Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20VC: The Ultimate Hiring Playbook: Five Questions to Ask Every New Hire | What Makes Truly Great Leaders and How They Give Feedback | Do VCs Really Add Value; Lessons from Hard Fundraises with Matteo Franceschetti, Co-Founder @ Eight Sleep About this episode Matteo Franceschetti is the Co-Founder and CEO @ Eight Sleep, a company dedicated to fueling human potential through optimal sleep. To date, Matteo has raised over $160M for the business from the likes of Founders Fund, Ryan Petersen, Naval Ravikant, Kevin Hart, AROD and many more. In Todays Episode with Matteo Franceschetti We Discuss: 1. Why Did Sleep Need "Solving": Why did Matteo decide he wanted to spend decades of his life-solving sleep? If Matteo has known how hard it was going to be, would he do it again? What does Matteo know now that he wishes he had known at the start of the journey? 2. Hiring the Best Team: What is Matteo's playbook for hiring? What are the five questions that Matteo asks in every interview? What are big red flags? What are strong signals of great talent? If people have been let go in a RIFF, is that a concern? How does Matteo construct hiring panels? What vote count is enough for an approved hire? What are Matteo's biggest lessons on title and pay a new hire receives? What are some of Matteo's biggest lessons when it comes to firing people? 3. Funding the Business: What was the hardest round to raise? Why? Are investors justified in their skepticism of hardware? What are the single biggest pieces of advice Matteo would give to founders on raising? How impactful has it been having Keith Rabois and Founders Fund as an investor? Do VCs really add value? 4. Mastering Health, Sleep and Nutrition: How does your diet impact the quality of sleep you have? How does exercise and the time of exercise impact your sleep? What are some common rules on sleep that are BS and myths? What are some of the most non-obvious truths about getting great sleep?
Transcript 21,208 words · 2 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 I always tell my executive, your job as an executive is not to be loved. Your job is to help your people achieve more than what they believe it was possible. The most important thing is people should always know what you think of their performance. I will not take a meeting with anyone in the company if I don't get an agenda slash memo. I run all the interviews with the same playbook. I I go through each of your previous jobs and I ask you five questions.
0:25 Harry Stebbings? This is 20 VC with me, Harry Stebbings. And for early stage founders, hiring teams, this is going to be the most valuable podcast you've ever listened to. In this show, our guest breaks down step by step their hiring process, the specific questions they ask, the best and worst responses, and so much more. Really is one for a notebook because it's very granular and detailed. Joining me is Matteo Francis Cetti. Knew I was gonna get that one wrong, but just roll with it, Harry. Co-founder and CEO at Eight Sleep, a company dedicated to fueling human potential through optimal sleep. Now, to date, Matteo's raised over $160 million for the business from the likes of our friend Keith Roy at Founders Fund, Ryan Peterson at Flexboard, Navar Rava Can, Kevin Hart, A Rod, and many more people.
1:08 Harry Stebbings? But before we move into the show's day, did you know that every 20 VC episode you listen to is recorded with Riverside? Riverside is insanely good. Like, I would pay $1,000 per month for Riverside. It's that good. Why? Well, first off, ease. Your guests do not need an account. One click and they're in the recording room with you. It is fantastic, especially for high-profile guests. Second, they record your video and audio tracks separately and in the background. So they're not only higher quality, but the guest does not need to record there and then send after, which is a total nightmare. But for me, honestly, what I love so much is how much thought they put into the product. Like, when the internet quality is low, they will disable the video for the call. But for the recording, it works seamlessly.
1:52 Harry Stebbings? It records perfectly. It's so thoughtfully done and it makes such a difference. Use my coupon code 20VC, that's two zero V C, and get a 15% discount. It is the tool I could not run my business without. Again, you can check it out at riverside.fm and use my code 20VC. That's 20 VC. And speaking of game changers for businesses, as a VC, I come across many businesses that have potential and offer a great product or service, but they run into issues. And that's why I love the team at Arising Ventures. They're a holding company that acquires tech startups that are facing setbacks and helps get them back on track to success. They've helped companies like Up Council, which they took from burning $1 million a month and shrinking
2:35 Harry Stebbings? to profitable, and Growing Jive, where they launched a shutdown company and went from naught to a million ARR in just five months. They want to reveal your great business underneath the broken incentives. Whether it's a broken cap table, co-founder disputes, underwater common stock, the team behind Arising Ventures are career-long tech founders, which is so important. They're not bankers and they know even the greatest businesses have tough times. Learn how Arising Ventures can be the one to help give your company new life by visiting arisingventures.com/20vc. Go to arisingventures.com/20vc. And finally, SecureFrame is the leading all-in-one platform for automated security and privacy compliance.
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4:02 Speaker 00 You have now arrived at your destination.
4:04 Harry Stebbings? Mateo, I am so excited for this. It's so nice to do this in person, so welcome to London.
4:09 Speaker 00 Yeah, thank you for having me and I'm excited to be here.
4:12 Harry Stebbings? I want to start with, we look at Eight Sleep now, it's this incredible brand, it's this incredible movement. Let's go back to the beginning. Why did you decide this was the problem you wanted to spend many decades of your life working on?
4:22 Speaker 00 Yeah, so when I was a teenager, I was an athlete. I was playing tennis and doing a bunch of other sports at competitive level. So I have always been in recovery. And so around 10 years ago, I started thinking, why Elon Musk is taking me to Mars, but I still spend a third of my life on a piece of dumb foam, right? We have technology in two thirds of our life and then you suddenly go to sleep and you pretend to wake up eight hours later, fully refreshed. That didn't make sense to me. And so that is when I started looking into sleep and decided to fix it.
4:51 Harry Stebbings? Can I, it's such a big problem to take hold of. What was your next subsequent step? Like, I'm gonna fix sleep. What was the first prototype? Just walk me through that.
5:01 Speaker 00 Yeah, so two thoughts. The first one is why there is no technology enhancing my sleep. And that is what we are doing. Then, even if I can compress your sleep, because I believe we will compress your sleep over time. So you might be able to sleep only six hours and get more rest than when you were sleeping eight hours. Six hours is still a lot of time for people like you and I. And so I started thinking, what else can we do? And then I started thinking, oh, we can save your life. We should use those six hours to scan your body and become the number one platform for health. You're standing still, flat on a surface for six hours. We have lots of space. How can we keep adding sensors to really become the preventative health platform?
5:41 Speaker 00 We are already working on technologies for body scanning. We want to detect cancer in the future by using some of these technologies. So think of almost of an MRI. It will not be an MRI technology because obviously you cannot have it in the home, but we're working on that kind of thing in our R and D lab.
5:56 Harry Stebbings? I absolutely love that. I totally agree with you in terms of six hours flat.
6:00 Speaker 00 It's still a lot of time and so how do I use it?
6:02 Harry Stebbings? Question for you. I saw this Jensen Huang comment the other day about Nvidia. And he said, if I'd known how hard it was gonna be, I would never have done it.
6:11 Speaker 00 I saw that tweet.
6:12 Harry Stebbings? I was quite saddened by it. I was like, no, you're my hero and I want to hear the inspiration.
6:16 Speaker 00 I share with my co-founders.
6:17 Harry Stebbings? Yeah. Is it the same for you?
6:20 Speaker 00 Hundred percent. If I knew what we would have to go through, I don't think any human being would do that. You need to be naive and you need to believe that it's hundred X easier. And then you need to have the stamina while shit comes to handle it.
6:34 Harry Stebbings? What was the hardest thing? When you look back and you're like, oh my God, I can't believe we went through that. What was that?
6:39 Speaker 00 So many things. I would say there are two major buckets. One, hardware. So I tell you this story that very few people know, but it was immediately after Y C, right? We just closed Y C, we had our seed round, so that part was was going well. But what was not happening was manufacturing. We didn't have any expertise in manufacturing, right? So we were really naive. And so at a certain point, I go to my wife Alexandra, who is one of the co-founders. And I say, look, manufacturing is not happening. I need to go and fix it. And she says, oh, okay. And so what do you do? Oh, I'm flying to China. And she says, when? Tomorrow. And she says, when do you come back? Once I have fixed it. And so I came back a few months later after being there.
7:19 Harry Stebbings? Sorry, and she was okay with that? I mean, that's not a normal thing.
7:23 Speaker 00 My wife is, you you have to do what you have to do, right? And particularly for the company, if the company needs this, then you have to go to China, go to China, fix it and then come back. That is how it works in our family.
7:34 Harry Stebbings? My word, that's patience, my friend. Was that a seed round easy to raise? Respectfully, you weren't like Silicon Valley, Stripe, a software engineer. And you were fixing hardware, not a popular investor category. And like sleep, not an obvious category that investors are messing. Was it an easy seed round to raise?
7:50 Speaker 00 Yes. And I don't say yes easily because a lot of our rounds have been very, very, very difficult. The advantage we had at the time is that hardware was really hot at the time. There were a lot of campaigns on Indiegogo and other platforms. And so a lot of investors immediately after Y C, because we already sold six thousand, eight thousand units in pre-orders. We were one of the hottest Y C startup at the time. But that almost didn't happen anymore. So after that, actually hardware became something that very few investors like in the valley. Because it's very complicated, it requires a lot of capital, it's very easy to screw up. And so after that, it became much harder to raise.
8:30 Harry Stebbings? Do you think investors are justified in their hatred of hardware?
8:33 Speaker 00 They are justified ninety eight percent of the times. But I think if you find the right company and the right team, no. Because, I mean, look at Tesla and Apple. They are hardware companies. So if you want to build trillion dollar businesses, hardware works. It's really, really hard to get there.
8:49 Harry Stebbings? So when you analyze, I'm now purely using this for my investing business. When you're analyzing a hardware startup and you're looking at the team, what is it that you want to see? Is it, hey, you've been in manufacturing before, you know how the sausage is made and you can build product? Like, is naivety good in building hardware?
9:04 Speaker 00 Number one thing you really want to analyze is how much they understand their unit economics. Meaning, as a company, we have been in trouble a bunch of times until when we really fix our unit economics. If those unit economics don't work, the faster you grow, the more you lose money. And then hardware, you can have returns, replacements. So there are a lot of different factors. It's a very complicated business. And so you really need to understand, okay, do the unit economics work in this business or not?
9:31 Harry Stebbings? So when we say about the unit economics, is that in terms of like your bill of materials, which is obviously the cost it is to create the goods? What, how do you break down unit econ? Because you've got also customer acquisition by channel.
9:41 Speaker 00 Yeah, yeah.
9:42 Harry Stebbings? Yeah, LTV, I guess, is a difficult thing to understand.
9:45 Speaker 00 Yeah, yeah, it's a great question. You almost need your P and L at the unit basis. And so, okay, what is your gross margin, which comes after the bomb and the cocks, right? And what is included? And after that, that needs to really be above fifty percent.
9:57 Harry Stebbings? Above fifty percent?
9:58 Speaker 00 Yes, and probably best is fifty five, sixty. And then after that, you need to have, obviously you have CAC, you have a credit card, you have returns and replacements, you have all that. And then, okay, what is your contribution margin?
10:11 Harry Stebbings? And what would you say CAC is?
10:13 Speaker 00 Yeah, I think for great companies, I know our CAC is really, really good. It needs to be below twenty percent of the price.
10:20 Harry Stebbings? Okay.
10:21 Speaker 00 But a lot of companies, you will start seeing they are thirty, forty, fifty. And the reason is they postpone their payback period. So a lot of companies, they will tell you, okay, I don't know, my gross margin is thirty percent. And then I spend forty percent because then I have a subscription and in twelve months I get the payback. That most of the times doesn't work. And the reason is substantially, you need to have enough cash for twelve months to cover that delta in the CAC. While instead I take sleep, we have an immediate margin on day zero. So the more you sell, the more cash flow you generate and you become profitable. And we have been profitable for two quarters now.
10:56 Harry Stebbings? Can you take me to a time when unit economics was off and what you learned from that?
11:01 Speaker 00 I can talk about that for hours, yes. There was a time where our gross margin was half of what it is now and our CAC was 2X what it was now. We were air shipping units because of the demand. And so air shipping for a product like ours, which is fairly big, is extremely expensive. And so our units were upside down. And so what happens is you keep selling and you keep growing, but it becomes a vanity metric. Because you're really burning cash for every unit that you sell. And so that is the moment where if there is, I don't know, a recession or the market slows down, you're in real trouble because you can't raise. This is the typical example of growth at any cost. We just wanna grow. Yeah, we are growing 3X year over year, but at what cost?
