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Oh, hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Founders Felgate. Founders Field Guide is a series of conversations with founders, CEOs and operators building great businesses. I believe we are all builders in our own way and this series is dedicated to stories and lessons from builders of all types. You can find more episodes at Investor Field Guide dot com.

Patrick O'Shaughnessy is the CEO of O'Shannassy Asset Management, all opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shannassy asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shannassy Asset Management may maintain positions in the securities discussed in this podcast.

My guest today is Matteo Franceschini, the founder and CEO of Eight Sleep. Eight Sleep builds mattresses with dynamic temperature control and a variety of biometric sensors, and their goal is to make their customers get drastically better sleep. We talk about why biometrics matter, how hard it is to start a hardware company and launch manufacturing overseas, how Mateo manages his own sleep and the massive potential preventative health companies like Eight Sleep may have in the future. I hope you enjoy this conversation with Matteo Franceschini.

OK, so, Matteo, I think this is the first time that I can say that I am a nightly active user of the product of one of my guests. Your product is Eat Sleep a mattress that does all sorts of interesting things. I'd love you to begin by describing the origin story of this business. What was the path that led you to found sleep?

Yeah, it was the typical entrepreneur working long hours. And I started looking to sleep to see if I could sleep less, could have more time to work and do whatever I wanted. And then I started wondering why Elon Musk is taking me to Mars. But I still spend a third of my life on a piece of foam. I mean, if I'm going to live a hundred years, I'm going to spend 33, three years of my life on a piece of foam that was now making sense to me.

And so I thought maybe I can fix it.

What was the original journey of creating this product like? Because I imagine it's very complicated. There's a cool picture that will post in the show, notes that shows like Wires Everywhere. And what was version one like?

How did you decide what should go into version one is a cool story because my co-founder Max, so we built the first version in his garage in San Francisco. He just hacked a bunch of different sensors and then he was also able to create a sort of heating pad and keep everything like sunny days, but obviously was a real hack. And then we invited friends to his place for a pajama party and everyone came with their pajama and they tried the product and they give us feedback.

But at the time, there was no company, right? It was a side project. It was like the third stage of the project we were playing with. And one of the people coming gave us a check at the end of the pajama party and say, I want to give you a twenty five K to start the business. And that is how it started.

Describe the state of it today for listeners. What are all of the things that the mattress does today?

Let's start was the vision and then I explain what we are doing today. So we want to do two things. We want to compress your sleep and we want to save your life. Compressor's Labor Lieberman's. What if you could sleep only six hours and get some more rest than when you were sleeping eight hours. So technology can enhance your sleep performance. Then during the six hours, we still want to scan your body to identify that is any illness or anything that you should be aware of.

So going to bed is more valuable than going to your physician. What we do today is we already do potentially both these two things. On one side, we improve your sleep performance and we do it through temperature so we dynamically change the temperature of your bed and your body during the night to help you fall asleep faster and get more sleep. And second, we track everything about your heart rate, improving HIV, respiration and sleep. It comes in true form factor.

Is it all bad or is the mattress cover that can be installed on to any bed? Then let's talk to each of the reasons why those things are good. So why is temperature an interesting variable to play with as people sleep? What's the research behind it?

Temperature is the big elephant in the room. When you think of sleep improvements outside sleep medical disorders, there is plenty of medical evidence about that. And the results are called The Way We Sleep, written by Professor Matthew Walker. That has a whole section about carbon regulation. But the bottom line is your body temperature changes during the day and changes during the night. So what we do is we just enhanced these changes to help you fall asleep faster, get more sleep and get more or less wake up and less taxes in terms.

Then inside the device embedded, there are a lot of sensors that we use, a technology called ballistic hagiographic. And so you just go to bed. But the bed has all these sensors and it's working like a Wi-Fi connected stethoscope through the sensors. We can pick any information about your heart rate in the future. We will see. We'll see fibrillation. We will be able to predict if you are getting sick because your heart rate address changes a couple of days before you get the flu and talk me through.

