#1064 Matteo Franceschetti On How Entrepreneurs Can Navigate A Recession

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. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  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. Mateo and Alex are the co-founders of Eight Sleep, 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

• 0:43Anthony Pompliano?

  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 instance 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/pomp

• 1:28Anthony Pompliano?

  today. Again, that's bcbgroup.com/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 Eater, they're offering the Full Monty Unverified Collection with more added every single day. Ready to check? Get it out for yourself, run, don't walk.

• 2:12Anthony Pompliano?

  Over to exodus.com/pomp for your free download today. Again, if you want the world's leading desktop, mobile and hardware crypto wallet, go to exodus.com/pomp today. This episode is brought to you by Eight Sleep. Good sleep is the ultimate game changer and the Eight Sleep 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.

• 2:56Anthony Pompliano?

  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, 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. The Pod's not magic, but it sure feels like it. Go to eightsleep.com/pomp to start sleeping cool this summer and save $150 on the Pod.

• 3:40Anthony Pompliano?

  Eight Sleep currently ships within the US, Canada, and the UK, and select countries in the EU and Australia. Go to eightsleep.com/pomp today and you'll save $150 when you buy that new Pod.

• 3:50Speaker 01

  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.

• 4:14Anthony Pompliano?

  Mateo, how are you?

• 4:15Speaker 02

  Good. How you doing?

• 4:17Anthony Pompliano?

  I see you have your black shirt on. Congratulations, great, look very fashionable.

• 4:25Anthony Pompliano?

  Here's where I want to start is 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, 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. What are some of the things that either you do or other people you think should be doing?

• 4:54Speaker 02

  Yeah, a couple of different things. First, they can try to wind down in the evening, like an hour or three minutes before going to bed. Without not looking at the markets and crypto numbers. Otherwise, they will just get nervous and probably not 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. 1:00 or 2:00 PM, around that time, that will enhance your performance in the afternoon. So you will be sharper, way more reactive and focused during the day.

• 5:38Speaker 02

  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.

• 5:45Anthony Pompliano?

  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?

• 5:55Speaker 02

  Yeah, so caffeine you should stop. If it's like a regular coffee, eight hours before going to bed. If it's a decaf, it should be four hours before going to bed. That's what I usually do. So I drink coffee all in the morning. And what was the other question?

• 6:15Anthony Pompliano?

  Food, like what should they eat in the morning?

• 6:17Speaker 02

  Yeah, 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 2:00 PM, from 2:00 to 3:00 PM. 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.

• 6:47Anthony Pompliano?

  And then when you do eat, what do you usually eat in terms of food? You said it's light, but what is that?

• 6:53Speaker 02

  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 1pm, otherwise you will feel sleepy 100%. So you can try to have anything else that is keto compliant. That is my advice.

• 7:21Anthony Pompliano?

  The last thing around food or diet is I see people commenting Napa Chino, which for those that did not hear you say this last time, explain what a Napa Chino is.

• 7:31Speaker 02

  Yeah, Napa Chino 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.

• 7:55Anthony Pompliano?

  It's like double.

• 7:56Speaker 02

  It's the best hack ever.

• 7:57Anthony Pompliano?

  Yeah, it's like double. You get both the sleep rest and then also from the caffeine. You guys recently just launched the Pod 3. Explain to everyone what the difference between the prior versions and the Pod 3 are.

• 8:10Speaker 02

  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. So all the tracking is better. And then the device essentially became a computer. It's based on Linux, it has like 1000x more computational power. And so it's the greatest sleep machine that will enhance your sleep through thermal regulation and will track your health.

• 8:57Anthony Pompliano?

  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 thermal regulation with the, with either the pod or the mattress? Like, what are the biggest things that happen to their health?

• 9:14Speaker 02

  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, especially sometimes investors or friends, they ask me, 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, only a positive impact. Well, instead, sleep pills are known for having negative, a negative impact on your health.

• 9:54Anthony Pompliano?

  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? Like, what's going on?

• 10:08Speaker 02

  A lot.

• 10:11Speaker 02

  I don't know how much time I have, but I'll try to do brief.

• 10:17Speaker 02

  A lot, a lot of issues. In particular, we cannot go to China. We, you know, 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 continuously, 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 that we had, 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, we airshipped, but that had an impact on gross margin as well.

• 11:01Anthony Pompliano?

  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. Like, how do you think about marketing during times where maybe the macro environment or the supply chain is having some complexities or issues?

• 11:26Speaker 02

  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 inclusive 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, many other Formula One drivers, world champion CrossFit, athletes in NBA, NFL, top tennis players. And so that helps us to build that 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

• 12:09Speaker 02

  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.

• 12:29Anthony Pompliano?

  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. And so it feels like when people get a good night of sleep, they talk about it. They tell folks. 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. And so in some way, there's like this organic marketing that just occurs because of that happening, right?

• 12:59Speaker 02

  Yeah, and for us, it happens in two ways. On one side, people just talking about their own experience, right? But on the other side, we are also helping couples because like fifty to sixty 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.

• 13:33Anthony Pompliano?

  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 partners, vendors? Like, what's the kind of the operating of the business? What's changed? And kind of how are you navigating this?