11:44 Harry Stebbings? The hard thing is you can also justify it in your head by saying, well, we can sell ancillary products to those existing customers.
11:51 Speaker 00 Yeah, this is always, oh, and then we've reduced the bomb and the cogs and then things will change. Things will not change. All you need to do is you stop, step back and you say, now I take a hard decision and I change the price and I make this thing work and I set a cap to our CAC, which is what I did. Then you take a hit because growth stops for some time. You just need to believe in your team that within six months you're gonna fix it and you start growing again. It's a shocking time. I can't tell you.
12:20 Harry Stebbings? How do you think about setting a cap to your CAC? A CAC obviously is customer acquisition, it's how much it costs to acquire a customer. How did you approach setting a cap to that? It's a very hard thing to do.
12:30 Speaker 00 Yeah.
12:31 Harry Stebbings? Did you do it by channel?
12:32 Speaker 00 No, you start blended. At least we started blended. And I came up with a hard number and I said, from now on, we don't spend a penny about this CAC. I don't care about anything that is happening in the world, this is our CAC. Why? First, an internal decision, right? But I tried to base it on a couple of things. First, okay, the top companies in the world, what is their marketing budget compared to their revenue? So you try to find a proxy. Second is also, what is the CAC that I can afford to have this contribution margin? And so you almost go top down. If I wanna have 20% net margin on day zero, this is the CAC I can afford. And so you go to your marketing team and at the beginning they will complain, this is absurd, it will never work, growth will fall apart.
13:16 Speaker 00 But if it fall apart, I give you six months and then you need to start growing again because you need to figure out channels that work at this CAC. And we have done this two times and it worked every time.
13:25 Harry Stebbings? Do you think marketing teams are ready for that? They've been so trained on a world of free cash. That just brand marketing, this, this, this, that's. I didn't feel that mentally.
13:34 Speaker 00 You know what is the biggest issue often, and it happened to us twice. I'm the king of mistakes, so I can talk about any mistake. But then where you struggle the most is with executives. So you can find executives that have been in previous companies and they grew them. But it was a different time in the market where it was growth at all costs. If you go to those executives and they're used to spend, I don't know, a hundred bucks. And now you tell them you need to do it with fifty. Within three months, they're gonna quit. Because they think this is unreasonable, this will never work. You need to reach this scale before you can start thinking about optimizing. You need the economics and all that. And the other day is all bullshit, no? You do it since day one, you build a business that is here to stay. You make it profitable and you figure it out.
14:18 Speaker 00 By forcing my team with this structure, we were able to unlock channels that we were not using at the time. And now we can deploy millions of dollars in these channels at an extremely efficient CAC.
14:30 Harry Stebbings? Which channels were you deploying heavily into, which wouldn't waste it, which were not useful?
14:35 Speaker 00 There are a couple. More than anything, I would say the typical mistake you do during those days is you just deploy on the digital channels, right? Okay, let me put money on Google and Facebook. If it was that simple, everyone would be building a billion dollar business just by putting money on Facebook and Google because it would become a commodity. And so what we did is we changed our velocity and pace in testing different ads on all these platforms. And so our Facebook or Google CAC now is like seventy-five percent lower than what it used to be two years ago, seventy-five percent. So it's massive. The blended CAC is around fifty percent lower. So this is the fourth year in a row where the company keeps growing and we're growing really fast. And the CAC is at the lowest it has ever been.
15:20 Harry Stebbings? So how do you use velocity to lower CAC? I know it's one of the principles that you'll get into, but how do you use velocity to lower CAC so much?
15:27 Speaker 00 Testing. So for Facebook and Google and the other particular for Facebook, you test a lot of different assets. So the velocity of assets matter.
15:36 Harry Stebbings? And when you say assets, you're saying kind of imagery, wording, messaging?
15:39 Speaker 00 Exactly. And so if before we were doing one test every two weeks, now maybe we do five a week. And so you learn way faster. And then we unlock other channels that could be podcasts, right? We invest quite a bit in podcasts. We work with influencers, started some marketing campaigns. So we have sponsor Mercedes F1. So we call it the rule of the seven touchpoints. It's another rule I came up with, which is substantially you want to surround your customers and you want them to see your brand seven times before they pull the trigger. Our purchase is not an impulsive purchase, right? It's around 2,000 bucks. It's not that they are going to see this product and they just buy it. And so you want them to see your brand seven times or you want them to hear about your brand seven times through friends. So word of mouth is really important for us.
16:23 Harry Stebbings? I get that in terms of the seven touchpoints. The hard thing is data attribution. You see them on the car when I'm in the gym and they have the TV on in the gym. You don't know that I've seen that. How do you think about channels where there's no attribution and you're really quite blind on data?
16:38 Speaker 00 Most of our channels, except few brand marketing initiatives, they have attribution, right? The point is attribution will never be perfect, but there is where you just look at the portfolio, the blended CAC, and then there is no debate. How much did we spend? How much did we make? What is the percentage?
16:54 Harry Stebbings? Which channel have you been most surprised by?
16:57 Speaker 00 I mean, for us specifically, word of mouth is the most incredible, right? Because you still have 30, 40% of the revenue just coming through word of mouth. And that is insane at our scale. It's a lot of money. So that is the biggest. And then I would say there are certain channels that work, like for example, podcasts could be one. It's not a channel that works for every brand. So here is another mistake, I think, a lot of, not our investors, but there are a lot of investors that they always push you to reduce prices. Our investors, they're almost the opposite. And the reason why I think it's wrong to just be obsessed with price reduction and time. Is often your CAC will not change linearly with the price. Meaning if you reduce the price of our product by twenty percent, the CAC is not going to go down twenty percent.
17:41 Speaker 00 So what you need to do is keep that price, add value, but don't change it because our CAC is already so efficient. That is extremely hard to move it down. The key is keep CAC consistent and just find ways to generate more value and more margin.
17:56 Harry Stebbings? What been your biggest lessons on pricing? He said it's a two thousand dollar purchase, a very considered purchase.
18:01 Speaker 00 Probably this one, that whenever people, if I talk to investors or even for future rounds and they start talking about, oh, but the, why don't you reduce the price to accelerate growth? I just disagree and because I don't think CAC will change. And so if anything, yeah, maybe there is a portfolio strategy where you have a cheaper product, but you have the current one and also more expensive. But I don't think sometimes people are sophisticated enough to understand the relationship with the CAC.
18:26 Harry Stebbings? Can I ask you a weird question? Two thousand dollars, what would happen if you made it four thousand dollars? Have you done price experiments to understand demand sensitivity?
18:35 Speaker 00 This is actually the perfect question and I can tell you wouldn't change too much. Actually going up with prices sometimes is very beneficial for a company like us. And we just did it because when we had to readjust our unit economics, we had to increase prices. We did it in twenty twenty one and the impact was minimal. And so one interesting thing for you to know is sometimes I talk to different people about this topic. And so when I want to talk about pricing, I talk to Italian, very successful companies that have been profitable since day one. I don't talk to many Silicon Valley guys. And the reason is these guys, they built, I don't know, one of our investors is the founder of a major fitness company in Italy, right? They make almost a billion dollar in revenue, they're worth multiple billion, so big business, right?
19:19 Speaker 00 These guys started the company thirty years ago, never raised a penny until when they went public, blah, blah, blah. And so I talked to these guys because this guy is selling fitness equipment for ten K with a profitable business that generates seventy million in cash every year. And so I want to talk to him because he knows how to make the bottom line work, not the top line.
19:39 Harry Stebbings? I was speaking to someone at Chanel the other day and they raise prices 11% twice a year and they see increased demand.
19:46 Speaker 00 Yeah, 100% because it becomes way more aspirational. And people think correctly that if you raise the price, the quality is higher than other competitors. So you don't want to get in a price war. Once you get in a price war, probably with a physical good, you're in real trouble because then the the business will not work.
20:02 Harry Stebbings? We're going to get to principles. I do just have to ask, you mentioned the rounds being hard to raise. It's never a straight line. What was the hardest round to raise when you revert back?
20:12 Speaker 00 The A is a Series A.
20:13 Harry Stebbings? Why was that so hard to raise?
20:15 Speaker 00 At the time, we were receiving a term sheet. But part of our business at the time was also licensing our technology to some mattress manufacturers. It was a sort of intel inside concept. And so there was this investor who already invested in the seed. They were interested in leading the A. But part of the investment was subject to signing an LOI was one of the largest mattress guys in the world. And then these guys, they called me and they say, we're out, the mattress guys. We decided not to move forward. So I had to call the investor and the investor say, Mateo, I told you, you know, this was a key for a key thing for me. So we're out too. And he was super fair, meaning I knew that that would happen.
20:56 Harry Stebbings? Are you not a bit like, fuck you? And I mean that in the nicest way, but it's like, believe in me. Why do you need an LOI? It's a Series A. Like, we're not at the DE stage. Why is your belief in me and the vision?
21:06 Speaker 00 Yes, but they have always been upfront that that for them was really important, right? That they be to be business. They didn't believe in the B to C part. I immediately understood, but I still remember very clearly me and one of my co-founders, Max. Max smokes, I don't. And so we were downstairs in front of our office with Max smoking and talking about how much runway we had. And we had a couple of weeks to fix it or we were in trouble.
21:32 Harry Stebbings? A couple of weeks to fix it?
21:34 Speaker 00 Yeah.
21:34 Harry Stebbings? Who came in and led the A in the end?
21:36 Speaker 00 There was another investor that we had called Yunchee. He's a very large investor. They helped us with China to create the manufacturing. So we went through all that and then Keith led with Cosla and then Founders Fund and then Valor.
21:49 Harry Stebbings? There was like a plateau in H's history in my mind in terms of brand perception. And then it suddenly ramped.
21:56 Speaker 00 Yeah.
21:56 Harry Stebbings? And I don't know why it suddenly ramped. Why was that for you?
22:00 Speaker 00 So when Keith led the round with KV, with Kozla, that is when we really rethought many things, including the brand. We rebranded completely and we created this concept of sleep fitness. We decided to go up with prices and premium positioning. We created the pod, right? So the current product that is hundred percent of our revenue, launched literally four years ago, twenty nineteen. So this thing went from zero to hundreds of millions in revenue in four years, which in our world is really rare. But the previous products were completely discontinued. And so if you look at the companies like those.
22:34 Harry Stebbings? Were you scared to do that? It's a big decision, discontinue.
22:37 Speaker 00 Yes, but at the same time, we wanted to play bold. I think having people like KV and Keith and there was also Dalian behind your back and supporting bold decisions gives you a lot of confidence. Because it's not, oh, am I smoking something about this vision? No, if these people believe it.
22:58 Harry Stebbings? People are like, you know, do investors really add value? Do they really add value? Did having KV subsequently Founders Fund, did that change your ability to hire, do you think?
23:08 Speaker 00 Yes, and maybe it's not hundred percent, but I think there are multiple gems that we have in the company that join because you have these people behind. And so they just say, okay, this vision must be real if these people are behind these guys.
23:25 Harry Stebbings? So you think investor brand really does matter?
23:27 Speaker 00 Yes, I know for sure, meaning some people apply to us because maybe they saw a tweet from Keith or some others applied or they joined because they knew that Kozla, Keith, Founders Fund, Valor and Antonio Invest.
23:40 Harry Stebbings? When you revert back to the fundraising journey, is there anything you know now that you wish you'd known then? Or you'd have buy as founders having been through all that you've been through?
23:49 Speaker 00 Yes, sometimes you just think about the firm, meaning, oh, let me try to talk to Founders Fund to see if you can raise. But if you have a very bold vision and a very contrarian view of how the world will look, right? And so you really need to talk to the right person in the firm. And usually is senior partners or people that know fully understand what you're trying to do. And the other big thing is this, if you look at our history, right? We have some of the greatest investors, right? We have Keith, we have Kozla Ventures, we have Founders Fund. Trey Stevens, we have Valor with Antonio Gracias, right? And what I realized is not a coincidence. Hundreds of people passed on us, but not these guys.