The challenge of the temperature seems kind of straightforward. You're pumping water that's warmed or cooled through these coils. And I think, you know, there's been mattress pads that you can cool through time. So that seems maybe less technically challenging. The sensor part seems really hard. So like what literally are those sensors and how accurate are they relative to, let's say you went to some institute and did like a sleep study with the most sophisticated, accurate sensors? Like how much gap is there between what you can do now and how quickly would that gap close briefly about temperature, sort of these technologies exist, that the big challenge is where to make it to create a great user experience, make sure that is not noisy, that it changes temperature quickly and that is compostable.

And then the big challenge is really the machine learning and A.I. because we need to keep adjusting the temperature based on your biometrics in your sleep, really. And on the sensor, we use these sort of microfilms. So there are these sensors that are embedded in the top layer of the story over you don't see them, you don't feel them. And as. I was saying they work like a stethoscope, they substantially pick up the vibration that comes from your chest and that vibration could be the vibration generated by the heartbeat or the vibration generated by your breathing then together with movement.

Because we are able to track movement as well. We are able to infer stages, for example, if you don't move, but your heart rate is accelerating because you're dreaming well and studying deep sleep, you have a different the breathing, a different heart rate and you still move.

I'd love to talk through. I like the idea that going to bed is more valuable than going to your physician.

What the most valuable inputs are for health. So you've talked about several of them, heart rate, respiratory rate, things like this. Maybe HIV is a good example of one that people may not be familiar with talking to a little bit about that. Why is it valuable? What does it measure with that feedback loop in place? Like if I get to see which I do use in the mattress every morning, my HIV, like, what can I do with that information?

Why is it valuable?

So HIV is a great proxy of how the rest of your body is. So let's say today you go and you run a marathon tomorrow, your HIV very likely would be really low. The higher the HIV, the better. It means that your body is more rested, particularly if you are into fitness, Crossfade or any sort of training. You start measuring how aggressive you are based on these metrics. And when you see that your HIV is really low, that is the moment where you should take the day off or you should have a Verilli session.

The risk that you have if you train during those days is that you could just get an injury or your performance would just be below par. So anyone who is again going to the gym or in health and wellness and fitness, that is a great proxy. Another great proxy is your heart rate at rest, which is indicative of what is your cardio fitness. So the lower the better. In this case is the opposite of the HIV. In my case, when I do high intensity interval training, the more I do that, the the more my heart rate that risk drops.

I have stats now with all the devices I use for the past probably three years. And I notice that all the kinds of for a couple of months I do high intensity interval training consistently for a month might have to press the other big thing. We don't track that, but is vital to Max that is indicative of capacity to really impact oxygen.

How much research is there on these variables? It seems like there's good research on the fitness component of this. It's helpful in terms of its utility to know when to train hard, when to rest, whatever. How much value is there in terms of more significant health problems or outcomes? Do you think that that's a realm that you'll be into soon?

Like, am I going to get a notification that says, like, you should probably check into X, Y or Z? Like what are the valuable non fitness health outcomes on how to take a risk?

There is plenty and there are also benchmarks of whether you should be based on your age, gender. And so you can immediately understand if you are Rambold below par or Ompa, the heart rate and rest is really important because it's a metric that changes when there is something wrong. So, for example, two years ago, December twenty nineteen, I got the flu and when I started looking at my heart rate at rest, I noticed that this type of change in three days before I got the flu.

So in the future, companies like Kaiser, they will be able to have an 80 percent confidence that maybe you are going to be sick in two days or if there is any inflammation or maybe even coughing on the respiration. The respiration is more what is really important is to see if you have sleep apnea, because when you have sleep apnea substantially, there is a lack of oxygen going through the brain. And so if you have a light sleep, it's fine, you want to measure it.

But there is no simple way to measure unless you use our product. You don't want to wear some of these machines. But if you're sleep apnea is really strong, you should use one of those. Otherwise you will not be arrested in the morning because your brain keeps lacking oxygen during the night. There is not a lot of information yet in terms of longevity and health and is the metric that keeps biting every single day. There will be more discovery.

