We were over our skis, and we had customers who had placed orders, and they were like, where is my product?
Hello, hello. Welcome to the Term Sheet Podcast. I'm Allie Garfinkel, senior writer here at Fortune. And every week at Term Sheet, we go over the latest news, deals and insights in venture capital, private equity and startups. Here is where you can listen to some of the most exciting figures in the private market. Now this week, I'm actually still thinking about some news from last week, and if you had a computer or a phone, you probably saw it. Salesforce CEO Marc Benioff, in the lead up to Dreamforce, told The New York Times that he was potentially supportive of President Trump sending troops to San Francisco. This created a fallout that I think was really interesting for a couple of reasons. First, it was so decisive, Dreamforce had a number of canceled appearances, and the blowback on social media was substantial. Maybe the most salient piece of blowback came from Ron Conway, who's widely referred to as a godfather of venture capital, a godfather of Silicon Valley, he stepped away from the Salesforce Foundation's board in response to Benioff's comments. Despite all of the discourse around how far right Silicon Valley has moved, true anti-Trump backlash can still materialize with consequences, even for powerful people. Now that's not to say the rhetoric around how far Silicon Valley has moved to the right is false by any means. It's completely true, but I will say it does suggest that the picture is a lot more complicated than a lot of conversations maybe suggest. I will say that complicated picture is the story I hear all the time behind closed doors. We're going to switch gears completely as we talk about this week's interview. Now I am a long-time Oura ring wearer. If you're unfamiliar with the Oura ring, it is this ring on my finger. It is a wearable. It is the only one I've actually ever successfully been able to stick with. So I am very excited that this week on the podcast, we have Oura CEO Tom Hale. We talked at Brainstorm Tech a few weeks ago, and in the time that's elapsed since, Oura has raised another $900 million at an $11 billion valuation. The wearables market is really competitive, and even as a devoted Oura ring wearer, I had a lot of questions for Tom, not only about the company's future, but about data security. This was a really interesting interview for me. I've interviewed hundreds of CEOs, maybe thousands, over the course of my career, but it's very rare that I will interview the CEO of a company where the product itself is a part of my day-to-day life, where it's something I interface with, sometimes hourly. And I think in some ways, I gave Tom a little bit of a harder time, exactly for this reason, because I do actually believe not just Oura, but all wearables, are going to be part of the future of healthcare and part of the future of our relationship to our own health. Here's Tom.
Tom Hale, welcome to the Term Sheet Podcast. Welcome to Brainstorm Tech in Deer Valley. How was your sleep score last night?
It was great, 90. But, you know, the altitude did make a difference. It was 90 at the altitude, that's pretty good.
I think I was 84. Yeah, I got a crown.
Oh, you got a crown. That's actually, that's pretty huge. As an Oura ring user, I'm familiar with the satisfying feeling that that provides.
Thank you for being an Oura member. Thank you, appreciate it. I was never able to keep a wearable before this, so I have lots of questions. I'm ready to go.
So I guess the place to start is how this came to be, because it actually, the first time I saw it, it didn't look like anything else I'd ever seen. What is the mythical origin story?
Well, the origin story takes us all the way back to the deep mists of 2013 when three Finnish founders had a vision of a ring that you could wear that was really a health ring. Wearables were relatively new in the moment, like Fitbit was just sort of starting to be a thing. Apple Watch was starting to be a thing. And they had the idea for a ring that you would wear all the time. And so about five years later, if you can believe it, 2018, the first ring comes out. And let me tell you something, this thing, it looked like, I don't know, an alien artifact from a future civilization dropped on the side of a Nordic hill. They were polished by trolls. I mean, it was amazing. It's about the size of a Super Bowl ring, and it was, you know, made of black zirconia. Very seriously, you cued me, so I just went there. Now the thing is, is that what it really was in its first incarnation was a sleep ring, and you wore it, you know, to bed, really, just to track your sleep. And that's what it really did well. And then very quickly, it sort of evolved to be something that you would wear during the day. And during that evolution, they got smaller, they got more comfortable, they started looking more like jewelry than sort of a technology artifact that you would wear. And you know today, here it is, this very slim, very small, very petite, and actually very quiet wearable. One of the philosophical, like, foundings of it was make it calm. Don't make it beep, don't make it vibrate, don't make it light up, just calm and part. Actually, that's the heritage of sleep, but also a very much Finnish set of values about calm.