24:33 Speaker 00 And the reason is these guys, they have a vision that someone will master sleep. Technology will dominate sleep at a certain point. So I don't have to convince them on that, right? If you talk to Keith, he already knows. He has been talking about this for 10 years. And so I don't have to convince him that technology can enhance your sleep and there will be a trillion dollar business in the space. At that point, it's a matter for these investors just to understand, are you the right team to do it or is there someone that is better? Well, instead, when you talk to some other investors, they don't have this belief of how the world will change. And I have to convince them that this will happen. And that is where I lose them.
25:09 Harry Stebbings? I do sympathize because I totally agree with you in terms of you don't want to educate the investor. When you educate the investors, it's just, it's too hard to sell. And I buy the long-term vision and I see that. But then you also have to be grounded in reality and grounded in unit econ and aware of ancillary products you build out, expanding LTVs. And that's where I think the dislocation can happen.
25:30 Speaker 00 Yeah, but I think some of the greatest investors, if they believe in you as a team, they know you will fix it. Fixing unit economics is possible, it's human, hard work of an operational excellence. And so you just need to hire the best people and you will do that.
25:45 Harry Stebbings? Yeah.
25:46 Speaker 00 But will the world change and adopt a technology that improves sleep? Yes or no? That is something that they just need to have a gut feeling.
25:54 Harry Stebbings? Okay, I want to discuss the principles because we kind of touched on them a little bit. You mentioned operational excellence there. I just want to start on the first one. And by the way, these are the principles of world-class execution.
26:03 Speaker 00 Yeah.
26:03 Harry Stebbings? Expecting a book coming out soon, I hope. Clarity of thinking, Mateo, what does that mean to you? And how do you try and make your clarity of thinking as optimal as possible?
26:13 Speaker 00 It's something I'm really obsessed about. First, the best way to develop clarity of thinking is writing, right? You need to write. Once you start writing your thoughts, you understand there are many things that are not clear or that you still don't know you didn't develop. But clarity of thinking is this ability to distill in very few words, a complicated concept. There is an area where I challenge my team and myself a lot because are you supporting your thinking with data? Second, what is the clear outcome? Sometimes people are, if they don't have clarity of thinking, they can write something that is very confusing, is not data-driven and you don't get to the endpoint. And so it's just a matter of practice. And you see people like Paul Graham. Or Keith or Boys, right? They are some of the greatest at expressing a very complicated concept with few words.
26:58 Speaker 00 And something that I call it the grammar rule, right? Something that my grandma could understand. Sometimes now my team writes me something and it's extremely complicated. And I just say, okay, can you explain this to my grandma?
27:08 Harry Stebbings? It's a really hard one, I think, for you in terms of like the grandma rule and where you position the brand. Cause you want this like, we turn everyone into a superhuman, but you don't want it to be too aspirational that it's out of reach. Do you see what I mean?
27:21 Speaker 00 Yeah.
27:22 Harry Stebbings? How do you make something accessible but aspirational?
27:25 Speaker 00 For aspirational, you use images, right? And you try to position very premium, something that you really dream of. But in terms of words and the value proposition and the benefit, you need to be very simple. And so there I always think of you having dinner with a friend tonight. How are you gonna explain my product? And there is where now we keep tweaking and tweaking and tweaking to help you pitch our product tonight.
27:47 Harry Stebbings? Why do you think people make mistakes on clarity of thought?
27:49 Speaker 00 Because they didn't think enough. They believe they have a thought, but they didn't develop it properly. And they don't have enough data to support it. So they're confused. At the end of the day, the opposite of clarity of thinking is confusion. You have a blurred concept that you're unable to express. Oh, we wanna try this channel. Why? And why? And why? Now the five whys. Keep going deeper and deeper and deeper. And do we need to test it now? Think of this, right? They, it just happened, right? They were suggesting, okay, let's test these other channels. And my point is, why? Right? It was in an international market. We didn't test it in the US. Why would we go there? Oh, because then we, I don't know, we can grow faster. But can we grow faster with all the current channels and just kill them more? Yeah, maybe. And did you spend enough in these channels?
28:33 Speaker 00 And do you already know that there is no margin for incremental CAC? You keep making questions. As a team, you need to help each other, meaning you will never start with clarity of thinking in anything. So I need help myself. This, this is just an example where as a group, we develop our clarity of thinking. But after you debate this, write it down and send me a blurb or a one pager about this topic.
28:53 Harry Stebbings? Mine is like the focus. I always tell people like, write a list of the top three and then just start from one. And then also it's like, understand what success is in each. I find so many people try things and it's like, I don't know if it's actually what we thought it would be. And it's like, well, what did you want to achieve? I don't know. We didn't set that. How do we know whether we should keep going?
29:09 Speaker 00 It's a great point. The other way is, yeah, maybe this increases your revenue, this new channel. But is there a faster and simpler way to achieve the same that works for now? Sometimes people come to me and they just give me one option. I suggest we do A. Doesn't matter if I'm in favor or against A. I never like to see one option. I wanna see multiple options and you tell me why we are not pursuing the others and we are pursuing this. I want a picture, a portfolio. Pick one based on impact and effort.
29:36 Harry Stebbings? I get you, but I also want speed of execution. And so I quite like it when someone says, hey, I analyzed all the options and I realized that actually this is the most efficient. Are you okay for me to proceed? I like that because the speed of execution means I don't have to go, oh, well, we've got five or we should debate. Well, I disagree with that one, actually.
29:52 Speaker 00 Yeah. For us, everything happens in writing async, so we don't lose time. Write it down. Just say, oh, I analyzed five options. I recommend option C. Cool. Can I read it? I read really fairly fast and within literally five minutes, I can give you thumbs up, thumbs down. And even async, we don't even need to jump on a call if we're not in the same place.
30:11 Harry Stebbings? Do you find you lose tone? I have with my CFO in particular, there's some sensitive items, budget items. I thought we were not tight as we could be. And there's some sensitive things. Do you ever pick the phone up and call people and say, hey, I feel this one actually needed to be on phone?
30:27 Speaker 00 Yeah, I would say probably 20% of my meetings is impromptu. And so I just randomly call. And so I actually allocate time in my daily calendar to make sure that I have bandwidth to just randomly call my team and discuss things.
30:41 Harry Stebbings? And speaking of bandwidth, another one is operational excellence. It's kind of a bandied around term, very popular. How do you think about your own operational excellence and what the biggest needle movers have been and what you've done to optimize it?
30:52 Speaker 00 Operational excellence to me means output, right? So what is the output and the efficiency of this output? And so there are a couple of factors behind that. The first one is quality. Second is velocity. You need to keep a very high bar in terms of quality at a very high velocity. And then you have this output and the output, there is actually some example from Keith, Keith Rabois, right? Output usually is a function of how many barrels you have. Barrels are people in your company that can get everything done from zero to completion, right? And you have barrels and ammunition barrels can lead anything from zero to completion, ammunition support them. Usually the output is a function of this. You can do as many things based on the number of barrels you have. If you have five barrels, you can usually do five things.
31:37 Speaker 00 But the key of this operational excellence is how do you make sure that you keep moving really, really fast without compromising quality? And so they are opposite metrics and you challenge them against each other.
31:47 Harry Stebbings? What's the biggest challenge of having them opposing each other?
31:50 Speaker 00 It's the best thing ever. And actually, this is a mistake a lot of companies do when they pick only one metric. I give you an example in growth. In growth, my team has a goal to grow, call it two X year over year at this CAC. There is a tension between these two, but this tension is exactly what they want, right? Because if you just give them growth, they could grow five X year over year. They just spend five X more CAC or three X more CAC. If they just use CAC, then they're not challenged to figure out how to unlock new channels that can push our growth. And so opposite matters, we don't do anything at eight sleep if there is not an opposite metric.
32:21 Harry Stebbings? What mistakes have you made with operational excellence? When you look back now, I can't believe we did that.
32:27 Speaker 00 Most of the times is probably connected to the opposite metrics. Like you wanna ship quality of software. Sometimes now we wanted to improve the quality of our software to make our software more reliable. But then what happens is it starts taking months to ship a new feature. Or another example is focus, right? Sometimes my engineers or the head of engineering says, we cannot address a bug we figure we found last night. This can happen in two weeks because the team is already focused on this pipeline of products. And my answer is no, we need to do it today. I I give them a forty eight hours, right? So usually if if something come up, we need to fix it within forty eight hours. If that doesn't happen, we must have a very strong reason and I wanna read about that.
33:10 Speaker 00 You always want to find this balance between these two opposite parts of the business.
33:14 Harry Stebbings? You mentioned like the forty eight hour turnaround there. I often think about speed of execution and velocity.
33:19 Speaker 00 Yeah.
33:19 Harry Stebbings? Part of me says it's the most important thing in a business and I do think especially in zero to one, it really is on the testing and iterating side. And then part of me thinks actually some things need a lot more deliberation. How do you think about is speed of execution as important as everyone says?
33:33 Speaker 00 It is without compromising quality. So yes, and then you said the opposite metrics of quality.
33:38 Harry Stebbings? Is it possible to do it without compromising quality? If I can do it today for you and it's eighty percent, or I can do it in a week for you and it's ninety percent, which do you want?
33:46 Speaker 00 So I want the eighty percent. And so there is where you need to be clear. It's also one of the points of the Elon algo on his book, right, about simplifying the requirements. So it's the definition of quality. Quality to me is not perfection, but there is a threshold where if you just ship tomorrow shitty up, then we don't go very far as a brand, right? But if it's eighty five percent there and then you keep improving every single day for the next week and you take it to hundred percent, hundred percent, we should do that. There was actually this point that now they taught us at Y C where they, if you were going to the Y C partners during the Y C program saying, oh, I'm gonna launch, I don't know, this website in thirty days. Some of the partners, they would tell you, no, you start shipping something tomorrow and you break that thing down in thirty pieces and every day you make some progress. We really talk about progress at eight sleep.
34:31 Speaker 00 How can you do as much progress as possible on a twenty four or forty eight hours?
34:35 Harry Stebbings? I do want to just dive into that because I think Ramp actually did it very well in terms of velocity. They have like at the top of every door, like day six hundred and twenty eight. How do you think about deliberately building velocity into a company?
34:47 Speaker 00 I think it's literally part of the culture. We call it eight slip speed, eight S speed. When we do something really, really fast, we celebrate that and I immediately jump in and I also hashtag eight slip speed. We want to do what any other company does in half the time. The key usually with senior executives where you really need to push them because in particular, if they come from big companies, they are more skewed towards quality and reliability. Well, instead you wanna be bold and just ship something eighty percent, take the risk and move on. And you need to create the culture.
35:18 Harry Stebbings? Have you ever had it where it's not been good enough and you're like, hey, this is shit work?
35:23 Speaker 00 I wrote a memo about this last Sunday to all my executives. And I say, I want to increase our pace by thirty percent and tomorrow we're gonna discuss this. And we had our internal executive meeting. Everyone reads the memo, they read the memo before the meeting. We debated the memo. By the end of last week, so last Friday, everyone took action in changes with their team to increase velocity thirty percent.
35:45 Harry Stebbings? How did they respond? Were they like, oh, Mateo, that's a lot, but we're pushing our hardest now. How was the response?
35:52 Speaker 00 At first it was mixed. Right, some people say, okay, this guy just keeps pushing for for velocity for the sake of velocity. But by the end of the week, hundred percent of them, they were hundred percent in.
36:03 Harry Stebbings? What are the most significant things you think the team will do to reach that thirty percent speed increase?
36:09 Speaker 00 The biggest thing is what I told them is they need to stop being too rigid on biweekly or monthly goals. If they're too rigid on that, when things happen, and in a startup, things happen every day, they are not agile enough to fix them. So let's say we discover a bug today, that bug needs to be fixed tomorrow. And it cannot be, oh, but we have this roadmap and we are shipping this engineering feature and we can do it in two weeks. No, they do it tomorrow. And so you need to talk to your engineers and they need to understand the importance of fixing this, right? For a brand that is premium and is positioned at two thousand bucks. That is the number one thing. We are sometimes too rigid with our schedules.
36:49 Harry Stebbings? Did they resonate with that?
36:50 Speaker 00 After I explained and gave examples, because then what I did in the memo, I gave good examples and bad examples. We had an executive meeting, sorry, an executive offsite four weeks ago. I created another memo about a product that we're gonna launch. This was new. But I think the case is pretty strong and it's pretty obvious. So everyone understood, okay, no, this this makes sense. It's not just my idea. Then they say, when do you want that? And I said, a very aggressive deadline. The first answer for the first five minutes is, oh, it will take us a month to validate all these things, if this is possible with our data. And I say, that doesn't work. We don't have a month to validate. How can you validate it in three days? Then they started thinking and say, it goes back to the Elon Algos of simplifying and reducing requirements.
