The Pomp Podcast - #1064 Matteo Franceschetti On How Entrepreneurs Can Navigate A Recession

Episode Date: July 29, 2022

Matteo Franceschetti is the Co-Founder & CEO of Eight Sleep. In this conversation, we discuss healthy sleeping habits, diet & exercise, and how you can optimize your body and mind for a productive day. We also discuss how Matteo is running his company during a down economy, the advice he has for fellow entrepreneurs, the combination of hardware & software needed to build Eight Sleep, and the announcement of Eight Sleep's newest product, the Pod 3. ======================= BCB Group is the leading payment services partner for the digital assets industry. BCB Group provides payment services in 30+ currencies, FX, cryptocurrency liquidity, digital asset custody and BLINC, which is BCB’s free, instant settlements network for the BCB client ecosystem. Find out more by visiting bcbgroup.com/pomp ======================= Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps. It’s supported on both desktop and mobile, allowing you to sync your wallet across multiple devices so you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset’s price history and your portfolio’s performance over time. And maybe the best part, Exodus is integrated with the Trezor hardware wallet - making advanced security easy for everyone.  Visit exodus.com/pomp for your free download or search Exodus on the App Store or Playstore. ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Even better? Eight Sleep recently launched the next generation of the Pod. The new Pod 3 enables more accurate sleep and health tracking with double the amount of sensors, delivering you the best sleep experience on Earth.   Go to eightsleep.com/pomp to start sleeping cool this Summer and save $150 on the Pod. Eight Sleep currently ships within the USA, Canada, the UK, select countries in the EU, and Australia. =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Matteo and Alex are the co-founders of 8Sleep, my favorite technology product and one that I like so much that I begged them to let me invest. In this conversation, we talk about sleep fitness, marketing in a digital age, the launch of their brand new product, the Pod 3 and what they're looking forward to as a hardware company as we go deeper and deeper into a recession. I really enjoyed this conversation with Mateo and Alex, and I hope you guys enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors.

This episode is brought to you by BCB Group. With a dedicated focus on institutional payment services, BCB Group provides business banking, cryptocurrency and foreign exchange market liquidity for many of the world's largest crypto engaged financial institutions. BCB business accounts allow businesses to load fiat currency and cryptocurrencies for payments, operations and trading purposes. BCB's clients can trade FX and cryptocurrencies quickly and at scale with market leading value. BCB's Blink Network is the European crypto industry's first instant settlements network and one of the first real time payment networks of its kind to allow free real time transactions across fiat and digital currencies. BCB's vision is to empower the global

financial revolution through sustainable and innovative banking. You can find out more by visiting bcbgroup.com slash pomp today. Again, that's bcbgroup.com slash pomp today. Today's episode is brought to you by Exodus, the world's leading desktop, mobile, and hardware crypto wallet. They offer beautiful user-friendly blockchain products that sync across all of your devices, making it easier to send, receive, and exchange over 150 or more crypto assets in one place. And with world-class customer service available to you 24-7, Exodus always has your back. But the fun doesn't stop with staking and trading. They recently launched a new NFT marketplace where you can buy and sell your favorite NFTs on the Solana network. By partnering

with the popular NFT platform, Magic Eden, they're offering the full Monty on verified collections with more added every single day. Ready to check it out for yourself? Run, don't walk, over to exodus.com slash Pomp for your free download today. Again, if you want the world's leading desktop, mobile, and hardware crypto wallet, go to exodus.com slash Pomp today. This episode is brought to you by 8sleep. Good sleep is the ultimate game changer

and the 8sleep pod is the ultimate sleep machine. Consistent good sleep can help reduce the likelihood of serious health issues, decrease the risk of heart disease, lower blood pressure, and even reduce the risk of Alzheimer's. Yet still more than 30% of Americans struggle with sleep and feeling hot at night

is one of the main causes of poor sleep. However, now I fall asleep in record time faster than I have ever before, all thanks to the Eight Sleep Pod. The pod's the only sleep technology that dynamically cools and heats each side of the bed to maintain the optimal sleeping temperature for what your body needs.

With the pod, you can sleep as cool as 55 degrees Fahrenheit or as hot as 110 degrees Fahrenheit. The result is clinical data shows that Eight Sleep users experience up to 19% increase in recovery, up to 32% improvement in sleep quality, and up to 34% more deep sleep. With more deep sleep, I can be confident

that my mind and body are moving through the restorative sleep stages that are vital for physical recovery, hormone regulation, and mental clarity. And even better, 8sleep recently launched the next generation of the pod. The new pod three enables more accurate sleep and health tracking with double the amount of sensors

delivering you the best sleep experience on earth. The pod's not magic, but it sure feels like it. Go to 8sleep.com slash POMP to start sleeping cool this summer and save $150 on the pod. Eight Sleep currently ships within the US, Canada, and the UK and select countries in the EU and Australia.