How do you think about the most valuable, measurable zir data that it will be really hard for you to capture in a mattress? You should be wearing the levels patch which measures continuous glucose blood sugar in your system, which I think is probably super valuable. Maybe there's other things that can be measured like vitamin levels or your urine. I've seen a product that does that. Just help us flesh out the rest of what's missing, like in ten years time.

What are the other things that we're going to measure that might be valuable? And which of them do you think you can do eventually?

To me, the most important thing we will do and I really care about is to really scan your organs. So I want to be able to detect cancer. There are already technologies that they do it. So we're not talking about reinventing the wheel. Just no one was able to bring some of this technology to mass consumer at a reasonable. And so imagine that with some of this technology in three to five years from now, we will be able to scan your organs and see sort of cancer in a couple of different areas of your body.

And we will go beyond that because maybe we'll just be able to see how your liver behaves after you have a couple of glasses of wine. Maybe not an illness, but right now no one knows. Does your liver become bigger? How much bigger? And then there will be the last step of predictive health where we will not even wait for you to develop a cancer. We will be able to know a couple of years in advance based on certain trends and patterns, that you have a high likelihood to develop a certain type of cancer.

That is what is going to happen in 10 years. We will change the form factor of the beds. We will introduce many more sensors. The beauty of what we do is there are three because of the price point. We can add sensors, I think 100 bucks sensor. It's something we can do is not going to meaningfully change them. But instead, in a wearable, you can not add 100 bucks in cost. Second, we have a lot of space because the result is done for that no one is really using.

And third, you use the product every single day for six to 10 years. And that type of retention becomes really valuable in terms of longevity, because your heart rate today is different from your heart rate.

And six years from now, I love the idea of the space, the frequency them SRP as variables that make the bed the uniquely right form factor to measure this stuff. Let's talk through the business now and we'll probably keep coming back to why this information's valuable. So many neat things to dive into. What were the interesting early challenges of getting this off the ground? It strikes me that there's a heavy R&D function in your business. It's physical, so it's manufacturing.

The marketing aspect is really interesting. Talk me through the early days of the business and the biggest challenges that you faced. Let me start with the family story.

So we went to work on business or we did see them one day we raised money. So it was a good moment and it was time to start manufacturing. But things were not happening in China. So I got to my wife with one of the co-founders and say, manufacturing is not happening. I have to go to China and fix it. And she said, oh, when do you go and say, oh, I leave tomorrow? And then she says, and when do you come back?

But once I have fixed it.

And so I got there.

And then for a couple of months, one way only and I started making manufacturing or something, contractors, and we figured that out. But the first batch, so everything started with an Indiegogo campaign. It was a crowdfunding campaign. And the time we sold eight housing units, none of us ever built a physical unit of anything in our life. So we didn't know much and we had to build eight housing units. So that was really painful. We were late in shipping and everything.

In order to cost more than you expect in February, when you don't have experience, you are not able to correct the mistakes that you will make.

Talk me through the early manufacturing lessons. So for those that want to go manufacture something overseas. So you land in Shenzhen, who are the players? Who are you talking to? What are you literally doing?

What are the steps that matter? What have you gotten better at since that original trip?

The real bottom line, if I was doing this again, is I would just hire people like our as VP of software. It's not something that you learn overnight. If I was giving you advice, is to hire the best person who knows this shit. Yeah. Find the person and they will figure it out. Otherwise, the learning curve is too slow because any mistake can cost a month. But if you're going to do that, then what I did is I went there through contacts and friends.

I got connected to a couple of contractors, identified one. And this person who was Chinese was taking us around to see all the different manufacturers. But what you really need to do is to identify who is going to be your manufacturer, negotiate with them based on the product. You might need more than one. For example, for us, there is one manufacturer, all of our sensors and other manufacturing for the thermal engines and then the one that assemble everything you need to run a process.

And that is where someone with experience would be way better than you. And in order to get the courts and then you need just to be really good at timelines. Again, any mistake.

