Welcome to The Peel. I'm your host, Turney Novak, founder of Banana Capital. Today's guest is Matteo Franceschetti, co-founder and CEO of Eight Sleep. Matteo and his team created one of the original breakout consumer health products in 2014, quietly building a business that's raised over $300 million and was reportedly free cash flow positive in the first half of 2025. But things weren't always easy. Matteo shares the challenges of starting a hardware company, why hardware companies have stronger moats, and the fundraising mindset he adopted that eventually got Coastal Ventures and Founders Fund to invest. We also get into the importance of sleep, how the company's Sleep Butler uses AI to help you sleep better, and the big opportunity of building more consumer health products. A quick reminder, I publish new episodes of The Peel every week exploring the world's greatest startup stories just like this one. Check out the back catalog of over 100 episodes including last week's with Rahul Vohra, founder of Superhuman Mail. Now, let's talk to Matteo after a quick word from Numeral.
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Matteo, welcome to the show.
Thank you for having me. I'm excited.
Yeah, I'm excited, too. I was just joking before we started recording that I've got terrible sleep the past couple nights, so I think it's kind of ironic we're doing this episode right now while I'm in like the worst cognitive sleep state that I've probably been in in a while.
I'm the perfect guest to be here today. So I maybe I can give you some tips.
Yeah, I want to ask you for tips, but I guess real quick for people who don't know what Eight Sleep is. I'm hoping a lot of listeners are maybe like 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.
Yeah, of course. We invented a technology that improves your sleep. It's 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, we'll make sure you fall asleep faster, you get more deep sleep and more REM, and you wake up more refreshed.
And this is maybe a kind of a rhetorical question for some people, but why is sleep so important?
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 if there are three pillars, one is the true foundation which is sleep because if you don't 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, you are ready to go to the gym, you are ready to eat healthy, the right type of food. And it's probably honestly even the simplest thing to take care of. If you can just go to sleep and make sure you sleep at least 7 to 9 hours and you're just disciplined, it's much easier than going to the gym every single day.
Yeah, like every person, no matter what, sleeps every day. Like it's not like you can't not sleep. Like you have to do it.
Yeah. But sometimes it's an afterthought or we think, 'Oh, I have to do all these, this, and that.' And you just go to bed and you forget to fall asleep and wake up fully refreshed after 7, 8, 9 hours. And really it doesn't work like that for your body. And so the example I usually give to people is I don't 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. Now 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.
Why do people forget it? Like why do people not prioritize sleep as much as they should if it's so important?
Because I think they're busy. I think they think it's something they can compress. Obviously sometimes, you know, you go out with friends, you want to have a couple of drinks, and 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 shouldn't 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. And then there are technologies like ours that can help you to take it to the next level, but even if you just nail the basics, that should be enough to help you have a pretty solid sleep.
So low-hanging fruit just for somebody who wants to like listen to this and just immediately improve, it's like stick to a schedule and make sure that you get, I don't know what you said, 7, 8, 9 hours of sleep. I think it depends, right, on kind of like REM cycles and all that stuff.
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, you know, 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 stop preparing for bed. And so we are actually running a study and the study is proving that it's not so much about using the phone or not before bed, but it's the type of content that you consume before bed that really matters in the quality of your sleep. So you need to start relaxing. You can keep using your phone. If you're chatting with your best friend about an amazing trip you guys had 3 years ago, that's 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, it's one thing, but even just setting the temperature somewhere between 68 and 72° Fahrenheit in your bedroom, very important. And those usually are the basics.
And that seems to be one of the big features of the product is temperature control. Why is that so important? Like temperature control in sleeping?
Yeah, so your body temperature already changes during your sleep. And so what we are doing is not that we are reinventing the wheel, we are just helping your body to do what it's 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 3, 4 hours before you wake up, it should be 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 two of the main 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. It's like having a sleep butler that keeps adjusting things while you're unconscious.
Interesting. So it's like in theory, you could, I don't know, like have an actual person that's there like changing the temperature of the room that you're in or something like that.
You are in the silent peace or maybe in early 9:00 making Android and you could literally have a human butler who was there adjusting the temperature, but they wouldn't know in real time your biometrics. So they would 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.
And so the way it works is so it's a pad that goes on top of your mattress and it just like how does it work that it knows what to do? Like what all goes into that?
Yeah. So it's a very thin pad. It doesn't 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 it's literally like having a Ferrari of sleep as there is this engine that sits next to your bed. It's extremely quiet. It's impossible for you to know if it's 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 and 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 it's not just Eight Sleep reporting the metric. Obviously, we have an app with all your, you know, 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 you're back home.
That's been one of my things that I was kind of, I was almost like scared about with Eight Sleep is because I run into this when I'm traveling is I have a really good pillow. We bought out Black probably like right before COVID, we bought one of those like $2,000 mattresses that is very nice. And then when you travel, you go to a hotel and it's like shitty mattress, the sheets are itchy, you know, maybe like the hotel room is bad temperature, all that stuff. But like you run into that scary problem with like, oh man, my home bed is so good that I literally cannot sleep if I'm not at home.
Yeah. Well, it's true. At the end of the day, you spend most of the time at home, hopefully. And so the goal is to maximize at least all the nights that you're at home. And then in the future, maybe there will be other technologies that we can offer to our users for when they travel.
Is that possible to build something like that?
Yeah, we have some ideas. You know, in startups, it's always a matter of bandwidth and priority. So we could build it in 6 months from now if we wanted. The question is, you do that or you do something else. It's just a trade-off.
Yeah. Well, I think I thought don't you do some hotel partnerships where like certain hotels have Eight Sleep covers already?
