How Eight Sleep Grew to a $500M Valuation By Building Relationships

Matteo Franceschetti, the co-founder and CEO ofEight Sleep, believes there are three pillars of health: nutrition, fitness, and most importantly, sleep. “If you sleep only two hours for the next seven days, you will not be able to train or go to the gym, and you will probably start craving a lot of junk food,” says Matteo. “At the end of the day, the foundational part is really sleep.”

这种信念带领Matteo co-founders-MassimoAndreasi Bassi, Andrea Ballarini, and Alexandra Zatarain—to start Eight Sleep, a sleep fitness company specializing in smart mattresses and mattress covers that heat and cool to regulate your body temperature. The end result is a deeper, more restful sleep and better, quicker recovery. Their two products, thePod Pro Mattressand thePod Pro Covercan be purchased online through their ecommerce store hosted on Shopify.

To date, they’ve raised over $150 million from top investors and have a valuation of $500 million. The growth strategies Matteo and his team have used to propel Eight Sleep to mainstream success often boil down to one thing: building relationships. The relationships they’ve cultivated with investors have given them the capital to scale successfully and the direction to make the right financial and operational decisions. The relationships they’ve forged with their factories in China have allowed them to build trusted products. The influencer relationships they’ve created with health-conscious technologists and elite athletes, like Lewis Hamilton and Justin Medeiros, have brought greater awareness to Eight Sleep.

In this podcast episode of theShopify Masters podcast, we sit down with Matteo to discuss how he and his team have mastered the art of relationship building that’s allowed them fulfill their mission of fueling human potential through optimal sleep.

1. Choose investors that make a difference

Matteo had scale on his mind from the start, opting to seek out investment for Eight Sleep rather than bootstrapping the business. In 2017, the founders joined Y Combinator, a Silicon Valley startup accelerator, and subsequently raised a $6 million seed round. Since then, they’ve gone on to raise over $150 million from renowned venture capital firms. The capital they’ve received from these firms has allowed them to scale rapidly. But the relationships they’ve cultivated with investors have resulted in invaluable advice that helped the company soar.

“The right investors will give you advice on things that are right and that you really need to get done. They can increase the odds of success, or they can decrease the odds of failure.”

“What I have learned over these years is the really, really good investors, they really make a difference,” says Matteo. “They push you once per year or two times per year in a certain direction. But those two things can shape the company [or] can save the company.”

A few years ago, Keith Rabois, a venture capital investor, invested in Eight Sleep and provided the business with advice on improving its unit economics. Matteo suggests Eight Sleep wouldn’t be here today without that push. “The right investors will give you advice on things that are right, and you really need to get done,” says Matteo. “They can increase the odds of success, or they can decrease the odds of failure.”

Here’s advice from Matteo on finding the right investor to partner with your business:

• Demonstrate traction:Investors look for traction as an early signal of how your product will fare in the market. Before taking on investment, Eight Sleep raised $100,000 and sold more than 8,000 units of tits first product in pre-orders through a crowdfunding campaign on IndieGogo.
• Build a minimum viable product: While you might need investment to fund the fully-realized vision of your product, create a minimum viable product that is simple and cost-effective but demonstrates the core value proposition of your product.
• Perfect your pitch: Prepare a pitch for investors that includes details about your mission, product, value proposition, market size, business model, competitors, team, and more. Matteo created a pitch in 2017 to win over his first investors and still uses a variation of that pitch today.
• Assess trust levels: Matteo suggests seeking out investors who trust their founders and believe in the company, but ultimately leave them to run the company as entrepreneurs.
• Evaluate value-add: Consider an investor’s previous experience and prior investments to assess how they might be able to help you. For instance, a more recent Eight Sleep investor, Antonio Gracias from Valor Equity Partners, has provided the brand with invaluable advice on company building, drawing from his experience as the first investor in Tesla and SpaceX.