And of course, the reporter, how did you think through the different potential business models here? So obviously it's a big physical product. You have to charge people for the product itself. And there's lots of ways that you can earn margin in any business. I guess. I think your model right now is you just buy the bed and the application that I'm using every day is currently free. What have you considered in terms of potential business models to make this thing one the most valuable and to customers, of course, and then to the most valuable business?

There are lots of features that are coming. So you can think of us like a lot of sleep. That is how our customers, they call us right now. The subscription is not paid yet, so we don't charge you for that. That is going to happen. We just want to make sure that we deliver delivering that value to our customers. Through how? Notifications and content and other data and insights and automatic temperature adjustment, we call it sleep fitness.

And the reason why we call it fitness is to be going to sleep is like going to the gym is something that you are doing for your body health and longevity and in the same way that you pay for your gym. There must be a small amount that you pay for your sleep in order to be sleep.

And when you talk about sleep fitness, you mentioned at the beginning one goal being potentially reducing the amount of sleep. Why would the goal be less sleep versus just like more good sleep? Just want more waking hours in life.

Like talk me through that as a North Star and why I care about that.

Our hypothesis is that what really matters more than anything is deep sleep and REM and those ones we want to increase them. The point is roughly, you still spend 50 percent of your time asleep in like sleep. And our hypothesis is that sleep is substantially an inefficiency of your body to transition to these different stages. Again, we don't want to actually program. We actually want to increase them, but we want to compress life, sleep that counts for around four hours a night.

So what if we could cut it in half?

I'm going to pull mine up because I'm just curious to ask the question and I'll give a real data point. And hopefully I'm not a terrible sleeper here. If you look at my data from last night, 60 percent of my sleep was light sleep and then basically split between REM and deep sleep for the rest.

So what is good? What is a target? What percent should be light in the best sleepers out there that you've studied or measured?

Yeah, a super personnel. But a rule of thumb, I think you could see your REM and deep anywhere between 15 and 25. For me personally, for example, if I got less than 18 percent deep, I will not feel good during the day and will not perform well anything above 80 percent. I started being good at anything above 90 percent. I'm like a killer. The is when you start really thinking that together they are deeper than they are in the 40 percent ish.

I could go between 30 and 50 and all the rest is like sleep and sleep is not what your body really needs to recover at its peak, because if you've got a full night's sleep, you will feel terrible in the morning, even if it was eight hours of what you need is deeper and more than anything.

Yeah, really interesting. What behavior changes have you gone through or maybe you and your wife gone through as a result of sleeping on one of these and having this data every day? Like what are the biggest changes that you've made?

Obviously I'm super obsessed with my sleep. And I can tell you that's the most impactful to me is what they call Actimel shock before the game that I usually take a shower and I keep switching between hot and cold 10 times, 30 seconds each.

Thermal shock really relaxes me if I'm in a hotel or if I have the opportunity to do a sauna and then nice bath that is the same as actually the bathtub. The other big thing is when the doctor is consistency, go to bed at the same time and more than anything, wake up at the same time every single day also during the week. And that way you train your body to wake up. And naturally at that time, you will wake up without an alarm, without feeling groggy.

Temperature, as we were saying, is the big elephant in the room. Key thing is when you hear people saying, oh, you should sleep at sixty degrees the whole night, that it's best. The reason is your body temperature changes during the night. So. Sixty eight degrees could be right for thirty minutes an hour, but not for the whole night. And that is where we come in. And with our technology we keep changing the temperature of your body based on what are your needs, that you can try supplements, you can try normal taking bullets to compress the legs, maybe these exercises.

Have you learned anything about what you consume and how it affects sleep? So when and what type of food, alcohol or not, these sorts of things would have been interesting lessons that you've learned there.

Yeah, so I stopped drinking two years ago. Alcohol has a huge impact on your sleep and your recovery in general. Sometimes you don't notice it or you think of the opposite because is just no slows your mind and it might relax you and you think, oh, actually a couple of glasses of wine, they will have to sleep better. The reality is, if you look at your biometrics, you will see that your heart rate at rest will go up, which is bad, your HIV will go down and in Germany you will get less restful sleep.

