The largest majority of our users, they have a wearable, right? And what they say is, look, this data is interesting, but so what? My wearable is not taking action for me, it's not doing anything for me. At a certain point I get tired of just reading my metrics without achieving anything. And that is the job of Eight Sleep. It's really our ability to start from the data and close the loop. I call it almost a sleep butler.
Hi, this is Matteo Franceschetti. I'm the CEO and co-founder of Eight Sleep, and I'm here with Brian Elliott.
Well, my friend, it's good to be with you. I can't believe it's coming up on our five-year anniversary. Last time we talked in person like this, or remotely in person. I guess I'm most curious about your tennis game. How's your tennis game?
Well, I became a padel player, so now I'm obsessed with padel. I play tournaments, and that is going really well. I just won a tournament last Saturday.
Oh, congrats. So, I've seen padel. I mean, it's sort of, for people who don't know what it is, explain it.
Padel, I would say, is a form of tennis, slightly simplified. There are walls around the court, so you can let the ball bounce. It's probably squash meets tennis, which is why I like it. It's more social because you always play two against two. The court is slightly smaller than tennis, but probably bigger, I would say, than squash. But it is, I would say, the new golf. The number of really big people that now play padel is incredible. And I started having a bunch of business meetings on the padel court, and they were pretty successful. I was even just in the Middle East for work. In the Middle East, they're obsessed with padel too, from the crown prince to sheikhs and everybody. And so playing padel is the best way to just build the relationship with some of these people.
Yeah. Is it played with a tennis ball or is there an actual padel ball?
It's a padel ball. It looks like the tennis one but is slightly softer. So less air inside. Yeah.
But aesthetically it looks the same.
It's just like an old, I would say, softer, like an old tennis ball.
Yeah. Like you've hit it, you know, several different times. Gotcha.
Well, you know, since it's been five years, I remember sitting here when we talked in 2021, here as sort of the guy who was battling or had sort of worked his way through sleep apnea. I hated the CPAP machines. You've now filed with the FDA to detect and treat apnea from the bed. Did you build that for people like me, or was that like the market pulling you that way?
Probably both. We have seen many people going through sleep apnea. Sleep apnea affects a billion people across the globe. The largest majority of them, they don't even know they have sleep apnea. Some of them, they're guessing they might have it, but they don't want to go through the pain of going to a doctor, sleep clinic, doing the test. And so we immediately realized there was this big opportunity. And we invented two technologies. One technology that is embedded in the sleep cover that can immediately detect if you have sleep apnea. But we also invented another technology that mitigates sleep apnea, specifically positional sleep apnea. This technology is approved in Abu Dhabi. And so the goal for our product is to become a medical product designed for people with sleep apnea that is reimbursed, covered by insurance. So in Abu Dhabi we already achieved this goal as a medical device. In the US we filed for FDA approval for both these two technologies. The idea is to now expand this technology and the ability to be reimbursed and covered by insurance across the globe.
So neither of us are medical professionals, but you know, I've been through it. I don't know if you had any experience. How would you describe apnea?
Well, apnea is so special. It's usually connected to how you obviously breathe in the middle of the night, is your position, the position of your tongue and the position of your mouth overall. And so you stop breathing and you have a certain number of episodes based on the gravity of sleep apnea. And because you stop breathing, oxygen doesn't get to the brain, which then impacts your sleep quality and your sleep stages. And so the usual typical, I would say, effect of sleep apnea is that people wake up in the morning, maybe they have been in bed for nine hours, but they feel extremely tired and they don't understand why. And the reason is just sleep quality was pretty bad because of the lack of oxygen going to the brain.
Yeah. And that was my experience. And you know, I know friends who use a CPAP machine. It just was not for me for lots of different reasons. You know, first of all, probably, and if I'm being honest, the number one reason I had to ditch it is just because it ruined my romantic life, and I was not going to do that for the rest of my life. And so I needed to find other solutions. Unfortunately, my doctor didn't really tell me what options I had. He just immediately prescribed the CPAP. So, you know, on the other hand, I have a friend or two that's like, you know, big NFL football player size, and they're like 280, 310 pounds. And sometimes when you're overweight, I understand, like from my friend telling me, it's not just a jaw or tongue problem, it's other weight issues. So, you know, for those people, I'm not disparaging the CPAP. I'm just, you know, because for some of them it's life-saving and it's important. I just want to be clear. But you know, for the rest of us who are battling apnea, there are other options, and now it sounds like Eight Sleep, you know, is among those FDA-approved options. That's pretty cool to hear.