37:35 Speaker 00 Okay, we don't need hundred percent certainty on that thing. Maybe we need eighty and for eighty percent certainty, we can just do A and B tomorrow. The same across all the different teams. And by the end of the week, we had a full plan and we have validated everything.
37:48 Harry Stebbings? How does the requirement for perfection or close to perfection change when you're comparing needs in hardware versus software? Software is obviously retracable. Ah, fuck, bug, let's replace it. Hardware, ah, shit.
38:03 Harry Stebbings? How does that change?
38:04 Speaker 00 It changes. You will never have 100% confidence when you ship a hardware that everything is perfect. You will always discover things that you didn't know. And so a certain point where you need to flip the narrative is about learning. The whole reason of velocity is not velocity for the sake of velocity. Is you need to learn as fast as possible so then you can adjust things as fast as possible, which goes back to the point where if you are too rigid with very long term roadmap, that doesn't work in a startup. When we switch from the mattress to the cover, which now is 99% of our sales, we did it in three days. And we didn't have a cover, but we had the wrap for the mattress and we had the cover. And we wanted to see how customers would react to that. And this thing immediately became 20, 30% of the sales, even if it was hidden in accessories.
38:48 Speaker 00 And so I always push my team, can this help us learn faster? And if the answer is yes, go and be bold and take the risk.
38:54 Harry Stebbings? Can you take me to a time on both sides? One where being faster has helped you and another where being fast has hurt you?
39:00 Speaker 00 Where it helped us was the cover, one of the mass biggest win of the business. Now, sometimes we have a subscription. We could have launched the subscription in a way where we could have tested more things before and could be more sophisticated. But there we did it immediately after we launched it. And so we could have done it a month before instead than a month after.
39:20 Harry Stebbings? Can you change pricing? People are always like, oh, it's very hard to go up in pricing. So you disagree with the notion you can't go up and it's difficult?
39:28 Speaker 00 100% disagree. I think we overthink because the whole point is your start. How many people really know your brand? Even if you're big, you know, you're not Apple. Don't fool yourself thinking that you are that big brand. Then what you need to be aware is there is a lag, right? So if you change price, there will be customers that saw your product for the previous 30 days, 60 days, right? And they saw a certain price, higher or lower. Like, for example, in our case, we tested different warranties on the product, right? We have seen for X period of time, people saying, oh, but what about that warranty? Everything you do, you can do it the same day. You just need to be thoughtful, which goes back to clarity of thinking about thinking the second order effect. Will people ask this? What do you answer it? Did you train the customer support to have an answer?
40:12 Speaker 00 So there is where you just need to be thoughtful, but you can do everything today.
40:16 Harry Stebbings? You mentioned like executive offsites. You mentioned getting everyone aligned in terms of moving 30% faster. Teams are the hardest thing always. What have been your biggest lessons in terms of talent management?
40:26 Speaker 00 I mean, I think one of the biggest lessons is you really need to pay attention with when you hire executives from big companies. I think this is something really well known, but I made mistakes there too.
40:37 Harry Stebbings? What are those mistakes that you would tell me as a young startup founder listening who sees shiny logos from Apple and Tesla and SpaceX and goes, wow? What would you tell me knowing what you know now?
40:46 Speaker 00 So first, even if these people were really the successful drivers of other, in other companies, right, which, which could be possible. You want to make sure that first, the historical time of when they were successful is still similar to yours. It goes back to what I was telling you, right? If you find people that were able to scale a business from a hundred million to a billion, but at a time where it was growth at all costs, and they join your company, your company is designed around CAC efficiency, it will be really hard for them, right? They have already been successful, probably they already made money, they have their own playbook, that playbook doesn't work for you. So you need to find people that were really successful at scaling businesses with a very efficient CAC. That is a different game. The second is, if they come from very large companies, the requirements compared to a
41:31 Speaker 00 startup are very different. We are pirates, they are the navy. These people need to be able to launch a new product in two days just because they want to test it and be fine with the customer reaction. If they start thinking about the brand, the brand impact and this, this and that, obviously you need to be thoughtful, but you need to take some risks to learn faster. And maybe they reach a point where they were not anymore because that company was way bigger. And it's really hard to reverse back if they have been there two, three, four, five years. And then sometimes some of these people, what I have seen is if they have already been successful, if they made money, you know, maybe they are a different phase of their life. And instead in our company, again, we are pirates, man, if you need to work on Saturday and Sunday, to ship the thing and test it and it's a bold move, you have to do it.
42:15 Harry Stebbings? How does your hiring process look as a result of that? How do you structure it then to test for those?
42:20 Speaker 00 So we made a lot of mistakes in hiring too.
42:23 Harry Stebbings? I've never met anyone who's like, oh, we did it well from day one.
42:26 Speaker 00 So the first thing is we accept to be slow at hiring and slow not in terms of the process, in terms of the steps, but we have a bunch of steps. The second thing is everyone has to do homework. Anyone who joins the company, we give them a project. They need to work on that at home and they will present to a panel. I don't care if you are the senior executive and you are the CFO of Amazon. If you want to join Eight Sleep, you have to do your homework and we give you a few days and a very complicated project and you will present. If you don't want to do it, it's fine. For us, it's a way of selection, right? Because it shows how committed you are.
43:03 Harry Stebbings? And just so I get an understanding of this, this is a task that you would do in that role?
43:07 Speaker 00 Usually it's a problem we currently have in the function. So we also learn what is your perspective and it's actually like your first day of work.
43:16 Harry Stebbings? Okay.
43:16 Speaker 00 This is a problem you would face the first day of work. Put it together, put your thoughts, put your strategy, show me the data, show me your clarity of thinking.
43:24 Harry Stebbings? Have you ever had anyone be like, kidding me? I was a principal engineer at Tesla.
43:28 Speaker 00 Yeah, particularly not sometimes executives. Then you're surprised, sometimes recruiters say, oh, this person will never do it. They are a senior executive at Tesla. The good people, 100% of them, they do it and they get excited. So that is one. When you talk to a person at Eight Sleep, there are three ratings. There is pass hire and strong hire. We don't hire anyone if there are not three strong hires. It's hard rule.
43:51 Harry Stebbings? So three strong hires on the voting panel for that?
43:54 Speaker 00 Yeah, the people that they spoke to.
43:55 Harry Stebbings? How many touch points are there with the team? Is that three out of 10, three out of five, three out of 15?
44:01 Speaker 00 It's probably somewhere between three out of five, three out of six.
44:05 Harry Stebbings? So it's kind of at least 50% is a strong hire?
44:07 Speaker 00 Yeah. And the other thing, and this is more mental, is we are a default and no hire. The default is if you come to Eight Sleep, we don't hire you. Unless you really blow our mind. The reason why this is helpful is, I don't know, one of my executives recently came back and said, oh, this engineer has a great pedigree, now work at this company, that company. I'm not a strong hire, but I think I can grow this person into the role. And I say, no, we are a default no hire. So unless you are extremely bullish on this person, that you believe we would be done to let this person go, we don't hire. We just stop here at the process and we move on.
44:44 Harry Stebbings? You mentioned kind of being slow there. I guess it, but sometimes you just have to hire today because you you need a seat filled and you need to actually start doing something. How do you determine just kind of rush the hire and just get someone in the seat because they need to versus no, it needs to be the right, perfect hire?
44:59 Speaker 00 We hire really fast in 2019. I would say we probably screw up a large percentage of all the people we hire because we had that approach. What we learn is the pain that you go through if you hire the wrong person is probably 10x bigger than delaying the hire by a couple of months. And so the way I look at this is in different buckets. One, I measure the top of the funnel of each executive and I see how many interviews they do per day, per week. And now I start having a baseline on my mind of how many they should do, how many people they should interview. But more or less, we hire a person every hundred. If they start telling me, oh, I'm struggling, I don't find this engineer in San Francisco
45:40 Speaker 00 for mechanical engineer, blah, blah, and I see that they just did 30 interviews, it's just math. On an average, we hire one every hundred people. If you didn't see 100 people, you're not going to hire, it's not going to happen. That is how you create velocity. And then also I measure the steps. How long does it take to go from step one to step two? Is it 48 hours or it's taking you a week? And if it's a week, why were you so late, so slow? So there is where I create velocity. But then in the selection of the candidates, man, the bar needs to be incredibly high. If you, as executives, are not strong hire, why are we hiring this person if you're not bullish? Would you take a flight to China with them and spend a week with them? Would you have fun? If no, what's the whole point? Would you be excited about having a one-on-one with them? If no, what's the point? That is one. Second, are there other people in the
46:25 Speaker 00 Company that believe what you believe and so they are two more strong hires. If not, I love you, but we are default no hire. And so I assume no. And then there is my final step, which is still fifty fifty. And sometimes I feel so bad as a CEO. But if I don't click culturally with the person, I still pass and I'm close to fifty percent pass.
46:44 Harry Stebbings? Does that cause dissent? If I'm working for you and I go through all of these steps, we go through the panel. They're great. I need this in my function and he, she is great. And then like you don't click.
46:56 Speaker 00 I mean, the definition of click, let's expand it. So I send you a bunch of bullets with pros and cons. I try to be very detailed, probably when I pass. Because I don't want this to look like, oh, Matteo was in a bad mood and he just said to pass, right? I have my pre-made playbook of how I run these interviews, right? And I run all the interviews with the same playbook. And that helps me because now I have seen thousands of candidates with the same playbook, the same questions, right? And so I can identify certain red flags faster.
47:23 Harry Stebbings? What is the playbook?
47:25 Speaker 00 I go through each of your previous jobs and I ask you five questions. How did you find the job and what did they hire you for? So that helps you because in how you find the job, if they had five, six jobs, you want to see if they were recommended by anyone or their previous managers. That is a great sign, right? If it never happens, it's not a red flag, but it's not a positive sign. Second, biggest achievement. Biggest achievement seems a stupid question, but it's one of the greatest questions. Because if you start talking to me about, oh, I bonded with my people or my teammates, I assume that you bond with the other teammates. I'm talking about what has been the biggest achievement, your biggest contribution, you, not your team. And the best people come back with data. I improved the CV art of the website from eight percent to nine point two by doing A, B and C. That is a great thing.
48:10 Speaker 00 If they are fluffy, third question is, what has been the lowest point? And this is another great one because a lot of people, they start complaining and you see what they complain about. Or my manager, they never gave me the right task and this and that. Or they didn't give me enough freedom to operate, blah, blah, blah. Then you ask, who was your manager? And what are they gonna say about you in the next reference check? But you wanna say in the reference check, because they can lie. Because they know that you will do the reference check. And so there you immediately see certain people becoming rigid. You know, I mean, we had a good relationship, but it was not really perfect, my managers. And the last one, why did you leave? And there is a soft weight, you know, did they push you out? Was a reef?
48:52 Speaker 00 And when you start doing for five jobs, five, six jobs, you start seeing patterns. And so when I go back to you as an executive, it's not Mateo's opinion, is I come back with a list. Because I take notes and I saw X red flags. And at that point, they trust me.
49:06 Harry Stebbings? How long does that take?
49:07 Speaker 00 This is another great question. With the great people, in twenty, twenty-five minutes, I can go through five jobs, they are fast. There are some people where you go through two jobs in thirty minutes and that is another red flag.
49:18 Harry Stebbings? Oh, for fuck's sake. I have it sometimes, half an hour and they're like, and then I went to Stanford and you're like, oh, no.
49:25 Speaker 00 Yeah, yeah.
49:25 Harry Stebbings? So we have that. I hate bouncers, I call them, which is, as you said a couple of times, five, six jobs. I'm like, if you were somewhere for a year and a half and another for two years and another for a year and a half, with ramp time and leaving time, you basically did six months of work.
49:42 Speaker 00 Correct. I look at that a lot. That is why it's really important to understand how they found the next job. Meaning if it was your former boss that gives you the opportunity of a lifetime and you leave after eighteen months, I understand, right? If there was a reef, fine.
49:54 Harry Stebbings? I think if it's a reef, fine, and this is gonna be very unpopular. If it's a reef, does that not show that you weren't crucial?
50:01 Speaker 00 I think of that, definitely. I think even though you wanna see a pattern, I see sometimes people that have been part of three reef.