So I stop drinking completely. I was not a heavy drinker even before, but now I'm good. Then I'm also coffee. Coffee. What we have seen is, I mean, the rule of thumb is to stop drinking coffee eight hours before going to bed.

Anything on food specifically. That's interesting for you personally that you've learned like types of food or how proximity of eating to bed or just anything like that, anything on the consumption side of food, food and sleep.

Specifically, there are some studies that prove that carbs, they can help you fall asleep faster, but then you will have less restful sleep. Usually you should stop eating a couple of hours at least before going to bed if possible. And on a lighter meal is better than a one. And the reason is that if you involve digestion to. There is where all the blood goes in your body, and that makes everything harder than outside sleep, I have a lot of stories about my nutrition because I'm monitoring glucose.

For example, for me, eating batteries is worse than eating a pizza in terms of glucose spikes. Well, instead, that maybe because I'm Italian and ice cream or gelato has no impact at all. My glucose zero is. Yeah.

Why is glucose spikes bad? Is there good science behind what is going on in the body, like what's downstream of that? So if that's the indicator you want to stay in like a low variance type band of glucose, why is that? Why is that true?

The simplest answer is glucose spikes. They create inflammation and inflammation is the problem that then drives sort of feeding those, including cancer, and it has an impact on your objectivity then if you keep being at high level, will cause you develop these sort of insulin resistance. And so you will start craving more and more junk food or foods that can generate these sort of high spikes, which is then what can lead you to diabetes.

Yeah, that's fascinating. Going back to the business. So you've got the early days. You had the eight thousand orders on Indiegogo and you struggle up the hardware learning curve in Shenzhen and elsewhere, and that's the early stage of the business. How would you describe the next chapter of the business after that? What were the challenges in Chapter two of the business?

We finally achieved a thousand units. I think it took us like 18 months. Overall, it was 2016. So at that point we finally are in real life or the number one challenge you face is then it's not that you sell or you need to build eight housing units anymore. So the big problem for our companies is you do this successful crowdfunding campaigns, you build these large volumes, but then when you start selling on a day by day basis, then each month you sell 300 units.

So that is going to screw up your whole supply chain. And the manufacturer is unhappy because this is what's happening on the kind of thing. But things start going well. At the end of 2017, Khosla Ventures come in, they invest in us Arabize is the one leading the round, and they give us the money to build the part, which is the current technology, because the first version didn't have cooling. But we knew since day one that cooling, again, was the big game changer is what can really enhance performance.

We just didn't have the money to build it. So Keithan, cause they come in, they give us the money. At that point we spend around fifteen months to build the pod. By then we had this hardware, so he was able to do it properly and on time we shipped that. And since then it has been I would say things went pretty well after the launch of the pod three, four months later is when I'm alone. I walked around with Chris Stevens and that was our last formal round.

Things are going really well now. People love the product. If you follow us on Twitter, you would see probably many people talking about that.

What have you learned about marketing with this product, specifically? What has worked? Well, what has failed when marketing a product that's a high price point and very different sort of thing. It's an infrequent purchase.

A lot of things there as well. I would say the biggest thing is we probably try to go on too many marketing channels too fast. And the result is this is not an impulsive purchase. And so our customers, before buying, they want to hear from other people on the devices that they trust that the product is good. They don't want to spend they blindly pre-K. And so what we understood is to focus on a smaller community and really own that community, which right now for us is the tax base.

And that's why you see me so active on Twitter. It's better to own more community that is still large because it's still millions of people and make sure that people keep talking about the product because that would create the snowball effect instead of just doing TV radio these days and that. But you don't create multiple touch points with the same customer.

Yeah, it's a fascinating density or heat of the comments. There's always really important. What is the most exciting day for you in the research part of your division across the firm's history? I think two things.

So first, the first prototype that was really about to call me, that was an amazing experience. Once you started using it, you started thinking why there is nothing like that is like living in the house without an AC or in the car without an AC. Once you start using it, it's so normal and so obvious that you can't imagine living without that. So that was one. The other one it was we picked the first episode of a ship in one of our clinical trials and you really start understanding that we can really save lives.