And how did you end up at Oura? Because you are, you don't seem, you don't seem Finnish.
No, I'm not Finnish. It's true, although it is an adopted country of mine, and I do have tremendous respect for the Finnish engineers and Finnish software developers and Finnish people who work at Oura. I arrived in early 2022, and, you know, we had, interestingly, I had, we just sold a company, and it was in the process of being unsold. It was a stressful time. Covid was very stressful. All sorts of being unsold. Yeah, yeah, the shareholders were voting down the deal. So it was a stressful moment, for sure. It was not an easy time in my life. And it for the first time, as a championship sleeper, I lost sleep, right? I mean, I've always been able to fall asleep and stay asleep, and this was the first time, and I was started researching, you know, kind of what I could do about it. Bumped into the Oura ring, you know, and fell in love with the product immediately. I started using it. In a short amount of time, I changed a bunch of very simple behaviors having to do with drinking coffee in the morning and then maybe a little bit of wine at night to unwind. I kind of reversed those behaviors and started getting quality sleep. And I'll tell you something, the transformation in my life, it was like walking out of a black and white television show into a 4K Technicolor movie. And I mean that in the way that, like, the colors were brighter, my cognition was better, my energy was higher, my mood was better. And as a consumer, it really made a difference for you as a consumer. And it was, you know, what it really showed for me, actually, was that I'd probably been sleep deprived since my early 30s, when I first had children and was in the heat of a career that was exploding and expanding, and so as a result, I just didn't prioritize sleep. And it wasn't until I sort of had to take a break, take a moment, prioritize sleep, that I realized how powerful it is and how important it is for your health.
That's really interesting. So you were somebody who came to Oura as a customer, as someone who loved the product, and how did you become the CEO?
Well, they were doing a search, and they interviewed me, and, you know, along the way, I became very convincing that I wanted to be part of the company, and they saw fit to ask me to join as the CEO. And since that time, we have been on a tear. Company has been growing, really, at hyper, hyper growth rates. Last year, you know, we broke through a milestone of 500 million of revenue in a year, profitable, all the things that, you know, make the business be successful. So I think it was probably a good choice on their part, if you don't say, if you don't say, if you don't say, you know, I think modesty has always been a strong suit of mine, but, but in this case, it's, it's actually true. I mean, to be, I mean, it's a two, two credit words, do you know you're, you've, I think, doubled sales of rings of units multiple years in a row.
Multiple years in a row. What is behind that?
Well, it's quite simple. Actually, there were three things that we really unlocked. And the first thing actually, was women. And it makes sense, in a way, that women would be a great audience for a wearable that's a ring that sort of has the properties of jewelry that is oriented around women's health, and some of the things that we do better than any other wearable really relate to either reproductive health or cycle tracking or giving you visibility into the best time to conceive. We partner with a Natural Cycles product, which is the sort of digital contraception. So we sort of nailed women. And in fact, at the time, I don't think anybody was paying a lot of attention to women, and didn't, didn't see them as a distinct market, or a distinct group of people with distinct problems, and we solved their problems very well. So that was one huge unlock. The second one, quite frankly, was retail. Again, going back to this idea that there's something about the ring that is, has the properties of jewelry, you know. You want to sort of see it next to your skin. You want to look at the size, how does it fit? Which, what finger should I wear it on? All the things that, you know, sort of help you make that decision. And retail was a huge key for that. We'd done a partnership with Gucci, and Gucci designed a ring that looked very much like a Gucci product. It was the sort of ring you might wear to, I don't know, a gladiatorial combat where you as, you know, the Caesar were going to thumbs up or thumbs down, you know, Spartacus at the end of the battle, right? It was black and gold, and it was, it was pretty boss looking. But the thing that we learned from Gucci was that they had a bunch of retail stores, and people went to the retail stores because they wanted to see the jewelry in person. Really fascinating. So we rolled out into retail based on that kind of experiment that we did with Gucci. And it was one of these big unlocks. We had been a DTC consumer, you know, kind of website, and when, when it became something physical, I think, I think part of it is people started to see us in a different light. We weren't just a website, which is kind of like an ephemeral thing with some pictures on it. We were like a stand with a big sign next to Apple and next to Google and next to Samsung. And all of a sudden we were the biggest, for example. And so all of a sudden we, it gave us credibility in a way that, I think, not that we didn't deserve it, we just didn't have it. So retail was the second thing, and then the third thing, and this is fascinating. Do you know what an FSA or HSA account is?