50:08 Speaker 00 But you know what? What you need to think there is, how did? Let's say there is a reef after a year or even six months, sometimes you see it. And you see this happening multiple times in their career, like three, four times. Then what I started questioning is, how did you judge the company? Why did you pick this company, right? There is that part of judgment that is key in their career because it means they are thoughtful about what company they're joining and why. Then the company can fail, but if you tell me, oh, look, I wanted to join a space company and it was, forget SpaceX, right? And then they fail, but I have been a dreamer of space for all my life. I get that. But if you get a company that is a bit debatable and it was really tiny and you came from Amazon and you went to, you know, it just makes no sense. There is another area that I judge a lot.
50:53 Harry Stebbings? How do you feel about title? What are your lessons on how successful a hire is correlated to their negotiation on the title that they want or have?
51:01 Speaker 00 So usually it's bad. Some of the best people, they don't really care about title. I understand that some people, you still wanna go home, you know, to your partner, to your friends and have some pride of what is your title, in particular if you're moving. We had experiences where, when we were hiring bad in 2018, a certain point, the VP of Engineering changed the title of an engineer and this guy started coming in completely dressed with a T-shirt and the tie the following day, thinking of being a manager. And he was managing like, I don't know, one or two people, so it literally made no sense. So the story there is, you need to pay attention, meaning sometimes you can play with titles. I don't like it eighty percent of the times, you can do it.
51:42 Speaker 00 But it's less about the title and making it clear that you're still an IC versus a manager. And we don't make anyone a manager unless they already led a bunch of squads successfully. So my step is, you will never become manager immediately, right? Going from IC to manager. You need to be a manager before you are formally a manager. The easiest way for us, we, our teams are structured in squads. There is the engineering teams, there is the product team and all that. Then they work in squads. So maybe there is a PM, there is two engineers and there is a designer, right? And there is a squad lead. The person who is leading that micro business unit. I wanna see you leading one of those things, or at least be part of the leadership of that squad successfully, before we ever talk about you being a manager.
52:24 Harry Stebbings? When can you play with titles?
52:26 Speaker 00 After multiple years, after an insanely great performance. So you need to be, you know, every six months or 12 months, you have your performance review. You get rated on all these principles for each of them. Strong, medium, low. And if you are a top performer in the company, probably you're at the point you're not asking for a title change. But if you do, that is the only case when we consider it.
52:48 Harry Stebbings? I think a lot of people, and I mean this respectfully to you, will be listening to this a little bit daunted because there's a lot of founders who are listening. They'll go, shit, I don't have any of these frameworks or playbooks. Did you have them from day one? And can they be implemented halfway through?
53:02 Speaker 00 Yeah, I didn't have them since day one. I literally spent a lot of time studying on a weekly basis. Right, I really studied the best. You will see that a lot of the things I share, for example, they come out enough from people like Keith or others. It depends on the subject matter, but it was developed over time. But it makes the difference.
53:22 Harry Stebbings? Would you say the playbook is the most important one?
53:25 Speaker 00 Yes, there is one we didn't cover yet that is writing. Obsessed with writing at Aisley.
53:29 Harry Stebbings? Well, I discussed writing after this one other one that I just have to pay. What have been your lessons on pay? When to move, what it can indicate?
53:37 Speaker 00 So we do it every year for people. I don't think we are very sophisticated on this. So whatever I say, I think it works for early stage companies. I think we need to raise our bar on this. But what we do today is we have three levels of compensation increase based on you're a top performer, you're okay, or there is no change if you're a low performer.
53:57 Harry Stebbings? If you're a low performer, no change, should you not move on?
54:00 Speaker 00 Yeah, that would be the first thing I would discuss with the executive, right? And the reason is, is not because you wanna be, you know, you don't wanna be fair. Actually, you want to be fair. So what you need to do there is first you need to talk to the person, right? Because if things are not working, there is always a why. Most of the times, people are not bad. And so maybe we're not the right fit, you know, as a culture, as a product. Maybe we're not the right fit for this time of their life, right? We are very intense as a culture. And so if you're not intense, if you have other things going on in your life, we should respect that. But at the same time, you cannot be frank with everyone. I always tell my team, right? So you need to pick your friends. Talk to them, give them an opportunity to improve and raise their bar. If they do it, that is success to me. If they don't, then we need to part ways.
54:44 Harry Stebbings? I think one of the big mistakes I see a lot of founders make is they're like, you know, Mateo, he's not great actually here, but we moved him to this other side of the business where he's actually quite good. And that works. And I always ask the question, forgetting the existing relationship with Mateo, if you were hiring for that new position that he was in, would you have hired him against the other candidates?
55:03 Speaker 00 Correct. And the other typical mistake is people come back and what they say is, I need three months. So I start looking for a replacement. I still need some help here. At the beginning, I was accommodating that. Now I became ruthless. I said, no. If you spoke to the person, if you gave them the time to adjust, and if that didn't happen, now you pull the plug. And the reason is first, you need to let these people move on and find the right job. You need to be respectful. You don't keep them hanging. And you already know that you want to look for someone else. And second is, if you don't let the person go, you will never move on to really find the right partner. Treat them fairly. Give them an opportunity. If we can help them, recommend them in other companies where they
55:44 Speaker 00 think we do. You need to find someone who is the top ninety, ninety-nine percentile for the job.
55:51 Harry Stebbings? Writing. The only thing I write, Mateo, is tweets.
55:55 Speaker 00 I'm very good at that.
55:56 Harry Stebbings? Thank you so much. You know, I've crafted it over many years. Let's just start with, like, you said before about the importance of writing. You said it's so important for clarity of thought. Help me. Why is this so important?
56:08 Speaker 00 I will not take a meeting with anyone in the company if I don't get an agenda slash memo. We call them agendas, but they're memos. It could be from a one page or a half a page. But an average meeting, it could even be five pages. We have a weekly growth meeting where we review all the data from the previous week. And there is multiple pages with all the data. Obviously, they come from the dashboard and there is a bunch of thinking about what is happening and why. So I'm not gonna take any meeting. You can't schedule a meeting with me if I don't get an agenda. I get all the agendas the night before. What makes a good agenda versus a bad agenda? Massive difference. And usually probably it takes at least six months to develop someone to write an incredibly good agenda.
56:49 Speaker 00 Because the best agenda, they're shorter, they go straight to the point, they're data driven and they're very clear. Do they posit opinions? Do they posit, like, do they say where they want to get to at the end? Like, how are they structured? And it sounds weird. So usually there is an executive summary at the top, which is the summary of the key topics with the key data. Then there is points to be discussed. And then usually there is the real meat. And so this is usually based on OKRs or goals. Our goals usually are monthly, four to six weeks. And so let's say you have a goal to grow one point four X, a goal to improve C V R and a goal to reduce CAC. You have three sections in the agenda. You're, you tell us what is happening in each of them, what we are doing, what's working and what's not working. That is usually a good framework, right? Summary, what's working, what's not working.
57:34 Speaker 00 Summary, what's working, what's not working. And you support it with data. And then at the bottom, there is an area for action items that the team takes live. And so when we discuss something, we put the action item, the D R I, so who is in charge and the deadline. And the deadline gets discussed, meaning that is how you enforce velocity, right? In my mind, if people talk to me and they don't set a deadline, it's the same day. That is how my brain works. And sometimes with junior people, it happened like two Sundays ago. I asked for something because I had a meeting early on a Monday and I asked the thing to the finance team. The person didn't say, oh yeah, I'll get back to you. And then at nine P M. I didn't get the thing and I say, where is the thing? I say, oh, I was thinking to send it tomorrow and I could have done a better job there because I should have set the deadline. So I think it was my mistake.
58:18 Speaker 00 But usually on my mind, if I don't set the deadline, it's same day. Is it wrong to ask someone to do that on a Sunday? It depends, meaning if it's just because, oh, it's just Mateo, yes. Why do I have to bother you on a Sunday? If I have a major, massive meeting that could drive a multimillion dollar fundraiser. Is at seven AM on a Monday, I think is not debatable. I'm doing the best for the organization and for the job of hundreds of people.
58:42 Harry Stebbings? So going back to the agendas, do you train people on how to write?
58:45 Speaker 00 Yes.
58:46 Harry Stebbings? What does that look like? I come into eight sleep.
58:48 Speaker 00 One more thing, and then I answer. The other thing we do in the meetings, we don't go through the agenda. We just go through the comments. So everyone had to read the agenda in advance. We do Google Docs. Everyone leaves comments and you just go through the comments. The rest, we assume that you have read it, you're fine, and there is nothing to be debated. And so sometimes our meetings can be very short, even if the agenda is very meaty, three pages, four pages of an agenda. Maybe there are three things to discuss. We discuss those 12 minutes and then we are all free. The way you do it is by giving comments. Oh, this is not clear. What is the data supporting the thing? What's happening here? What is the second order effect? Why there is only one option? What are the other option that you consider? What is the effort and impact of this? How did you pick it, right?
59:31 Speaker 00 Smart people, at a certain point, they will start understanding not the question that will come. And then usually executives, particularly in the early days, they try to prepare and work on the agenda before the agenda gets shared with me or the rest of the executive team, because usually the first mistake at the beginning is people are very long. They'll be confusing. They don't use data enough. These are the typical mistakes. And so even there, I start having a pattern, right? The speed at which I can read an agenda is indicative of how good is the agenda, because I can go through it really quickly.
1:00:00 Harry Stebbings? I'm really sorry. I've got twins. It's been a fucking manic weekend. I have my own marketing campaign to do. Didn't get to the agenda, Matteo. I'm really sorry. Should I come to the meeting? Should I not come to the meeting?
1:00:12 Speaker 00 No, we cancelled the meeting, but you know I'm not gonna be happy. It didn't happen because you didn't plan accordingly, and so then I'm not happy. If you were shipping the new redesign of the app and you were monitoring all these metrics and then there was an unexpected bug, right? All these things that you couldn't expect, but those were a P zero, of course. At that point, do we need the meeting or you need to stay focused on that stuff because it's a P zero, right? We call them P zero, P one and P two. So if there are P zeros, we cancel the meeting, maybe we go async or maybe you have the agenda. But if it was because of lack of thoughtfulness in how you plan your schedule, that doesn't work.
1:00:49 Harry Stebbings? Does that happen often?
1:00:50 Speaker 00 No, I would say, but even there, because I think sometimes what I try to coach is just be smart. If you were really busy, just send a very brief agenda, but literally three bullet points. The point of the agenda is not about being long. No one wants to read long documents. You can give me time back, right? I save usually an hour every day before I start working, just to review all the agendas of the day. Write three bullet points. If you were busy doing a P zero, I'm sure there is a lot of value in that P zero. Just write a bullet about what happened, right? We shipped the app to ninety five percent of the customer yesterday. We found this bug, we solved it within three hours, thanks to engineer X. I'm very happy.
1:01:27 Harry Stebbings? So we never not read it. Going back to the training, what does that look like? So I join Eight Sleep, thank you for hiring me. How do you train me to write agendas and memos?
1:01:36 Speaker 00 The only thing is writing a lot of agendas. You start.
1:01:39 Harry Stebbings? And you give me case studies, here's ten.
1:01:40 Speaker 00 Oh, every, let's say there is a weekly meeting for growth, there is a weekly meeting for art, or there is a weekly meeting for product, right? So there are these recording meetings. Again, you go back to the executive summary and then the OKRs. And you might write your KR, or if you are the lead of the squad, you write everything. And at the beginning, you will write something that is long, that is not clear, is not data driven, and the executive will help you. But it's trial and error.
1:02:06 Harry Stebbings? And so we have trial and error there. On the writing itself, do you worry about it impacting velocity? Like, yeah, yeah, I get it, you want an agenda, Mateo, but just get on the call with me and talk, because we need to talk about this CAC. It's not acceptable.
1:02:17 Speaker 00 That is the typical answer of someone who didn't write agendas. It's something like.
1:02:24 Speaker 00 The, think of the board deck. The biggest value of doing a really good board deck is not for my board, it's for me. It pushes me to think about creating a story of why this quarter was so good. What were the reasons? What really happened, right? Preparing for questions. Ninety percent of the value of the board meeting is in creating the board deck, not the board meeting. It's the same for the agenda. I don't want to come in a meeting where I don't have the information about that CAC, right? If we need to discuss that CAC, as you're saying, I want to read your thought, I want to read the data, I want to sleep on it. Obviously, I don't sleep on it because. The same day, right? But I I wanna rest a little bit thinking about that topic. You can't expect me to come to a meeting. I'm not a genius who just shows up and have a magic answer.