And that is when everything started having a bigger meaning. And what we do and at the end of one of our employees a year ago die was the heart attack in the early morning. So I think. Like that they shouldn't happen and we could prevent them hopefully one day. I love that. I mean, defaults matter, right? And people are lazy. People don't take active steps often, but if it's done passively and collected passively, which a bed is uniquely situated to do, it seems like a cool business angle or idea.

What else have you learned about Peloton, I guess is a great example of turning an infrequent purchase into a frequent purchase. Any nuance to that business model that you think the audience would find interesting?

Yes. Well, we did because we knew and we know we'll keep releasing new technologies. We didn't want people that bought a bed last year to then find the thing that immediately obsolete seven months after. And so the way we design our beds is that you can upgrade them at a fraction of the price. So let's say tomorrow we release a new pod. You don't have to buy the whole new pod. You just buy the top layer and you replace that in your current product.

The foam party will still last 10 years, as it has always done for the mattresses. But the technology at a fraction of the price can be updated every year. And a large part of our monthly revenue is still people just upgrading, which if you think is like the iPhone model, is the same concept.

Yeah, that's fascinating. And obviously, Larry, and subscription like Peloton has done content for them. Probably insights and data for your customers is another way of doing it. It's pretty fascinating. What has it been like working with your wife? That's a fairly unique co-founder story. I'm involved in another business where that's the case as well called bottomless. I'm just fascinated by it to work with my wife. What have you learned about doing that effectively and not killing each other?

I'll share a couple of stories because they are funny. So the first one is we use WhatsApp for our personal stuff and we use it for business. And so sometimes I might be screaming on Slack about something that needs to be fixed today. Then on WhatsApp, I'm asking what we are going to have for dinner. We have these two dimensions and then she's the one I would always talk about work. I will be working. Right. And so she was the one who has set the boundaries and just said correctly, you need to treat me like a colleague.

So it's not that the 9:00 p.m. randomly why we are on the couch, you can just stop talking about work. But then what I did, it was fine. I get that. I cannot talk about that. But I can still slack you because I would like I. I have an idea as though sometimes we out on the couch at nine thirty p.m. and I started writing her and I can hear her phone vibrating on the couch and we can talk about that.

That's really funny.

What else is exciting to you about the future of this quantified self movement? If we were to just start to dream a little bit and think about what might be possible in the future for us, for our kids, what is the almost like sci fi like potential outcomes that you think we might see in our lifetimes?

Preventative health? I'm so excited about that. So we have this vision. Let's assume we now know what a vision. We will give you an example. There was the death of a person. She's a founder in tech. She lost one of her parents in thirteen days because they discover she had cancer all over her body and then the person was gone. Thirteen days later, this can be sold. There are a bunch of different types of cancers that can be detected very early.

And actually, if you detect them very early, they're not even that complicated to be solved. The point is, it's really hard to detect them early. And so by the time you discover them, it's usually too late. And the end goal, as we were saying, is not even to detect them. Being one of cancer to me is isn't detecting the fact that you have a high likelihood that that will happen two years before it starts. That will happen.

Multiple companies will be able to help us achieve that, not just a sleep. And we have the data with all the wearables to make it possible.

What has been the hardest challenge overall in the business so far? What was the hardest hill to take? I think so.

Obviously, we started in 2015 when out of nowhere there was a lot of interest around outbreath then a lot of other companies had problems in the following year and so for a couple of years has been really tough for us because investors didn't want to invest in hardware anymore. We were lucky to find the right visionaries that were able to bethann our vision and take bold bets, but it was not an easy time.

Yeah, it's fascinating, although it is higher hardware. Saadiyat, I have a relative who is building a hardware business and it's just a it's like building a house like twice as expensive and twice as long with way more problems than you anticipated. Seems to be the rule of thumb. I'd love to hear switching topics a little bit. The most valuable things that you've learned as a huge fan of Formula One racing, something I know is a passion of yours.