And the way I think of sleep apnea is in terms of a portfolio of solutions, right? There is our technology that doesn't require you to wear anything and is designed for positional sleep apnea. There are CPAP machines that are still very effective for a specific type of users. There is GLP-1 now that Eli Lilly has been approved from FDA for the treatment of sleep apnea. And so if you are overweight or if by losing weight you can improve your respiration and your breathing, that is another option. And then there are also oral appliances. And that is what I really like, that we are able to provide users with a portfolio of options, and then they can select whatever fits their life the best.
Yeah. And I would say even from someone who wasn't greatly overweight, even losing just a little bit of weight actually made a difference for me. I lost about seven pounds just in me trying to eat better and exercise more, be more disciplined in the gym more consistently. I lost, you know, about seven, maybe eight pounds, but actually just that little bit of weight drop made a world of difference. So I would say, you know, if you feel like you're not feeling your best, you know, getting back on track with that nutrition is key. The other thing you said to me last time was that sleep is this foundational pillar, and I am all in on this, by the way. I'm on your side. Like, I am a believer. I think that sleep is where it all begins. But, and this is even before nutrition and fitness. Like, do you still rank them that same way, or has your thinking shifted?
Oh, absolutely. If anything, I have even more evidence of that, right? The way I think is health is based on three pillars. There is sleep, there is nutrition, and there is fitness. But sleep is really the foundation because if you start sleeping two hours per night, then you will crave junk food, and there is no way for you to go to the gym or you risk an injury. And so everything starts with good sleep, your mood, your mindset, and then also how ready and open you are to take care of your nutrition and your fitness during the day. Everything starts with the energy you have in the morning, which is a derivative of your sleep.
Yeah. I mean, and you know, going back to my main motivation of ditching the CPAP machine, if you're middle-aged and you're getting less and less sleep, guess what? Your hormones are also being affected, specifically testosterone, which is the sex drive and, you know, mood and, you know, all of that. And so the less sleep you get, the more it's going to affect your sexual health as well, which for a lot of us is, you know, super important. It's like, you know, it's up there with sleep and eating. And, you know, like to have a well-rounded, well-balanced life, quality of life, that's a big part of it, you know. And so hormone monitoring for me is another big one. And sleep is the killer. If you are losing sleep, it's a killer of hormones, right?
Let's talk a little bit about the company. So you raised at $500 million in 2021 roughly. Now you're at about, tell me if I'm wrong, $1.5 billion in 2026. So what changed sort of that number beyond the AI narrative?
Oh, the company growth is probably what was the most surprising part of these years compared to when you and I spoke. I think we have beaten all the projections and even the biggest dreams we might have about our growth. We now sell in 35 countries. We are approaching a very large number of users across the globe. US is one of the core business, the core markets for us, but now we are also in Canada, Europe, UK, Middle East. We just launched in China. We are in Singapore. We are in Mexico. So we are opening in LATAM, we are opening in South Korea and Japan. So we really became a global company. And that is reflected in our growth plus AI. We also created new generations of the product. Right now we are at Pod 5. You should imagine there will be a... there is the new generation of Pod 6, which we just launched. The beauty of Pod 6 is the summary of everything we have learned since when we launched this technology in 2019. And so it's smaller, it's more powerful, it has more sensors, it has a better performance, and it's also cheaper. And so we put a lot of engineering effort where everything is better, but it's also more affordable and it's also smaller. And this is what customers have been asking forever. So we are really, really excited about that.
Yeah. And I know, you know, we're going to hold this embargoed until we launch it in September. So I'll make sure that that stays top secret until then. Before I have you break down those little pieces that you just mentioned, you know, smaller, faster, better, stronger, you know, cheaper or less expensive, more affordable. Hardware companies, how would you categorize? Are you a hardware company? Are you an AI company? Because I see you as sort of a hardware company, and hardware companies rarely hit free cash flow positive. You did this last year, and so what did you cut or fix to get there? Was it just sales?
So I think of us as a consumer health company. I think in the next 10 years there will be probably two trillion-dollar consumer health companies. It's a whole new industry that is growing. There are 8 billion people, all of them they want to live a better and longer life, and companies like us are building products through hardware and AI software to deliver that value to them. So that is what we are. You will see us transitioning more and more towards also a medical definition because I think consumer products in our space, they will become medical products. For us specifically, last year we were profitable. We are in a very strong financial position, which is great. We have strong margins, and the goal is to IPO in the next few years.
That's exciting. Okay. So let's talk about Pod 6. So, you know, Pod 5 makes decisions on its own, adjusting temperature, you know, adjusting for elevation, firmness while you sleep. Talk about Pod 6, and also kind of want to understand where's the line between helpful automation and sort of taking control away from the user. There's a fine line there. Yeah.