Go to eightsleep.com slash Pomp today and you'll save $150 when you buy that new pod. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement

to make a particular investment or follow a particular strategy. but only as an expression of his personal opinion. This podcast is for informational purposes only. Mateo, how are you? Good. How are you doing? I see you have your black shirt on. Congratulations. Great.

You look very fashionable. Here's where I want to start. The bear markets of crypto, of stocks, all this stuff, people, their lives go into like a tailspin. There's chaos everywhere. what are some suggestions that you have from like a sleep perspective that when people have high stress what are some of the things that they can do to uh to at least be prepared to go to sleep on time get better sleep kind of take care of their bodies you spend all day thinking about

kind of performance and sleep fitness like what are some of the things that either you do or other people you think should be doing yeah a couple of different things um first they can try to wind down in the evening, like an hour or three minutes before going to bed without looking at the markets and crypto numbers. Otherwise, they will just get nervous and probably their mind will start racing and they don't fall asleep. Another trick is to take a nap. It's really hard to find the time, but if you can find literally 20 minutes, 30 minutes

max during the day, 1 or 2 p.m. around that time, that will enhance your performance in the afternoon. So you will be sharper, way more reactive and focused during the day. And in general, I would say try to sleep eight to nine hours. That is how you really maximize your mental performance during the day. And when you think about diet, I know something that we've talked about a bunch, like when's the last time somebody should drink caffeine? What kind of food do you think they should eat in the morning versus in the afternoon yeah so caffeine you should stop if it's a like a regular coffee eight hours before going to bed if it's a deep cafe should be four hours before going to bed um that's what i usually do so i drink coffee all in the morning

and um what was the other question uh food like what should they eat in the morning yeah food food is massive like for example i don't have lunch and if you have lunch you should stay very light. Otherwise you will start feeling like sleepy around 2 p.m. from 2 to 3 p.m. You will feel like, oh, I need to sleep. So in my case, I mean, in my case, I fast and I just eat once a day most of the times. But if I eat, I try to stay very light and I eat. I try to fast at least 16 hours and sometimes 24 hours. And then when you do eat, what do you usually eat in terms of food? You said it's light, but what is that? Yeah, so I'm on a keto diet most of the times,

unless when I cheat or maybe when I'm with you having a pizza. But other than that, I don't eat carbs. So usually carbs makes you feel sleepy. And so I would avoid like a big sandwich at 1 p.m. Otherwise, you will feel sleepy 100%. So you can try to have anything else that is keto compliant. That is my advice. the last thing around uh food or diet is uh i see people commenting nappuccino which uh for those

that for those that did not hear you say this last time explain what a nappuccino is yeah nappuccino is the greatest hack ever and i love it so substantially you drink a coffee in my case an espresso right before napping and then you nap for 20 to 30 minutes and by the time you wake up is when the coffee kicks in and so you feel super energized because you just napped plus you have the enhancement from the coffee it's like double the best hack ever yeah it's like double you get both the sleep rest and then also from uh from the caffeine uh you guys recently just launched the pod 3 explain to everyone what the difference between the prior versions and the pod 3 are Yeah. So it's the new product. It's the third generation, which is pretty cool.

Comfort is better. In particular, we moved sensors. Now you don't feel sensors anymore. So again, more comfortable. Second, we doubled the number of sensors. And so now we have reached 99% accuracy at monitoring your heart rate and 93% at measuring your HRV, which is heart rate variability. it. So all the tracking is better. And then the device essentially became a computer. It's based on Linux. It has like a thousand X and more computational power. And so it's the greatest sleep machine that will enhance your sleep through thermal regulation and will track your health. As you guys continue to build this, you now have a lot of customers. You've got a lot of data. You continue to kind of see it. What are some of the biggest differences that people go through

between before they sleep on an eight sleep and then when they have the thermoregulation with either the pod or the mattress? Like what are the biggest things that happen to their health? Yeah, there are pretty massive benefits. We see up to 34% more deep sleep. We see up to 32% improved sleep quality

and up to 19% increase in recovery. So substantially sometimes investors or friends, they ask me, oh, who are your competitors? And our competitors are really almost drug companies because we compete with sleep pills. But the difference is we are a healthy device, meaning you can use our device forever and there will be no impact on your health or a positive impact. Well, instead, sleep pills are known for having negative, a negative impact on your health. And as you've built this, you obviously have to build the hardware and the software. What are the challenges with building hardware right now, given kind of all the supply chain disruptions and manufacturing issues, all that?

What's going on? A lot. I don't know how much time I have, but I'll try to be brief. A lot of issues. In particular, we cannot go to China. We didn't go to China for a very long time. We are lucky that we have a team there. But the biggest issue is there are continuous delays, and this means you need to spot buy.

