value that, again, for a dollar a night, for you and your partner, this is more than worth the mark.
Turner Novak:
Yeah, that makes sense. Whatâs your personal sort of fitness or health regimen? Iâm assuming you use Eight Sleep. Iâm assuming you track and optimize that. What other kind of stuff do you do?
Matteo Franceschetti:
Well, Iâm fairly extreme. And so, I fast. I usually eat once per day or maybe twice. I definitely just skip breakfast. I usually never intake more than 500 calories before dinner. But I train every day, so on average, I probably burn in a day between 3000, 4,000 calories.
Turner Novak:
And you make it all back up at dinner?
Matteo Franceschetti:
Yeah, majority. Then, Iâm at like 8% body fat, so Iâm really skinny. Iâm at the peak in terms of HRV, which is pretty good for someone who has been running the company for 10 years that was able to keep my stuff in shape. My heart rate is at the lowest it has ever been. As I said, I train every day. But really, I play padel at a competitive level when I can, or I go to the gym. I do an ice bath every single day. I do probably a sauna two, three times a week. And Iâm on a keto diet, so I almost never eat carbs except Friday night when I have pizza with my wife. So Iâm very regimental. I donât recommend this to many people, could say Iâm a robot. But that is also what helps me to perform and stay stable as we build the company.
Turner Novak:
Well, and itâs probably good that you as somebody whoâs like youâre building a company for a certain percentage of consumers that really wants to optimize this stuff. Itâs probably a good thing that youâre constantly just iterating on the different areas that someone might want to optimize their health. Youâre basically your own customer in a sense. So itâs probably a good thing.
Matteo Franceschetti:
I think the type of Guinea pig who is testing things for our audience to then maximize their own sleep, Iâm extreme, and I think itâs fine. And at the same time I think of my job, like, Iâm an athlete myself. If I want to help the company grow and achieve what we want to achieve, I need to make sure Iâm a peak performance. And so, I try to lead myself as an athlete for as much as I can.
Turner Novak:
And I know you do a lot of sports, car racing. Is that considered a sport or is that more of a leisure thing?
Matteo Franceschetti:
I mean, when I do it, itâs a true sport. Itâs very competitive. I did a few years ago, the 12 hours of Abu Dhabi where I finished third. Yeah. Whenever I can, I race with cars because itâs the passion I had since when I was a kid. I donât have a lot of time for that, but itâs really good for my brain because itâs all about taking decision quickly at high speed. There is adrenaline. And so, yeah, I love it. So I just work and play padel. And a few times a year, I race with cars.
Turner Novak:
Yeah. Well, a lot of people donât realize how physically demanding that is. You look at the F1 guys, and theyâre in very good shape. And itâs because itâs super stressful. Your mind is constantly thinking. And you have to be super quick, the fastest reflexes of any human in order to do that. So yeah, I think itâs a lot harder than people realize.
Matteo Franceschetti:
Two things people underestimate. The first one is the braking. Itâs almost the equivalent with the cars I drive. You need to put the pressure of 160 pounds-ish just with the left leg multiple times lap. And you need to go full power. That is one. And the second is, particularly, in GT cars. Inside the cockpit, it gets really, really warm. Youâre probably in the hundred, 210 Fahrenheit. And then, you have the helmet and the gear, and youâre there performing for a couple of hours at peak perform-
Turner Novak:
Thatâd be really uncomfortable for most people.
Matteo Franceschetti:
Yeah. I remember when I stopped racing cars for many years, then I was able to just go back a few years ago, and I was not in the shape, my current shape. And after an hour, right? Because itâs a matter of a 10th of a second there. Itâs not seconds, itâs a 10th of a second. And so if you just become a tiny little bit slower because you just get a little bit tired or youâre sweating a little bit too much, you merely lose three tenths of a second.
Turner Novak:
Oh, wow. And thatâs like everyone else youâre competing against is probably not missing that three tenths of a second, so youâre immediately in last place.
Matteo Franceschetti:
Yeah.
Turner Novak:
Well, this is a lot of fun. Thanks for taking time to come on the show.
Matteo Franceschetti:
No, of course. Thank you for having me. It was a great chat.
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