1:03:09 Speaker 00 I need to digest it. I need to read the data. Maybe I want more data and I leave you the comment before the meeting. So you add the data. And so then we can run a meeting in twelve minutes instead than three hours and get to a better conclusion.
1:03:20 Harry Stebbings? Given the amount of sleep you get, you could sleep on quite a lot, Mateo. But can I ask you, do you use them historically? Oh, we did this last week. We did this.
1:03:29 Speaker 00 Hundred percent. So we have an executive meeting every Monday. There is a section in my agenda called lessons. And I talk to all the executives about lessons that I learn with other executives. This has happened with this candidate. This candidate didn't work because of A and B. Here happened that we didn't achieve what we had achieved because we did this mistake. I create a cross pollination in those moments. And so there is the executive that experienced the thing with me. And then there are all the other executives so they can make questions. And that is how you really create the culture because they see, first, they accept mistakes. Something that is really accepted in our executive meeting. We have no problems with mistakes. I screw up multiple times and I say, guys, I apologize. These are the mistakes I did this week.
1:04:11 Speaker 00 Or this month or this quarter. And we do also postmortem and a pre-parade every quarter. I don't know if you know this thing. Yeah, it comes from Sequoia, the pre-parade. So substantially, you celebrate the quarter. This quarter will be successful. This next quarter will be successful if you've write it down. And then when the quarter ends, you see the pre-parade and you do the postmortem.
1:04:30 Harry Stebbings? And you do it one on one or you do it as a team?
1:04:32 Speaker 00 Everything is shared. I don't care about anything.
1:04:34 Harry Stebbings? And then you discuss it with them because I think one thing that people will always do is they'll try and make it. This quarter will be successful if we increase by twenty five percent. No, we should increase by seventy five percent. People will set the goal lower because they want it to be a success.
1:04:46 Speaker 00 And no, this is another rule from Keith, I think, from his time at Square, where substantially everything is public in our company except a comp. Usually comp, you don't wanna share it, but everything else is is shared. I leave you the comments there if I disagree. Even because I want to incentivize the fact that we can disagree, this is something that is really strong at Founders Fund, right? It's good to disagree. Then I think the D R I still needs to take the decision that they
1:05:12 Harry Stebbings? So the D R I?
1:05:13 Speaker 00 The the right responsible individual, so the one who is the owner of the project or the topic. It's still their call. We use the thing that comes from Amazon that is disagree and commit. And I do sometimes in product, right? Not always, but sometimes I decide to disagree. But I raise my hand and I say, I disagree and commit, but I'm disagreeing.
1:05:33 Harry Stebbings? Do you agree that I don't like disagree and commit? It's like I'll marry you, but not I am to you.
1:05:38 Speaker 00 Yeah, but sometimes it could be, I don't know, u- usually I use quadrants, right? And so there is what is
1:05:43 Harry Stebbings? Cool city.
1:05:44 Speaker 00 And knowledge. And so if the impact is really high, something that can kill the company. This is another rule where you understand when to delegate and not to delegate. And so you have impact and you have knowledge. If this is a thing that can kill the company and has, I don't know, a legal background, I used to be a lawyer. I'm not gonna delegate that thing. And probably if it can kill the company, I'm not gonna delegate that thing, right? I wanna be very, very involved. But if this is a thing that has very minor impact and I don't even know it well. That is not the good use of my time. And so it falls in the bottom left quadrant and so I delegate. And so here is how I decide all the times if I wanna take the final decision. No, we are not gonna do that, even if everyone else disagrees with me.
1:06:28 Speaker 00 Versus something that I think, look, this is minor, they might be right, they might be wrong. I don't have way more experience than them. Sometimes you also want the team to feel empowered, right? So there is the tricky line as a C E O. Because if you always take the final decision, then people say, okay, if I have to come here and just do what you say, find someone else. The best minds, they they wanted to feel empowered. But they also sometimes wanna feel the pressure to say, I'm fine, I'll follow you, but this is your call.
1:06:53 Harry Stebbings? Have you always had a good culture? When was the time when the culture was broken and you were like, we need to be a lot more deliberate?
1:06:59 Speaker 00 Yeah, I think when we hired a lot really fast, the culture broke a little bit. And it was because of the quality of the people.
1:07:06 Harry Stebbings? How did it break? Like, how does that show up in an organisation?
1:07:08 Speaker 00 Speed and quality, which goes to operational excellence. What we realised is we were becoming slower as we were adding people. And the quality was going down, which is really the worst. What happened is there was Covid coming, and so that required multiple changes. And I think those changes push us to realjust things for the good. But if you ask me as a CEO, yeah, that was one of the of the times where if I look back, I think I should have done a much better job.
1:07:34 Harry Stebbings? Before we move on to like sleep itself and fitness and health, is there anything that you haven't discussed today that you think is core to driving Eight Sleep's success?
1:07:43 Speaker 00 I think the other thing which we experienced that too is no politics, no ego. I think from my side, this approach where again, I can talk about anything about even if I disagree with you, with respect, but as a group, as an executive team, and our executive teams are the executives, but now we have a bunch of second lines that I start bringing in. So they learn by osmosis, our culture, right? And so our executive meeting on Monday, I expanded it. Now we have a lot of second lines. And we have this culture where I call it demanding and we are demanding and supportive. That that is my style and it's something I learned from from Sequoia. Sequoia is not one of our investors, but I still respect them a lot. Demanding means I'm extremely demanding, as you probably have seen in it.
1:08:28 Speaker 00 But I'm very supportive. I really care about my people. I'm the type of guy who's gonna do anything for you. And supportive outside personal reasons, right? In business or in this case means as long as you were thoughtful, as long as you know we're operating now with excellence and you care, it doesn't matter if the result doesn't come. I will support you. Move fast, try that thing. If it fails, I'm there with you. It's something I was discussing actually yesterday with one of our executives about velocity. Because he said, look, I'll try to go for velocity. I believe this is the right thing to do. We risk to compromise quality here and there. What happens if something goes goes wrong? And I say, be bold. I'll be next to you. We are into this together. And so that is something that I think is really important.
1:09:12 Speaker 00 The other thing is this, I always tell my executive, your job as an executive is not to be loved. Your job is to help your people achieve more than what they believe it was possible. That is what will make them great. That is what will help them achieve more. If you look back when you go to school, most of the times the teachers you remember were the tough teachers that you push you outside your comfort zone. That is a great leader to me, but as a leader, the way I think is if I believe you have a certain potential. My job is to help you fulfill your full potential, not to keep you at seventy percent pace in a comfort zone. I'm hurting your career. And this is a mistake a lot of executives do.
1:09:55 Speaker 00 Because they wanna be loved, they wanna be sometimes soft or too nice, you know, they don't wanna stretch you. The best players, the A players, think of Djokovic, the tennis player, right? What he wants from his coach is to get the most out of him, to improve every single detail.
1:10:10 Harry Stebbings? But it assumes that everyone is world-class talent. That's my only problem. World-class talent always wants to be stretched.
1:10:15 Speaker 00 Yeah.
1:10:16 Harry Stebbings? Okay. The truth is, how many people are in eight-seat now?
1:10:19 Speaker 00 It depends who include up to two hundred.
1:10:20 Harry Stebbings? But like, when you reach a hundred, two hundred, three hundred, it's not possible to only have A players by definition. So everyone has B players and B players don't necessarily wanna be pushed that much.
1:10:30 Speaker 00 I might agree that not everyone can be an A player, but I think every person deserves to fulfill their full potential. And if they don't wanna get there, then we are not the right fit for them. I think everyone at eight-seat right now, largest, largest majority are A players. Then A players can can be shaped in different ways. There are some that they push really, really hard, they go above and beyond. And there are some others that just master what they do and they wanna stay within those boundaries. But everyone has a partner, everyone has a family, everyone, they go home and they wanna be proud of what they do. They don't wanna just do some basic things for the sake of doing it. There is where you need to help them raise themselves, so they are proud and excited about what they do. If you just let them be and they just do a repetitive job, these people will leave.
1:11:15 Harry Stebbings? I just think it's very easy to let people, to be honest with you, some people don't care about being proud about their job. They just wanna tick the box.
1:11:22 Speaker 00 Yeah, well, at that point, they can be at eight-seat.
1:11:24 Harry Stebbings? Exactly, that's the point. And then when you get them in, you need to get them out fast.
1:11:28 Speaker 00 Yeah, exactly.
1:11:28 Harry Stebbings? Have you learnt anything about firing?
1:11:30 Speaker 00 Yeah, quite a bit. As you can imagine, I did everything good.
1:11:33 Harry Stebbings? I have an agenda.
1:11:35 Speaker 00 But I think for you and I, or at least for me, I come from a culture, I'm Italian, right? I come from a culture where in Italy is almost, you don't fire. When I moved to the US, it was really shocking to me to think that you can let people go. Then the way you do it, you need to be, first, I believe in radical candor. One thing I always challenge the executive is, if I call person X that reports to you, do they know if you rate them incredibly good, good, or meh? Yes or no? And if the answer is, I don't know, then you're doing a poor job as an executive. The most important thing is people should always know what you think of their performance. Because this is how you avoid problems in the future. And second, this is how you give them the opportunity to course correct. You can put them in a peep, which is not substantially when you tell them that they need to improve their performance.
1:12:20 Speaker 00 But when you're there, the relationship is kind of broken, right? Because I'm telling you that you have a month or two to fix things. It's very brutal. The bad thing is this concept of course correction. Some people that report directly to me, like Chief of Staff and so on, I give them feedback like real time, the same day. And they know when I'm unhappy in a week or if I'm very happy another week. Forgetting the weekly thing, at least on a monthly basis, do people know how happy you are? And what do you think of their performance? Where are they strong or not? If you do that, the best, they will keep growing. If you shut up and you expect to wait 12 months to then share your opinion, and at that point, you're even kind of soft. Because if you don't share your feedback constantly, it becomes way harder to share a harsh feedback in 12 months.
1:13:04 Speaker 00 Because you even didn't develop a relationship of feedback.
1:13:07 Harry Stebbings? But you lose your shit and you feel guilty about it?
1:13:10 Speaker 00 Yes, I do, which goes back to my radical candor. If I have a problem, I tell you immediately.
1:13:15 Harry Stebbings? Do you warn people about that? Do you say, listen, Matteo, when you work with me, I will be very direct with you. Don't be too alarmed, but I will let you know how I feel in real time.
1:13:24 Speaker 00 Yes, as you see, I will be very direct. I'll share what is on my mind. I don't pretend to be always right, but this is what is going on. And if you have to push back because you have a case, build your case. But I'm real time feedback guy, real time. If there is a presentation, I don't know, in the Olanz, and one of our people is running the Olanz, and I see something I don't like in the Olanz, I might like them in one minute after the Olanz with feedback about how to improve the Olanz for the following week.
1:13:51 Harry Stebbings? Do you ever get told you're too much? I get told I'm too much sometimes.
1:13:55 Speaker 00 Hundred percent.
1:13:56 Harry Stebbings? Someone I read, I run a lot and David Goggins says the difference between passion and obsession is passion is when everyone's like, yeah, you're passionate about it. Well done, Matteo. And obsession, people are like, oh, you need to like, stop that. And it's this interesting difference and obsession is actually where you wanna be.
1:14:11 Speaker 00 Yeah, you need to start controlling yourself, but I think if people understand first that you have always the best intention, if they see the point, it's way easier for them to understand it. Then sometimes they might not. But I think it's an era where I improved, but you don't wanna compromise velocity and feedback. I think the feedback is still in the best interest of everyone.
1:14:30 Harry Stebbings? Dude, I'm enjoying this so much. I do have to touch on just like fitness and health. In terms of sleep, let's start there, why not? What are one to two things that you think are non-obvious that is really important for people to know?
1:14:42 Speaker 00 The two basic things are really how much you sleep, which is pretty basic, and consistency. Because you really train your biological clock to fall asleep at the time and to wake up at that time. Your circadian cycle can substantially be trained. So consistency and amount of hours you sleep.
1:15:00 Harry Stebbings? And amount of hours varies. We have 25 year olds listening, we have 50 year olds listening. Do they need different amounts?