Yeah, you've heard of this, right?
It's basically, you put some of your funds aside for health or for flexible spending around your health. And it's, it's, it's pre-tax dollars. So we kind of nailed this by being the first, like, health wearable that you could buy with HSA or FSA funds. And I remember the moment that it happened, we started seeing people on TikTok and, you know, forgive the impression, but it was sort of like, Hey sister, that Oura ring wearable that you've wanted, you can now get through HSA FSA. And this was, you know, through no agency on our own, other than making it available and that sort of viral pickup of people being like, you mean, I can buy this thing with pre-tax dollars that I set aside, and I can, if I want the, you know, the fancier version of it, I can use that and get it. And the thing was, is, of course, HSA FSA, as you probably know, when you go to an HSA FSA store, the kinds of things you can buy there, they sort of range from, you know, band aids to first aid kits to suntan lotion and, you know, maybe glasses and stuff like that. If you have those things, there's not a whole lot else you can buy. Yeah, right. And, but there, here it was this sort of very desirable wearable, you know, high fashion available to you with your HSA funds and it rocketed.
How did you negotiate that?
Gosh, you know, I think it's a little bit of a situation where we had to go through a sort of an approval process, and we had to work through a set of partners who sort of walked us up there, sort of a governing board called SIGIS, and SIGIS gave us approval. And that was the unlock.
What has been the biggest challenge?
The biggest challenge, how much time do we have? As much as you want, especially if we're talking about hard stuff, I'll tell you. I think that, you know, the maybe the toughest moment, honestly, that I can remember was it was actually at the heat, at the tail end of this sort of period where we've been growing so quickly, and we sort of said, wow, it looks like we're gonna head into the new year, and we're expecting it to sort of slow down, and it'll be kind of a little bit of a breather, and we're fine in terms of inventory. And then what happened in January and February was that we were not fine. The sales continued to ramp, and we literally could not make them fast enough. And we had to make a really tough decision, because we were in the process of expanding into additional retailers. We had to make this tough decision, you were really over your skis. We were over our skis, and we had customers who had placed orders, and they were like, where is my product? And we had to choose, like, who got their product and we were trying to build them. And of course, you know, the thing that as a primarily a software person, I don't think I truly appreciated, is that you have to buy the parts to make the things months in advance, and then you have to make the things to have them so that you can sell the things. And so if you don't forecast appropriately, you will not have enough things to sell. And if you don't have things to sell, guess what, you can't sell them, or it's difficult when you do sell them. So this was a tough time, and we had to, we scrambled. We, you know, we did everything we could to kind of fulfill all the demand that we were facing. But it was what I would like to, you know, kindly refer to as a success disaster.
I was gonna say, how long did it take for you to get out of that trial?
It was about four months. It was about four months.
So what were you doing every day for those four months?
Well, I was explaining to people. It was a lot of reset. It was a lot of saying, Hey, I'm really sorry that your product, you know, is not available to you right now. And and yes, it is available on Amazon. So maybe if you want to cancel an order with us and go to Amazon, great, but, but it's one of these things where it's a good news, bad news story. So it wasn't that we had zero inventory, we just didn't have enough. And for people who had bought it directly from us, they were like, well, Where's, where's the thing that you promised? That was tough.
Well, it's really tough too. Because on one hand, this is, this is great. People want it. On the other hand, once trust is like, that is lost, it's, it's hard to gain back.
I went directly to a bunch of forums, to to Reddit, to online, wrote a blog just said, Hey, listen. You know, this is a situation where our success has outpaced our ability to deliver, and we're, you know, sorry, and, you know, we'll make it up to in all the ways that we can. And I find that actually, you know, weirdly, people responded well to that.
I was gonna say, this is actually something I've seen you do recently. I actually don't know when this is going to come out, but right now there's some controversy around the partnership with the DOD and, yeah, you took to TikTok.