So sometimes you need to find certain components on the spot buy market, which means you pay more, and that will have an impact on your gross margin. And second, particularly last year, we were so behind and we had so much demand that we had to airship units, but our units are pretty big. And so to try to, again, make our customers happy and try to deliver units as fast as possible will be air-shaped, but that has an impact on gross margin as well. And as you've kind of navigated all of this, obviously consumers continue to buy the devices. Health is kind of a cornerstone of what people care about. Is there anything that you're doing differently marketing-wise? I know that a couple of months ago you announced the F1 sponsorship. You all have kind of really ramped that up.

How do you think about marketing during times where maybe the macro environment or the supply chain is having some complexities or issues? Yeah. So at the end of the day, our device requires a lot of trust from the customer before being purchased. It's not an impulsive purchase. And so the way we build that trust is through influencers and athletes. A lot of world-class athletes are currently using our product. I was in Formula One, Mercedes F1, but many other Formula One drivers,

World Champion, CrossFit, athletes in NBA, NFL, top tennis players. And so that helped us to build a trust with the average consumer. Plus we leverage influencers. So other people that talk through podcasts or social media to our target audience, we let them try the product.

99.9% of the times they love it. And so then they keep sharing their experience and how much they love the product. That helps us to grow faster and in a cheaper way because the cost of acquisition of the customer keeps going down because word of mouth is accelerating. Yeah. And I guess as part of that, sleep is like such a personal thing. It doesn't just affect you, but also the mood you're in, the energy you have. It has an impact at work. It has an impact in your personal relationships. uh and so it feels like when people get a good night of sleep they talk about it they tell folks they people can see that you got a good night of sleep they see you have high energy they see that

you're not as stressed uh and so in some way there's like this organic marketing that just occurs because of uh that happening right yeah and it for us it happens in two ways on one side people just talking about their own experience right but on the other side that we are also helping couples because like 50 to 60 percent of couples they have temperature problems there is one partner who wants their room or the bed to be warm and the other one who wants it cold and so then when they are out for dinner with friends they talk about their experience with the pod where you can set different temperatures for each side of the bed and how now the pod helps them stop fighting about temperature at night got it and talk to me about inside of the

business obviously as you kind of navigate uncertain times what are you talking to the employees about to uh partners vendors like what's the kind of the operating of the business what's changed uh and kind of how are you navigating this yeah so most of the discussions they happen at the executive level with the executive team and so since three months ago i started talking about look we could be in a recession and i think today we have evidence we're having a recession and also the market changed, right? And so before in 2020 and 2021, all that matter was growth.

Well, instead now you can grow slightly slower, but you need to have a clear trajectory to profitability and positive unit economics. And so that is how we slightly readjusted the business. And I'm saying slightly because we were already in that trajectory, but we need to make sure that the company can get to profitability

and that our unique economics are healthy, in particular in terms of cross-margin and contribution margin. Got it. And then you obviously have done quite a bit of investing. What are you seeing there, kind of early stage technology startups? Yeah, I think the numbers and the valuations are going down.

I just start seeing deals at a much more reasonable valuation, which I think is good for everyone. And so I would say at the seed stage and serious A, not the market is still pretty active. The only change was valuations. At the growth stage is different because right now no one wants to raise money because of the valuation dropped somewhere between 60 and 80 percent. So a pretty meaningful way. So if you don't need to raise money, you wouldn't you shouldn't raise money right now because you're still being impacted in terms of valuation.

Got it. And are there any tips that you have for founders who are trying to raise money? Should they wait? Are there things that they can do to kind of increase their odds other than just build a good business? If you're an early stage seed in CDSA, I think nothing really changes. You need to accept a more reasonable valuation, which doesn't mean to be a bad valuation.

It's just more reasonable. I think last year and probably the second part of 2020 was a bit out of control and crazy. And so just go ahead. Obviously, I think investors will pay more attention to your unit economics and the health of the business more than just the growth. If you are in growth stage, I would say pull back, try to stay lean, try to have a runway at least until 2025, mid-2025, so you make sure that you can go through the winter and be stronger once the markets are back. Yeah. And then when you start to evaluate where a lot of these companies are, were most of them just drunk on lots of money sloshing around and they actually weren't even close to profitability? They're kind of, I don't want to say bad businesses, but just not amazing businesses. And those are kind of getting exposed right now.

Or do you think maybe that narrative is kind of overblown and actually a lot of these companies have been able to course correct, get at least closer to profitability, extend their runway, and they should be able to survive? I think what happens in the US and in the venture business is sometimes what you optimize for is different, right? So last year, it was all about growth. And so as a CEO or as a founder, you were thinking, look, I can raise money. I just need to grow. I can accept to airship units because the business is doing well. There is a lot of demand. And if I need more money, I can fund it.

then what happens this year is things are very different and you understand that you need to be way wiser in how you manage your cash and you need to run a proper business that can be here forever. And so I think the best CEOs are the ones that are able to adjust continuously to the market.