Yeah. The comment we get. So the largest majority of our users, they have a wearable, right? And what they say is, look, this data is interesting, but so what? My wearable is not taking action for me, it's not doing anything for me. At a certain point I get tired of just reading my metrics without achieving anything. And that is the job of Eight Sleep. It's really our ability to start from the data and close the loop. I call it almost a sleep butler. You can go to bed as you did for the rest of your life. You can fall asleep, be unconscious, and we will take care of you. We'll change your body temperature to give you up to 30% better sleep, and we will elevate your head, or we'll have a couple of other responses to help you breathe better and solve sleep apnea, solve snoring and similar issues. And I think that is what customers really want, is essentially they want us to do the job for them, not just to keep telling them what they're doing wrong, because most of the times, particularly on the same day horizon, they already know how they slept. Maybe sometimes on a weekly basis, you can provide some trends and information they didn't know, but on a daily basis, they know pretty well how they feel. They just want to feel better.
Yeah. Yeah. Yeah. There is such a thing as data fatigue. And I wrote an article about this a couple weeks ago about how optimization culture is sort of killing us. Like we're measuring everything always. And even just the stress of looking at your, you know, tracking device sometimes, if it tells you it's less than perfect, you think, oh, you know, my day is shot or something. But I mean, you know, intuitively when you wake up whether or not you feel well or not. And so yeah, can you drill down a little deeper into like how, and maybe let's frame this in Pod 6. So like how does it solve some of these problems like apnea? Does it like give you a little tingle or like, you know, explain some of the features and how they work?
Yeah, we will respond to your needs in a couple of different ways. Obviously, the biggest is temperature. So we track everything about your sleep and your biometrics, including HR and HRV. And we dynamically adjust the temperature of your side of the bed multiple times during the night to optimize your sleep performance. Then we have another feature that is elevation. So if you're snoring, we can elevate your head, and that will mitigate your snoring. And then we have this new medical feature specifically designed for sleep apnea, for positional sleep apnea, which means usually you have sleep apnea when you are sleeping on your back. In that specific case, when we track and see there is an episode of sleep apnea, we vibrate your side of the bed until when you move on the side. It's very similar to what a partner would do. A partner with you in bed would do by tapping on your shoulder when you're snoring until when you move and you stop snoring. We just developed that same technology with AI and hardware, and we can do it at scale for millions of users.
So how does the... I understand how elevation can work, the, you know, the bed's on a movable robotic, you know, frame and it senses. So does it, is it listening to us or is it feeling the snoring vibrations? How does it know that we're snoring?
Yeah, we don't listen. We don't have microphones at all. The way it works is literally like a stethoscope. Imagine that you are sleeping on an AI hyper-advanced stethoscope. Your bed becomes a stethoscope, and just through the vibration we can pick up your heart rate, pick up your HRV, and obviously any sort of breathing disturbance, including sleep apnea, snoring.
So that makes me think, you know, you built in a lot of this, I would call it like illness prevention or illness prediction or red flagging of certain things like heart rate variability. How often is the bed right versus wrong? Is it like 99% accurate or does it sometimes get it wrong?
It usually depends on the metrics. The metrics where we are the strongest is anything related to your cardiovascular system. So when you compare us to EKG, our level of accuracy is extremely close to the one of a medical-grade device. Same for sleep apnea and breathing. That's the reason why we filed for FDA approval. We have really high confidence on the quality of our metrics. Then sleep quality is the next one where we are investing the most. Sleep is always a derivative because we don't have your brain waves. So we don't have the ability at looking at the behavior of your brain while you're asleep because nobody wants to wear a headband. And so we infer sleep through other metrics including movement, heart rate, and breathing and other information. But what you should expect from devices like us, first obviously again our product, just to repeat it, is a mattress cover that can be installed onto any mattress, will make your mattress smart. It will improve your sleep performance. What you should expect is sometimes technology takes a little bit of time, but here it's happening, that these consumer products are becoming medical-grade devices. Doesn't matter if it's yesterday, if it's today or is tomorrow. This is happening, and I think this is the beauty of how we can really democratize health and transform a company like Eight Sleep into a preventative health company where we will be able to predict when you have a stroke. We'll be able to predict if you're developing diabetes or hypertension, and we'll be able to predict if you're getting sick two days later.