1:15:06 Speaker 00 It depends. So usually as you get older, they're just harder for you to sleep eight, nine hours. A rule of time is between seven and nine hours for everyone, except very, very few people that have a genetic modification and can sleep only three, four hours.
1:15:20 Harry Stebbings? So what non-obvious stuff should we know, should we do?
1:15:24 Speaker 00 One thing is usually playing outside aid sleep, but playing with your own body temperature before bed is really impactful. And so let's say you're in a hotel or you have a larger home and you can have a sound and a nice bath. If you do that before going to bed, it's gonna help you sleep better, meaningfully, right? It's one of the biggest thing, even if you listen to people.
1:15:43 Harry Stebbings? Do you need the contrast sauna and ice bath, or can you just do sauna?
1:15:46 Speaker 00 You can also do only sauna. So that is why also people recommend just doing a hot bath or a hot shower. The way it creates is it starts warming up your body, then your body needs to dissipate the heat. From the bathtub and so the core body temperature goes down. So it's actually counterintuitive and that is when your body prepares for sleep. Because the second you fall asleep, your body temperature drops. And so you want to try to create that system.
1:16:13 Harry Stebbings? And we want to have a cold room as well when we sleep in it?
1:16:15 Speaker 00 Yeah, you want to be in a cold room. The thing there, which is a typical mistake is you hear a lot of people say, oh, you should sleep at sixty eight degrees. That is wrong. And the reason why it's wrong is sixty eight degrees might work, I don't know, in the first part of the night, but not in the second part of the night. Your body temperature changes during the night. That is why sometimes at four AM, five AM, you start feeling a bit cold and now you bring back your your blanket and you cover yourself. It's because your body temperature is changing and your body is preparing to wake up.
1:16:42 Harry Stebbings? How much does it change throughout the night?
1:16:44 Speaker 00 Not significantly, but enough for you to really feel that. The the temperature drops at the beginning of the night is like a U curve. It drops at the beginning of the night, so immediately as you fall asleep, it goes down. And then two, three hours before you wake up, the body temperature rises. And so your body is preparing to wake up. Which if you think, if you go back to thousands of years ago, it just follows what happens in the night with the sun. Right? If you were sleeping in a cave, right? The temperature drops because there is no sun and the night comes. And then a couple of hours before sunrise, the temperature starts rising again because the sun starts coming out.
1:17:18 Harry Stebbings? You said beforehand that you sleep nine hours a night, which is fantastic. There's many people who have three kids. That changes a lot. I don't have children, but I imagine that changes a lot. What advice do you have for them, Mike? It's just a physical impossibility to see that.
1:17:32 Speaker 00 Yeah, so I don't have kids, so I don't know, and they might disagree and they will likely disagree. And so we have executives which have kids. And there is one who just had a kid, I think in March. And we have an internal competition with sleep data inside the company. So there is a sleep fitness work up that is just inside the company. And so we compete with the sleep score every day. And this guy is always in the top three, four, five. And he was able to, I mean, organize his schedule with the kid to sleep enough. Then obviously it depends particularly when the kids are, based on what I know. When they're not small, right? They wake up in the middle of the night and so there are a bunch of interruptions.
1:18:12 Speaker 00 But I think once they cross probably the threshold, I guess the kid is gonna sleep eight hours. I don't know.
1:18:18 Harry Stebbings? How does food impact sleep?
1:18:20 Speaker 00 In a lot of ways, the most impactful thing of everything is alcohol. Alcohol is massively, is gonna disrupt your sleep massively. You feel that you are probably more relaxed mentally. And you think, oh, I will have a great night of sleep. But in reality, all your biometrics, heart rate will accelerate, HRV will drop. And in general, your sleep architecture, so the sleep phases will change. Usually, you lose probably somewhere around twenty percent sleep quality with alcohol. Then carbs, they help you fall asleep, based on a bunch of studies. So you you tend to feel more sleepy if you had carbs. But then the quality of sleep, in particular if you had quite a bit of carbs, is fairly impactful.
1:18:59 Harry Stebbings? Quite a bit of carbs, just for people listening, is that a bowl of pasta?
1:19:02 Speaker 00 Yeah, it's probably around a bowl of pasta. Then, sleep is very subjective, right? So there are all these rule of thumbs, but the point is, there is very little knowledge about sleep at scale. And there is where I think companies like us will make a massive difference, right? Because today, if you really wanna know about your sleep stages and everything, you need to go to a sleep clinic. Well, they cover you with sensors and you're in this clinic, which is a foreign environment. Well, instead, Aids sleep. Now, now, we have hundreds and thousands of customers sleeping on these devices every single night in their home. We are discovering things literally no other professor or scientist can know, just because of the scale. And so it's very subjective. Even the alcohol, there are certain people that react to alcohol in a certain way versus others.
1:19:44 Harry Stebbings? I said to a girlfriend about this interview, and she said, I wanna know, ask Mateo, why can some people drink coffee before bed and sleep well, and I can't?
1:19:54 Speaker 00 Yeah, it's very subjective. In general, the rule of thumb is you shouldn't, because it takes around eight hours for the coffee to really leave your body. I don't have a lot of coffee, but if you have coffee, you should stop drinking coffee at least eight hours before bed.
1:20:09 Harry Stebbings? How much does sex impact sleep?
1:20:11 Speaker 00 There is very little data on that. I think there is a lot of mental probably relief and relaxation that helps you. I mean, there will be probably an hormonal impact across different dimensions, but the knowledge is very limited.
1:20:24 Harry Stebbings? Final one, I promise. Exercise. How does that? I do a lot of running. I do thirty, forty, fifty K. Does that help me sleep better or not? My body's very tired.
1:20:33 Speaker 00 So first, it depends when you exercise. I stop exercising after five P M. I will never exercise, but I exercise every morning.
1:20:41 Harry Stebbings? Why?
1:20:42 Speaker 00 So two things. First, you rise your heart rate, right? So it depends on what time you go to bed. I go to bed fairly early, nine thirty, ten. You don't wanna do exercise, or it's not recommended to do exercise in the second part of the day, because you accelerate your heart rate. You accelerate your body temperature. You you create a bunch of changes inside your body, and then your body needs to go back to baseline, and then needs to get into the the phase of preparation of sleep. And so the best of the best is if you can train in the first part of the day, so there is plenty of time for your body to go back to baseline, and then go into sleep preparation. So if I play, I don't know, paddle or tennis, which are two sports that I like at seven P M., there is no way I fall asleep at ten. Everything in my body is still too active compared to usual.
1:21:26 Harry Stebbings? Do you ever have like a late one? Stay up till like one or two A M.?
1:21:29 Speaker 00 No, unless it's for work, I almost never do it. Obviously, there is a crisis at work.
1:21:34 Harry Stebbings? Exercise, sleep, food. Which one do you slip up on most?
1:21:39 Speaker 00 I mean, sleep. I sleep nine hours, right? Every single day. Training, I train substantially every day. When I'm in Miami, where I'm based, I do an hour and a half in the morning, tennis, paddle, something like that.
1:21:49 Harry Stebbings? What does your training routine look like?
1:21:51 Speaker 00 So it's usually eighty percent cardio, twenty percent strength, and cardio, I range between zone two and zone zone five.
1:21:59 Harry Stebbings? Do you have a monitor on?
1:22:00 Speaker 00 I I use this guy. I use Apple Watch, so I try to monitor that. Usually, you wanna be, based on what Peter at T S A C recommends, eighty percent of the cardio in zone two and twenty percent in zone five, so you can really train your heart rate to spike and drop. There is a couple of metrics that few people know, but they are very helpful, that is heart rate recovery. But substantially, you you can use a an app called Zons that gets the data from your Apple Watch. You wanna see how much your heart rate drops after a spike, if you rest. Well, let's say you spike your heart rate to one seventy, and then there is one minute and two minutes. How much does it drop? So from one seventy to one thirty and then from one thirty to one ten. That speed is indicative of how good your heart rate is.
1:22:42 Harry Stebbings? Which one do you slip up on most?
1:22:44 Speaker 00 Probably between the three, nutrition a little bit more. But even though I'm on a keto diet, I usually eat once a day just for dinner. I cheat on Fridays. I have pizza with my wife on Fridays, so the Italian part of me comes out.
1:22:58 Harry Stebbings? So you just have dinner and?
1:22:59 Speaker 00 Usually I have a late dinner or at least I do the what is called the sixteen eight fasting.
1:23:04 Harry Stebbings? What does the dinner look like normally?
1:23:05 Speaker 00 Yeah, it's usually some form of meat. I don't eat a lot of red meat, but just because of preference or for other reason. Sometimes we have a soup with veggies.
1:23:14 Harry Stebbings? You're not a bit pissed off, Mateo? I mean, you just fasted for twenty hours and you get a soup with veggies?
1:23:20 Speaker 00 Yeah, so I tested a bunch of that thing until when I found something that I really like. So I don't know, I could pair it with guacamole, which I really, really love. Yeah, I play with that.
1:23:30 Harry Stebbings? Can I ask a bit of a weird one and then we'll do a quick fire? I listened to you and you just sound a bit perfect, if I'm honest.
1:23:35 Speaker 00 Yeah.
1:23:36 Harry Stebbings? Do you have anything that's just a bit weird and all?
1:23:38 Speaker 00 I think the challenge is I try to do all these things and so it's.
1:23:42 Harry Stebbings? You put this pressure on yourself.
1:23:43 Speaker 00 Yeah, exactly. So that is probably the hard part of always pushing yourself to this limit. And so this sometimes impacts your mood.
1:23:52 Harry Stebbings? You ever just like, oh, fuck, can't do this?
1:23:55 Speaker 00 Yeah. And at that point, you have like now the equivalent of the cheat day, right? It's not that you can always be like this or that, but you shouldn't be perfect every day. This is something I learned from a video of Tom Brady, but what you want is the consistency. It's less about cheating one day or another day. But if you zoom out and you look at how you manage your things, are you consistently enough in all these different dimensions? And it's less about one day or two days. It's more really look at the year, at the month, at the years. And can you sustain that? That to me is more important than anything else, even alcohol, right? You and I, we had this episode a few years ago and since twenty nineteen is when I stopped drinking. Can you drink from time to time? Yeah, you can, but are you consistently, in my case, avoiding alcohol?
1:24:39 Speaker 00 Yes, and the reason why I do it is just because I feel bad.
1:24:43 Harry Stebbings? I totally get you and agree. You said about sustaining over years. Final, final one, I promise. Your co-founder is also your partner. What's the secret to a successful marriage?
1:24:52 Speaker 00 I tell you a story first that you like, so. Probably as you feel like you have understood is I'm always on unless when I'm sleeping about the business, but my wife sometimes she wants her time where I don't bother her about the business, right? She wants to be in her own world. That is how she, you know, digest things and develop ideas. And so sometimes, you know, it's, I don't know, nine P M. And and I I want to talk about some stuff or asleep. And she said, look, after this time, you need to treat me like any other executive and colleague. So you can't bother me all the time. And so you can't talk about work after nine P M. Whatever. You're like, right, sleep time. Don't wait. But so I say, okay, fine. I need to treat you like any other executive.
1:25:33 Speaker 00 And I can't talk to them because I wouldn't call them at ten P M. But I would slack them. And so sometimes I just slack her and we are both on the couch and like nine P M. And there is something on my mind about growth. She leads growth and marketing. And I start slacking her as it is the phone that vibrates there next to me, but I cannot talk about the topic.
1:25:53 Harry Stebbings? Does she answer in real time? Or does she wait until tomorrow?
1:25:56 Speaker 00 It depends. If it's urgent, whenever she looks at that, then she will answer. But that is funny because sometimes also with our exactly, oh, can you ask this thing to we we call her A Z because it's Alexandra Zetterin, right? And we call her A Z. And okay, you ask these to A Z and I say, no, you ask her because I treat her like literally any other executive, even if we are in the same house and she is in her office and I'm in.
1:26:20 Harry Stebbings? Is it difficult to retain the romance?
1:26:22 Speaker 00 I would say for ninety percent of the couples, probably. In our case, I don't know, we clicked. And so that works really well. And she's really good at setting boundaries. Even on a Saturday and Sunday, we talk about work quite a bit, but at a certain point she says enough. At that point, I just need to live in my world and I can't talk about that.
1:26:41 Harry Stebbings? Was there ever a moment where it was challenging? And what did you learn from that moment?