F1 is obviously fun and interesting to watch and exciting and precise and high paced. I remember watching the documentary years ago. It's one of my all time favorite documentaries, but beyond. Just the enjoyment of it, what have you learned about the way that business operates that you find most interesting is really an engineering business?

Everything is about gaining a tenth of a second. They spend 300 million or 500 million in a year. You just gain a couple of pennies and they need to be reliable. A lot of things that are really common to working out of their stuff that you need to almost match perfection with a product that doesn't break and really performance at its best. They have some of the best minds in the world for software, but there are all of these software engineers and sometimes you see the drivers that they start having software problems and they just change their steering wheel and the problem is solved.

Or you see these engineers connecting to the car with their computer to reset all the key aspects of the car. And I think for the average Formula One fan who is not infected, they don't understand that because they are still very old school aelfwine that was very mechanical, while instead and now the F1 is really a software control device driven by the SUPAMAN.

What do you think will happen to old mattress companies as you and maybe others are successful in modernizing the bed? What's interesting to you about everyone knows, like Cilliers or Certa or some of these brands that go to that stupid showroom and lie on these things, that's got to be a pretty big industry. Purple and Casper are the modern equivalents. What have you learned about all those companies? Like what else is interesting about the mattress ecosystem or industry to you?

The problem varies from Israeli commodity. If you wanted to start that mattress company today, you could do it today and you could be able to ship probably within a week. You just call it a couple of these large manufacturers. You set up a deal with them because there are so many companies, they have probably a template. You sign it and they start shipping for you. There is not technology. And so it's really a matter of how much do you want to pay for this phone?

You want to pay on their back three hundred or a thousand bucks. It's really like going to the market or having a menu and then you start shipping. It then becomes just a branding exercise. Then obviously I still have a respect for this company. They're still great people working. They're going to be able to move large units. So I'm not talking about the people. I'm really talking about the type of business. I think if you go on Google and you just Google banks in the Middle Ages, it will still look at the same bad.

Or if you look bad at the time of the Romans, substantially the same thing. This means that for the past twenty years, no one brought any sort of improvement, technological improvement to sleep, which again is thirty three years of our life. If we live a hundred years the last innovation and sleep with memory foam in nineteen sixty six and memory foam is not really a technological innovation, it's just a different type of foam. So that's the part that I honestly don't like of the industry.

What other businesses have you learned the most from in terms of lessons that they've offered you in Building eight sleep?

I think test drive electric cars from a certain perspective, I'm being ambitious. I think it's like a test of sleep. And the reasoning is when Tesla started out with the electric cars existed but was a very niche market and no one was betting on that because the user experience was not good. It was too painful. The batteries were not the last thing. Now that Elon doubled down on that and now every other company is trying to catch up with Tesla, but they cannot.

And the reason is that the software company first, then they also have great hardware capabilities, but is not a mechanical company. And I also think they built a brand that really stands for electric vehicles. And so it will be way harder for BMW and Mercedes and all the others to catch up with that. And so my dream is that the same thing will happen with sleep where a sleep will be. Hopefully the Tesla sleep and all the other companies, they will try to catch up.

But because it's not part of their DNA to have that skill and that software and machine learning skill, they will always be behind.

I'm sure also that you're collecting valuable data that only you could have by virtue of having people on these things. Every night you've got a data set and there's a compounding data advantage of sorts that you couldn't buy this data from some other vendor like you have to I guess you could buy sleep, study data or something, but you can't do it in a way that helps you iterate the quality of the product via software in such a way. Anything you've learned about that part of the business, I'll call it like the pure data part of the business and how to manage that piece well.

So that one, you're getting good lessons. And two, those lessons are feeding back into the quality of the product.

Our data is really helpful in two ways. The most obvious is for us to keep improving our products. The more data we collect, the more we can improve on what, Alagoas? So our algos, they learn. And sometimes we also ask our users for. It can be up because of the feedback we keep improving our allergies, but the second big thing is the amount of data that we collect in the knife is probably more than what some of the best professors in the world have seen in their whole career.