Yeah, we had a partnership with the Equinox Hotel in New York. And we are talking to multiple hotels. So that could be another easy way where at some point there will be some hotels that are just affiliated and they have an Eight Sleep in their main suites.
Okay. And you mentioned that you're able to use AI to do this stuff. I mean, what are you actually doing there? Is it using LLMs to do something? What's actually happening?
We have been using hardcore AI for now many years, you know, five plus. Because at the end of the day, the key of what we do, there are 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 our extremely advanced models that can detect first all the different parameters, all the different biometrics. And second, now they're also able to triangulate and take action for you. And so, let's say that you had a late meal or let's say that you train really late, we will automatically adjust the temperature based on how your body's 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 gave us plus your biometrics and it keeps tweaking things to maximize your sleep performance. Then in parallel, when you wake up in the morning, this 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 they're becoming smarter than us. And they can triangulate certain types of data and come up with certain potential risk or certain health conditions we were not even thinking of. That's the power of now reaching the scale that we have reached where you're able to feed this data into the models and the models can literally save lives. I received an email recently from a customer who said that you 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.
Wow. So how does it actually work? Is it depending on like how your weight is distributed on the pad and like heat and like does it, do you need to have your skin touching it in order for it to measure it? Like it kind of seems like it's pretty tricky to get all that to work.
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 a doctor with a stethoscope on your back during the night. We also detect snoring, but we don't use microphones. Everything is based on vibrations. It's 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, you know, everything you need to know about your health and your longevity.
So with all the data that you have and you're collecting just like on aggregate over all these people, what is kind of the most interesting or surprising thing that you've kind of come across? Like it literally can be anything. But I'm assuming there's some interesting stuff.
Well, now it's so cool because with AI, we're really unlocking the next frontier of longevity. And so right now there are hundreds of Matteos, digital twins, replicating my health, my sleep, and my health policies for the next 10 and 20 years. And they're simulating different behaviors and based on that, we can understand what I should be doing or not to make sure that I'm 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 Alzheimer's or diabetes and all these kind of things. And the more data we are able to feed into the model, the more the model will be accurate. And so soon you should expect that you can upload 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 in 20, 30 years down the line.
Yeah, and you kind of, a lot of people, you'll kind of say like, how do you build a successful AI company right now? You need to capture like a new data source that no one else has data and like build this like proprietary, you know, data stream. And I mean, it kind of seems like you've done that with the pod or like with the pads and with, I mean, I'm assuming you can make like a blanket. I know there's like an app component. I'm assuming you could make like some sort of wearable device. Like 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.
I always think of data in two buckets. Very, very right now with this AI wave, on one side, you want to have your own data as a company because you don't want to rely on external data, otherwise you don't 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 that's all that we do. So we give back. Substantially, 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 don't 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 it's almost a modern form of medicine. And that is where we want to extend your life, help you, you know, live a longer and healthier life and to be able to give back to your loved ones.
Yeah, and one really interesting thing that you mentioned there was relying on external parties and third parties. I know recently, we're recording this the day after the great AWS outage. I think this episode's coming out on, it's either Thanksgiving or Black Friday. I know we were going to do a little like Thanksgiving promo related to the, like a Black Friday promo related to the episode. But when we were recording this, you're fresh off like AWS went down across, I don't know, a large portion of the internet. What happened on your guys' end and how did you fix it?
Yeah, there were some devices that were impacted and so some functionalities didn't work for some hours as they were expected. And so we really 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 big deal. Then the P1, which is what we are currently working on and we worked on that the whole night, is also to make sure that this doesn't 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, you know, 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 I'm 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.
Interesting. So by the time people are hearing this, it's all been shipped and released. I think we're going to throw this up on Twitter for people, but people listening to the full podcast, I guess it goes to show how fast you can actually move. Like some people don't realize how fast you can move on things. What was the reason that happened? Like I'm assuming you guys didn't get much sleep last night.
No, we didn't. 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 wouldn't impact our device. So here it was extended for multiple hours. And the key is always just to build now multiple backup solutions instead of just few. And so we are adding more solutions to make sure that this is not going to happen again. Again, last night everything worked properly. Everything was restored. And we fixed it.
Nice. That's always good. I know that Eight Sleep you have this sleep score that kind of ranks or like sort of shows you how well your sleep was. I'm assuming what were sleep scores like internally at the company the past few days?
It was pretty bad even because our engineers that caught the outage very soon, they were still up at 2:00 a.m. two days ago working. And they caught 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 substantially we kept working non-stop. And we will keep working non-stop until when we ship this backup solution with Bluetooth control that can make sure that if there is an outage, nothing happens to your device and more than anything to your sleep.
Yeah. I mean, it's like pretty quick turnaround. I guess what else are you guys cooking in terms of product roadmap over the next couple months, couple years, decade? How do you just think about what kind of opportunities you have?
We think it always in two buckets. One there is hardware and we're working on a lot of new products that will come out pretty soon. I'm really excited. So we'll keep it 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 you're snoring and you will stop snoring. So we sell your beams 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 we 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 you're asleep, we'll do it. And this is on the software side, we have an internal beta 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 don't 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, if 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.
Interesting. And I like that you call it a butler and not like an AI agent because I don't know, it just makes it a little bit more human. Makes it a little bit more like easy to identify with as a consumer.
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? Like did you grow up in Italy?
Yeah, born and raised in Italy. I moved here just 14 years ago now.
Oh, wow. Okay. I very like not planned, but I've actually invested in two companies with one of them is actually based in Milan, Italian founders. And then one, she's like half Italian, half Venezuelan and is in San Francisco, but I never thought I'd be investing in a bunch of Italian founders, but I guess there's actually a lot and they, I mean, they seem to be pretty good. All the ones I've met are pretty, they're crushing it, so.
