Matteo Franceschetti, CEO of Eight Sleep, would prefer that you don’t call his startup a mattress company.
Eight Sleep does sell mattresses, albeit smart ones packed with sensors and temperature regulation controls. The company has raised north of $70 million from backers including Founders Fund and Khosla Ventures. A great deal of this funding surrounds the idea that there is more untapped potential in the sleep economy than existing players in the space have been able to imagine.
While Franceschetti says he intends for his company to remain private for the “foreseeable future,” Eight Sleep is in a less-than-comfortable spot following Casper’s botched IPO last week. Though Casper’s stock popped on its first day of trading, the process of pricing its shares ended up leaving its private investors a bit less than ecstatic. Casper debuted trading at a value of $575 million, a far cry from the $1.1 billion private market valuation it had previously achieved.
Franceschetti has been aiming to transform Eight Sleep into a company more focused on a robust tech platform than your average bed-in-a-box company. The startup’s initial effort, a smart sleep cover for your existing mattress, evolved into a mattress with a layer of sensors that then transformed into a sensor-laden mattress with a heating and cooling unit, called “The Pod.” The company’s product development has aimed to build out a more end-to-end platform for sleep, something Franceschetti says has made him reticent to compare his company to other direct-to-consumer mattress companies.
“You can really think of us as a Peloton for your sleep. And so you buy the bed, but it also comes with a digital experience.”
Yes, Eight Sleep sells a $240 per year lifestyle subscription for your sleep. The digital experience for The Pod includes dynamic temperature regulation so that it can automatically adjust mattress temperature through the night to help you sleep soundly and wake up refreshed, they say. It also includes content like meditation practices as well as deeper analytics so you can study the numbers behind your sleeping patterns.
While Casper markets itself as part of a broader sleep lifestyle brand and has released products like its desk-side nightlight lamp to further drive that point, Eight Sleep is navigating the waters a bit more boldly in an effort to build an ecosystem that keeps a tighter hold on users. While consumers were used to paying gym dues and Peloton convinced them to pay for those memberships for equipment they owned at home, most consumers may take some hefty convincing that they need to pay a membership for sleep.
Eight Sleep only began selling The Pod this past June, and rolled out the subscription product in the latter half of 2019. While its company’s sleep platform is organized around their most expensive mattress (a queen mattress goes for $2,495, a king for $2,795), Eight Sleep is still continuing to sell its less-pricey non-subscription smart mattresses.
Though the products reach a different price point for users, Franceschetti seems hopeful that they can shape their subscription business to reach the lower-tier users, perhaps at a different price point, something that would progress his perspective of Eight Sleep transcending the “mattress company” qualifier.
“I think the subscription can and might be adjusted over time,” he says.
Franceschetti tells TechCrunch that he spent plenty of time going through Casper’s much-studied S-1 financial filing and has been keeping a close eye on Peloton’s performance. He doesn’t think that the market for sleep products is being overvalued in private markets by a long shot and he thinks that Casper certainly isn’t representative of the entire sleep industry.
“I think our own margins are really healthy,” Franceschetti says. “The Casper guys did an awesome job and in the startup world things can go up and down, but then you can also look at a company like Purple where the price per share keeps going up and up recently.”
Franceschetti wants Eight Sleep to be the top tech-enabled sleep company, but he says there’s plenty of potential for surpassing Peloton in size.
“Our total addressable market is by definition bigger than the one for Peloton for obvious reasons; everyone sleeps, right? So then it really just becomes a matter of price points.”