1:26:45 Speaker 00 Yes, in the earlier days, because you know, Alex leads growth, which is something very measurable. Revenue, CAC, there is no debate. And in a company growth is not that it's always gonna go great. My job as a CEO is to push, particularly when things are not going great. And so for her or not, then you need to pay attention to not create some resentment. And you need to understand when they are going through a lot of pressure. Because growth has this problem that first is daily, every day, the first thing I look at, right or wrong, probably wrong, but it's revenue of the previous day. I receive a look at dashboard, right? That's the first thing I look at. And so that immediately sets your mood. And the other brutal thing is you do a great year and then January first comes and is you need another great year and everything starts from zero.
1:27:29 Speaker 00 It's really hard for growth people and there are a lot of pressure. And then that comes immediately after Black Friday for us, which is another big moment. And so at the beginning, I think we had to fine tune that part of the relationship because yeah, sometimes that was too much. But I think there is where she's been great.
1:27:44 Harry Stebbings? Did she say that?
1:27:45 Speaker 00 Yes. The other funny thing is we use Slack at work and then we use WhatsApp for personal stuff. And so sometimes I might be writing about growth and we need to accelerate the thing, we need to do this, this, this and that. And then on WhatsApp, I'm saying, oh, it's Friday night. I can't wait for our cheat day of pizza. And, and so we have two channels for communication.
1:28:04 Harry Stebbings? Listen, I want to move into a quick fire round. So I say a short statement, you give me your immediate thoughts. That sounds okay. Let's start with this one. What do others not know that you know to be true?
1:28:12 Speaker 00 Your bed will become the most powerful preventative health platform in the future and will save your life.
1:28:19 Harry Stebbings? In what timeline?
1:28:20 Speaker 00 We already saved a life, multiple lives, because some people saw that their biometrics were upside down.
1:28:26 Harry Stebbings? Can you tell me, actually, one of your investors told me, ask about how eight has saved a life. Is there one that sticks to mind?
1:28:32 Speaker 00 Yeah, multiple stories, but there is this one, it was the first one we got. So a customer writes me and he say, I just wanted to say thank you. You guys saved my life. He or she didn't get into the specifics, but the, the biometrics were off compared to the usual baseline. This person went straight to ER, they found there was a major health issue. He had an immediate surgery and that saved his life. It was a big deal. And that is when now you really realize that you're really proud of what you're doing. You understand why we're working so hard and now putting so much effort in what we do. One of our goals is we want to track how many lives we save.
1:29:05 Harry Stebbings? But like, how long do you think it is before you are having preventative body scans in your sleep?
1:29:10 Speaker 00 Three years, five years, 10 years. No less.
1:29:12 Harry Stebbings? And then who owns that data? Consumers?
1:29:15 Speaker 00 Yeah, I mean, what is the standard market practice of like an Apple Watch or like a?
1:29:21 Harry Stebbings? Well, no, I'm just thinking like if you have an eight sleep that's preventative health and scans you every night. And then you actually have like the anonymization of data that can correlate your body to my body. Or my mother's got multiple cirrhosis and they can tell that temperature correlates to relapses in multiple cirrhosis. And you could actually have this incredible global data set that learns from each other.
1:29:39 Speaker 00 Yep.
1:29:40 Harry Stebbings? That's really cool.
1:29:41 Speaker 00 The power of discovery is insane because the advantage we have at Eight Sleep are three. One, we have a lot of space, right? So we can literally add any sensor you can think of. Wearables can't. Second, we have you for eight hour ish every day. It's a lot of time and you're standing still. And third, once you install our product, you don't remove it. And so we have very longitudinal data, which is one of the biggest issues, right? A lot of wearables, people stop using them within three to six months. In our case, they keep the product there, just not because we are geniuses, but because it's the type of form factor. And so if you fast forward, even just now, for us, understanding what happens across a million nights, it happens in less than a week.
1:30:21 Harry Stebbings? CEO of any other company for a day, which would it be?
1:30:24 Speaker 00 Tesla. No, actually, you know what? I will think of this, it would be the CEO of Mercedes F1 or Ferrari F1.
1:30:32 Harry Stebbings? Why?
1:30:32 Speaker 00 I'm really into F1. If if you ask me if I was not an entrepreneur, what else would I like to be is to be an F1 driver. I raced with go cars when I was a kid and all that. And so I think there is the man and the machine, high performance, high engineering, a lot of technology, but applied to sport. And I used to be an athlete. And so that kind of competition and challenge would excite me so much.
1:30:55 Harry Stebbings? What's your favorite consumer brand?
1:30:58 Speaker 00 True that I respect a lot. One is Tesla. And the reason why is because of how obsessed they are with the customer experience, right? They are minimal, they are simple, the the product evolves with software. And so we use Tesla a lot as an example at Eight Sleep. And the other one I really like is Nike because they honor great athletes. And so there is this respect for the customer in the way they honor it. Really the word honoring your customers that I really love. It's not customer obsession, not just business management, I call it customer obsession to me. It's honor your customers.
1:31:33 Harry Stebbings? Tell me, you can have dinner with anyone, dead or alive. Who do you choose to have dinner with and why them?
1:31:38 Speaker 00 Three people.
1:31:39 Harry Stebbings? Really pushing the boat out, yeah.
1:31:40 Speaker 00 Ayrton Senna, a famous Formula One driver who died in eighteen eighty four, but one of the greatest. Winston Churchill, because I love history and when I read about Winston Churchill and how he handled a lot of different things in the Second World War or that. I I find it fascinating. And then Barack Obama, just because he was one of the youngest US presidents. And not because I'm with this political side or the other one, I'm pretty agnostic. It's just people I would like, you know, to have a dinner and make you a bunch of questions. How did you handle that? How what happened here? How did you and your wife handle what you asked me, but to these guys?
1:32:16 Harry Stebbings? Have you met Peter Thiel?
1:32:17 Speaker 00 I met him very briefly.
1:32:19 Harry Stebbings? Tell me, what single piece of advice have you been given that most stuck with you?
1:32:23 Speaker 00 I think the you never have a second chance to make a first impression. And so always try to be now very thoughtful when now you meet the person, particularly if it's a person on your your respect, to prepare it. And to be knowledgeable and to go into the meeting very well prepared.
1:32:40 Harry Stebbings? What is the strongest belief which you had that turned out to be wrong?
1:32:43 Speaker 00 I have this contrarian approach to rest that I call it active recovery. It's it's pretty weird, but if I go on a vacation or if I take any time off, everything is designed around me recovering as fast as possible. I almost think of that still as a part of my daily performance, right? I think of myself like an athlete, even if I'm the CEO of a company. And everything I do, I try to do it to increase my performance as an athlete, my professional performance. And so my wife and I, we A B test vacations where we A B test different things and see what helped us recover the most, particularly mentally. And what are the things that they help us?
1:33:22 Harry Stebbings? What has he tested?
1:33:23 Speaker 00 From the lengths of the vacation to what we do in a vacation, right? Do you wanna go on vacation in a resort and stay at the pool and read? Or you wanna do nature and just walk?
1:33:32 Harry Stebbings? What have been lessons on length and then type for you?
1:33:36 Speaker 00 Yeah, so usually four days is more than enough. We almost see no incremental value after that. The key thing is to disconnect from socials. Sometimes if it's for a few days, I even don't learn or listen to podcasts. I really try to recover and I just do what I call stillness. I try to spend as much time as possible doing literally nothing and letting my brain go and just think about everything. I need to train, so if I just stop training and I just eat a lot, then I just feel guilty with myself. The other thing for me is I don't disconnect completely because what I realize is good or bad. Sometimes I like to know what is happening and if there is any urgency. And so if I just try to put my phone away, it just gives me more anxiety. And so I'm always on, always on vacation.
1:34:22 Speaker 00 You will never find me off. And people say, oh, why you do that? And to me, it's actually the thing that helps me the most.
1:34:28 Harry Stebbings? Final one, we have a show in twenty thirty three. You further increased your productivity to all new heights. Where's eight sleep in ten years?
1:34:37 Speaker 00 We have saved a million lives. We have improved millions of lives, right? Between sleep and preventative health. We're a public company, hopefully by then. And the reason is why I think they will set the right structure to build a long term business. And a word I use a lot is building an iconic global company. Meaning if I think of legacy and leaving a mark in the world, to me, it's not about not the money. It's really helping these millions of lives and doing it with a brand that is iconic and globally recognized. If you ask me, if you had a magic stick, what you want your life to be spent on? That's it. Helping millions of lives with a brand that is iconic and well recognized globally. You really stand with that brand.
1:35:20 Speaker 00 You care about those guys, you know that that brand cares about you and that brand is doing something well for the world.
1:35:27 Harry Stebbings? It's very rare where I actually do a show and I'm like, oh shit, I need to change a lot of how I manage teams. This was like absolutely that. Thank you for doing this. This has been amazing and you are a star.
1:35:38 Speaker 00 Well, thank you so much for having me.
1:35:41 Harry Stebbings? As I said at the beginning, I think that is one of the most granular and action-packed and advice-filled episodes that you will ever hear as an early-stage founder hiring and retaining teams. If you want to see more from us, of course, you can on YouTube by searching for 20VC. But before we leave you today, did you know that every 20VC episode you listen to is recorded with Riverside? Riverside is insanely good. Like, I would pay $1,000 per month for Riverside. It's that good. Why? Well, first off, ease. Your guests do not need an account. One click and they're in the recording room with you. It is fantastic, especially for high-profile guests. Second, they record your video and audio tracks separately and in the background, so they're not only higher quality, but the
1:36:23 Harry Stebbings? guest does not need to record there and then send after, which is a total nightmare. But for me, honestly, what I love so much is how much thought they put into the product. Like, when the internet quality's low, they will disable the video for the cool, but for the recording, it works seamlessly. It records perfectly. It's so thoughtfully done and it makes such a difference. Use my coupon code 20VC, that's 2-0-VC, and get a 15% discount. It is the tool I could not run my business without. Again, you can check it out at riverside.fm and use my code 20VC, that's 2-0-VC. And speaking of game changers for businesses, as a VC, I come across many businesses that have potential and offer a great product or service, but they run into issues. And that's why I love the team
1:37:08 Harry Stebbings? at Arising Ventures. They're a holding company that acquires tech startups that are facing setbacks and helps get them back on track to success. They've helped companies like Up Council, which they took from burning $1 million a month and shrinking to profitable, and Growing Jive, where they launched a shut-down company and went from naught to $1 million ARR in just five months. They want to reveal your great business underneath the broken incentives. Whether it's a broken cap table, co-founder disputes, underwater common stock, the team behind Arising Ventures are career-long tech founders, which is so important. They're not bankers, and they know even the greatest businesses have tough times. Learn how Arising Ventures can be the one to help give your company new life by visiting
1:37:50 Harry Stebbings? Visiting arisingventures.com/20vc. Go to arisingventures.com/20vc. And finally, SecureFrame is the leading all-in-one platform for automated security and privacy compliance. SecureFrame simplifies and streamlines the process of getting and staying compliant to the most rigorous global privacy and security standards. SecureFrame's industry-leading compliance automation platform, paired with their in-house compliance experts and former auditors, helps you get audit-ready in weeks, not months, so you can close more deals faster. SecureFrame uses over 150 integrations, built-in security training, vendor and risk management, and more, to make compliance uncomplicated.
1:38:34 Harry Stebbings? SecureFrame makes it fast and easy to achieve and maintain compliance so you can focus on serving your customers. Automate your security and privacy compliance with SecureFrame. Schedule a demo today at secureframe.com. As always, I so appreciate all your support and stay tuned for an incredible 20-growth episode on Wednesday, where we feature the incredible growth of Duolingo's TikTok account from naught to 7 million followers. Stay tuned.
Previous 20VC Will Seed Pricing Remain High | Where is the Funding Crunch? | Three Core Elements Required to Raise a Series B/C | Why AI is Like the Lottery Today | Why Now is the Best Time to be Investing in Crypto | Why Investors Do Not Want to Reprice Companies Next 20VC: Why OpenAI Will Become an Infrastructure Play, Why Apple Will Win in an AI World, Why Google is the Most Vulnerable Incumbent, Will LLMs Be Commoditised, Which Startups Are Thin vs Thick Wrappers on Top of LLMs with Jeff Seibert, Founder @ Digits Page updated October 26, 2026 · transcript and summary are machine-generated