And the reason is because in the past, there were no devices that were able to track sleep every single night at home five years ago, or you could go to a clinic. But the sleep clinic is a very boring environment and hospital. They cover you with all these sensors in this room and they put you to sleep, which is not going to help anybody or if you already have sleep problems. And then you add to this anxiety, nothing is going to happen.

The way we can help doctors and research is by providing three hours of your sleep data at all in your normal environment. And based on that, they might be able to help you to solve some of your sleep issues.

How do you think about gathering other useful data as frictionless and passively as you gather sleep data? So like, I'm sure it would be valuable for you to know when somebody had a glass of wine or something like this or eat some fried chicken at 10 o'clock or something like that. How do you think about that? Getting more data into the ecosystem that helps your customers, but maybe doing so in a way that's not invasive or requires them to open an app every time they do something?

We are pretty obsessed about this passive data. So we want to have as much as possible without you doing anything, because I hate doing things where things change. And so we do it in two ways. On the flip side with our device. But now we are connected to Apple, connected to Apple Health and to Apple health. If you use any other device, there will be the data and then we can. And so we are already running studies internally where we see when you train or what time of the day you train, what kind of training was it?

Yoga was it. And this was a high intensity interval training or whatever. And then we started working on correlations. That is something our users really want because they want to know, OK, should I train in the morning or should I them? Or maybe I'm agnostic and I can do whatever I want, make it specifically as a matter or if I train. In the late afternoon, I struggled to sleep. My sleep quality drops like 10 percent.

And the reason is I tend to go to sleep early. And so if I don't let at least a couple of hours go by before I go to bed, then my sleep is very nervous.

What have you learned about what's going on at Apple that people might find interesting? Because I'm very interested in what I'll call like protocol businesses, where it's sort of like the standard that everything pipes into and data can be pulled out as well.

What's interesting about what's going on at Apple Health, I think Apple Health is becoming the first platform where we're really collecting all the data, possibly developing their own devices. The Apple Watch is really a medical grade device. Maybe not now, but it will be in a couple of today's already to a certain degree. So they created this device that if you think is very similar, they use it for the fact that people are already using, as we do and they are reinventing the watch.

We are reinventing the matrix. The purpose is to build the medical devices that can help you live a healthier and longer life. But the strength that Apple has is that everyone else is pushing data to them from other wearables or devices. And I'm sure they are developing a very large database health database myself. I keep using my Apple Watch. I have been using it for three years now, not so much for the single day, but because I'm really building a data set about my health.

And so in 10 years from now, we'll look back and I will see what was my heart to be and how that is changing. And hopefully by then, machine learning will be at the point where they will be able to tell me if I can develop or I could be subject to a heart attack.

It's a fascinating future, right? The preventative health side of all this is what's most exciting, as you laid out. I'm an early adopter of all these things typically, so I recognize it'll be some years before this is everybody. But you have to figure that it's going to be a generally good thing for national health. What is the thing you're most excited about for the long term future of sleep? I realize we've talked about some of these aspects already, but as you look forward and just put your vision hat on, what thing are you most excited about?

Compressing the sleep and preventative health? I mean, I want to think that probably even today when I show that people still think I'm crazy, so that gives me more energy to really make them happen. And I'm pretty confident that maybe two different degrees, but both of them, they will happen. They're already happening with our device because our customers are already falling asleep faster. So they are gaining time. They're already getting better sleep. So they are improving their efficiency and we are already detecting some diseases.

Fascinating stuff.

I've loved using it. I think people listening know I'm into all this measurable, wearable, quantified self stuff. But it's not just for fun. I think the impacts could be quite interesting. So it's been a pleasure to meet you and. Format, I asked the same closing question of everybody, which is to ask, what is the kindest thing that anyone's ever done for you?

I would guess my wife, she has taken care of me multiple times. Even recently, I had a really bad day at work. I was crazy. I was a bit down and she made some dinner for me and gave me energy, a game that just happened last week.

Very simple. It's great to see you. Thanks for doing this. So my pleasure. To find more episodes or sign up for our weekly summary, visit, Investor Field Guide dot com. Thanks for listening to Founders Field Guide.