• 13:49Speaker 02

  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 have in a recession. And also, the market changed, right? And so before, in 2020 and 2021, all that matter was growth, while 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're already in that trajectory. But we need to make sure

• 14:31Speaker 02

  that the company can get to profitability and that our unit economics are healthy, in particular, in terms of cross margin and contribution margin.

• 14:40Anthony Pompliano?

  Got it. And then you obviously have done quite a bit of investing. What are you seeing there, kind of early-stage technology startups?

• 14:47Speaker 02

  Yeah, I think the numbers and the valuations are going down. I just started seeing deals at a much more reasonable valuation, which I think is good for everyone. And so I would say the seed stage and series A, 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 obviously valuation dropped somewhere between sixty and eighty 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 risk to be impacted in terms of valuation.

• 15:27Anthony Pompliano?

  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?

• 15:37Speaker 02

  If you're at an early stage, seed and CDSA, I think nothing really changing. You need to accept a more reasonable valuation, which it doesn't mean to be a bad valuation. It's just more reasonable. I think last year, probably the second part of 2020 was a bit out of control and crazy. And just go ahead. Obviously, I think investors will be, 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

• 16:18Speaker 02

  go through the winter and be stronger once that the markets are back.

• 16:24Anthony Pompliano?

  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?

• 16:52Speaker 02

  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 find it. Then what happens this year, things are very different and you understand that you need to be way wiser in how you manage your cash. You need to run a proper business that can be here forever. And so I think

• 17:32Speaker 02

  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 make sure as a CEO that you always have a plan B in case of a recession. And that plan B sometimes might be might be tough, meaning you need to make changes and cuts to cut your cost and make sure you can survive through the winter.

• 18:08Anthony Pompliano?

  Yeah, and as you start to see more and more companies

• 18:14Anthony Pompliano?

  just go out and raise capital, try to navigate this market. Are there areas that you're most excited at and if people are building certain companies that they should should reach out to you for?

• 18:22Speaker 02

  No, I mean, I'm a diagnostic on the to admire and respect the founders. I mean, I want to say, oh shit, this guy is gonna, I want to work with this guy. If I can put a chip, I want to be in because I will learn from 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. That doesn't matter if you build houses like Cover. I'm an investor. I just tweet about them and their factory. Or if you do web three, 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.

• 19:04Anthony Pompliano?

  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, they it doesn't fit the pattern to some degree. And and that's actually might be a an encouraging factor is that they sound a little crazy.

• 19:21Speaker 02

  Yeah, that's what PG always says, right? That the best ideas at the beginning, they sound crazy, impossible. Airbnb obviously is the 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 Y C, they came and speak. 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 gonna 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.

• 20:04Anthony Pompliano?

  Yeah, that that makes that makes a lot of sense. Does your team have that?

• 20:10Speaker 02

  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're shining and growing. It's tough sometimes, but it's part of the game.

• 20:26Anthony Pompliano?

  As a as a closing point, maybe tell us one of the stories of when you all almost died and what you do to to survive, just to give people a sense of when they have the Eight Sleep Pod in their room and they're sleeping on it. It's kind of this magical experience. We go to sleep, 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 did you guys do to survive?

• 20:51Speaker 02

  A story that is public and it comes from Y C is that we got rejected twice from Y Combinator. And 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 Eight Sleep, where 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 in of the Y C network.

• 21:26Anthony Pompliano?

  Only just beginning. The story is not over yet, my friend.

• 21:30Speaker 02

  Yeah. And the other day, I always think for founders, the rule number one, and this comes from P G, from Polygon as well, is just you need to keep going. And then things will change. You adjust, you adapt, maybe market product markets, you find product markets 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.

• 21:53Anthony Pompliano?

  Yeah, I think that's right. Where can we send people to find you on the internet or check out the pod three?

• 21:59Speaker 02

  Yeah, I go on eight sleep.com eight like the number just in letters, E I G H T sleep dot com. And there's there is 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.

• 22:17Anthony Pompliano?

  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.

• 22:28Speaker 02

  I just start tweeting when it's time for you to go to sleep at night. So now tonight and I'm sorry, I will start tweeting, but you should go to sleep.

• 22:37Anthony Pompliano?

  Don't worry, Plana does a great job of reminding me, get your ass to sleep. All right. Listen, thank you so much for doing this. As everyone knows, I think that it is no secret, eight sleep pod and mattress is probably the number one tech product that I've purchased over the last two years or so. It is absolutely incredible. I finally convinced you to let me invest in the business. Thank you. 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 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 three or or the mattress and get a better night of sleep. It actually will

• 23:20Anthony Pompliano?

  will make your life better. So Mateo, thank you so much for for joining us and we'll definitely do it again in the future.

• 23:25Speaker 02

  Thank you. Thank you for having me.

• 23:27Anthony Pompliano?

  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. We teach you exactly what you need to know to break into the industry, including live interview prep and resume review. Our students have been hired at over 75 of the world's best Bitcoin and crypto companies. Go to thecryptoacademy.io to learn more. Again, that's thecryptoacademy.io. If you enjoyed today's episode, make sure you share it with your friends and I'll see you all for the next episode.