At the end of the day, you need to build a healthy business because if you build a startup, right? Let's say the startup lasts at least 10 years if it's successful. it means you will face a recession in 10 years because historically every 10 years there is a recession. And so you need to be and make sure as a CEO

that you always have a plan B in case of a recession and that plan B sometimes might be tough, meaning you need to make changes and cuts to cut your cost and make sure you can survive through the winter. Yeah. And as you start to see more and more companies just go out and raise capital,

try to navigate this market? Are there areas that you're most excited at if people are building certain companies that they should reach out to you for? No, I mean, I'm agnostic on the, to admire and respect the founders. Meaning I want to say, oh shit, this guy's got, I want to work with this guy.

If I can put a chip, I want to be in because I will learn from this person and I want to build the relationship with this person for the next 20, 30 years because this person will be super successful. That is what really excites me. It doesn't matter if you build houses like Cover. I'm an investor.

I just try to tweet about them and their factory. Or if you do Web3, the smartest people, they will succeed and maybe they will need to pivot. I don't care. I just want to work with the best minds so I can learn from them. Yeah, I think that that's probably the right way. And it also feels like a lot of founders who know something that the market doesn't know, they sound a little crazy, right? Like they sound, you know, it doesn't fit the pattern to some degree. And that's actually might be an encouraging factor is that they sound a little crazy.

Yeah, that's what PG always says, right? That the best ideas at the beginning, they sound crazy, impossible. Airbnb obviously is the greatest example. But you're betting on the person that these guys, they will figure it out. I remember when I met Brian Chesky and Joe Gabia at YC, they came as speakers. And the feeling you had from these two guys is you could drop them without water in the desert in July, and they would figure it out. I mean, these guys are going to survive whatever happens. That is the feeling and energy they transfer. And so that is what you want to see in founders.

That doesn't matter if they succeed or not. They will keep trying until when they succeed. Yeah, that makes a lot of sense. Does your team have that? i hope so and i think we have i think we have data points to prove that we have that because we almost died a couple of times and we are still here and we are we are shining and growing um it's tough sometimes but it's part of the game as a uh as a closing point maybe tell us one of the stories of when you all almost died and what you do to uh to survive just to give people a sense of uh when they have the eight sleep pod in their room and they're sleeping on it it's kind of this magical experience you go to sleep you get a better sleep but like there's a company there's

people there's an entire team that's working their asses off behind this thing what's one of those stories where you guys almost died and what you guys do to survive a story that is public and it comes from yc is that we got rejected twice from y combinator and um but then we made it the third time. And so sometimes when they go around the world and they pitch Y Combinator to other potential companies, they always say, don't give up because look at 8sleep, they got rejected twice. They never give up. And then we know they got admitted into Y Combinator. And now they're, I think, one of the largest hardware companies of the YC network. Only just beginning. The story is not over yet, my friend.

Yeah. At the end of the day, I always think for founders, the rule number one, and this comes from PG, from Paul Graham as well, is just you need to keep going and then things will change.

You adjust and you adapt. Maybe market, product market, you find product market fit later. Maybe you find a better product market fit later. But number one rule is to keep going and then the odds will play in your favor. Yeah, I think that's right. Where can we send people to find you on the internet

or check out the pod three? Yeah, go on 8sleep.com, 8 like the number, just in letters, E-I-G-H-T, sleep.com. And there should be also the link to my Twitter where I'm pretty active. Not as active as you, or at least I don't have your following, but I'm still active a little bit. I think you're doing a great job. You're my favorite Twitter follow, only because it's a combination of a reminder to go to sleep and also of things around business and investing, which is all I care about. i just start tweeting when it's time for you to go to sleep at night so now

tonight at 9 30 i will start tweeting don't worry polita does a great job of reminding me get your ass to sleep uh all right listen thank you so much for doing this uh as everyone knows i think that uh it is no secret uh eight sleep uh pod and mattress is probably the number one tech product that i've purchased over the last two years or so uh it is absolutely incredible I finally convinced you to let me invest in the business thank you so much I appreciate you letting me be along for the ride

I'll do my best to stay out of the way and just help where I can and if anyone wants to check it out I dropped in the chat here you can go click on that link and you will get a little bit of money off and check out the pod 3 or the mattress

and get a better night of sleep it actually will make your life better so Matteo thank you so much for joining us and we'll definitely do it again in the future Thank you. Thank you for having me. All right. Later, buddy.

Thanks so much for listening to today's episode. I really hope you enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to transition into a brand new job in the Bitcoin or crypto industry, we've got you covered. Head over to thecryptoacademy.io. My team and I have been working with the top HR teams in the industry to develop an intensive three-week training program with over 50 live events.

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