Yeah. And maybe even if I'm just forecasting further into the future. I mean, I recently had a DEXA scan, you know, just like a normal healthy checkup just to see. And my understanding of a DEXA scan is it measures the fat around your internal organs and it sort of gives you a score of how you're doing, maybe your body fat metrics. Maybe that's in the future. I mean, you're laying on this flat mat and, you know, I mean, who knows what the future can hold out. I guess I'm thinking about, you know, the billions, you probably have over a billion hours of this biometric sleep data. So what does that data let you do in 2026 heading into 2027 compared to what you couldn't do in, what did we last, in '21?
Our AI models reach a new point where they are becoming literally smarter than us. I like to say, meaning we already see in the back end the ability for our models to diagnose diabetes, hypertension, and other diseases just based on your sleep data or the type of data we are able to track. These models are becoming smarter than us because sometimes it's not fully clear to us exactly how they are triaging the information to get to that outcome. But what we can measure is the outcome and see if that outcome is true, and that is what we are seeing directionally. So there was a paper published from Stanford that said that with the data of one night of sleep it's possible to detect up to 130 diseases, including again diabetes, hypertension, and many others. That is another thing you should expect, the level of sophistication and understanding of certain patterns inside your biometrics. It's something that was not as understood as it is today, and is probably even today will never be comparable to what it will be in six months or one year down the line. And that is where you keep, I keep going back to this concept of preventative health, where wearables and Eight Sleep that are becoming preventative health machines that will be able to tell you the likelihood that you develop a certain health condition before you even know you have that condition.
Okay. Okay. So now let's go back to Pod 6 and break down what's new compared to Pod 5 and even, you know, you said it's a culmination of everything that you've learned up to now. So what are the highlights? What can we be excited about?
Well, Pod 6 is the state-of-the-art, sorry, Pod 6 is the state-of-the-art of a technology designed for sleep enhancement, and it's everything 5 does plus many other things, and it's also more affordable. It has more sensors, it's more powerful, it's smaller, to a completely new design. So it also looks way, way cooler, and as I said, it's even more affordable. So we have put a lot of engineering effort in making sure that we were not just improving the product, making it like literally the Ferrari of sleep, but also making it more affordable. I always, I used to say in some of these interviews that we were at the Model S of Eight Sleep if you compare us to Tesla, and then the Model Y, the Model X and the Model 3 would come, and this was our first step towards that direction because the end goal here is to democratize better sleep and democratize better health.
I love that it's more affordable. I noticed a big change, maybe between, correct me if I'm wrong, between Pod 4 and 5, the tubes which, you know, send the liquid through, the water through the system. By the way, the temperature control, you know, this is by far my favorite feature and by far I think the most useful for me because I do sleep hot and my wife sleeps cold to medium most of the time, and so it's really brilliant to be able to have temperature controlled at, you know, through the app and whatnot. It's a game changer for me. But I noticed the tubes were significantly smaller. So you say it's better, stronger, faster. Like, is it smaller tubes? Like, what changed with the technology? Because I did notice that it was more comfortable or, you know, less intrusive than in the earlier. It's almost like I think about, you know, the first iPhone, you know, it was kind of like this brick, a brilliant brick, but it was, you know, rudimentary and fundamental and game-changing at the same time, but it was still, you know, compared to like iPhone 17, it's quite different. What did you do with the technology? Did you shrink it or help me visualize like how it got better?
Yep. So our technology, the Pod, right, our hero product is made of two parts. There is the cover that wraps your mattress, and then there is the hub, which is the one that sits on the side of the mattress. The hub is the one that was re-engineered completely to make sure that it would be around half the size of the previous generation, but is also way more powerful, and so it can get colder and it can perform many more activities compared to the previous generation. Then the other big change was inside the cover where we redesigned the sensor array and we introduced new sensors. The beauty of what we do compared to wearables is we have way more space than other wearables. And because of our price point, for us adding a sensor that costs a few dollars doesn't really change our margins. And so what you should imagine over the years is that your body will literally become a health platform with an incredible number of sensors that can track everything. In the future, as you were saying, we'll introduce other forms of products that can probably scan your body every single night. That is where we are going. The challenge was to deliver more value to the user while also reducing the cost. And that is where we had to re-engineer a lot of things to make up not only for the additional cost from the new things that we introduce, but also to gain an edge compared to the previous generation. That was the very challenging part, and at the same time we also had ID constraints because I wanted this device to look incredibly cool and nice and sexy, and so these were the north star for our team.
And so you feel pretty confident that you've got a Pod cover that will fit any bed, any mattress?
Yep. I think even because, sorry, when you think of us selling in 35 different countries, the mattress size in different countries is very different, right? In Europe it's completely different from the US, US and UK is different. The same happens with...
Asia. So from a logistical standpoint, the different mattress sizes is quite a complicated topic, but now we are able to serve, I would say, probably 80-90% of the sizes across the globe.