2. Find manufacturers that are company-aligned

After finishing their time in Y Combinator and raising their seed round, Matteo and his team had a prototype they needed to bring to life. They started looking to build relationships with manufacturers and turned their sights overseas to China. While other entrepreneurs might opt to seek out a distant manufacturing partner by corresponding over emails, text, and phone calls, Matteo pursued a more direct approach after experiencing remote roadblocks.

Matteo decided to visit China, telling his team he was leaving to fix manufacturing, unblocking the hurdles to perfecting their product. When one of his team members asked, “When are you going to come back?,” his response was “Once I fix it.” He returned several months later having built relationships with manufacturers on the ground and established the entire supply chain that they still use today.

Here’s the criteria that Matteo assessed whiles searching for the right manufacturing partners for Eight Sleep:

• Consider affordability and volume: Select a manufacturing partner that is aligned with your budget and manufacturing quantities. While Matteo found tier 1 manufacturers used by mattress competitors in the sleep space, they needed a manufacturer that was more appropriate for the brand's early stage—both in terms of affordability and volume.
• Understand a manufacturer's existing relationships:Dig into other companies a manufacturer is working with to assess if they have the capacity for additional partners and whether they’ve maintained long and fruitful relationships with current clients..
• Evaluate manufacturing terms: Discuss manufacturing terms including payment schedules, optimizing for both speed and flexibility.
• Assesses quality and expertise: Touring factories allowed Matteo to observe materials and craftsmanship up close.
• Determine health, safety and cleanliness: Matteo could see for himself how clean and safe factory conditions were and whether employees were treated well.
• Keep location in mind:Eight Sleep prioritized finding factories that were in convenient locations that its China-based team members could easily access from their homes.

3. Work with the right influencers who make an impact

To get Eight Sleep in front of a bigger audience, Matteo and his team turned to influencer marketing. However, they took a different approach than many consumer companies. Rather than tapping lifestyle influencers on Instagram and TikTok, the Eight Sleep team turned to the friends and peers they knew best: high-profile thought leaders in the technology industry posting on Twitter.

“We knew that if we were doubling down on that community, and if the community loved the product, they would start talking about us publicly on Twitter, and that is what happened,” says Matteo. “Today if you go on Twitter, there are probably 2,000 to 3,000 people raving about us and the quality of our product, and that that drives growth at no cost.”

Eight Sleep captures these mini-reviews and recommendations on its website'sWall of Love—a collection of complimentary tweets. These tweets serve as social proof about their product, from users who love their Pod Pro Mattress and Pod Pro Cover.

With the success of its initial foray into influencer marketing, Eight Sleep went on to build relationships with a different type of influencer: athletes. The target market made sense as sleep and recovery are crucial to performance. Plus, dozens of athletes were already reaching out to them each week. These signals led Matteo and his team to contact athletes directly, forging relationships that eventually would lead to influencer endorsements and brand ambassadors.

“Now you have Formula One drivers, tennis players, NBA and NFL players, CrossFit athletes, triathlon athletes, Ironman, cyclists, snowboarders,” says Matteo. “All of them, they sleep on our products.”

Similarly to its Wall of Love, Eight Sleep has leveraged its website to showcase how much athletes love its product. ItsEight Sleep Athletespage includes brand ambassadors like Lewis Hamilton, a well-decorated Formula One driver, and Justin Medeiros, a prominent CrossFit athlete. ItsBetter Everythingpage includes case studies with athletes like Katie Boren, a ballerina at the American Ballet Theatre, and Buster Skrine, a professional football player.

“All of them have hard evidence that we are improving their sleep. The reason why they have evidence is most of them were already using a wearable before Eight Sleep,” says Matteo. “They report up to 30 to 40% more deep sleep, more REM, falling asleep faster, and on average, higher sleep quality.”

八个睡眠继续向前看d is continuously improving its products. While its products don't provide diagnostics, they can provide information about your health over time. “The company keeps growing,” says Matteo. “You will see more products and more opportunities to help you sleep better, wake up more refreshed, and have more energy for your loved ones.”

Relationship building is just one of the many topics we covered on this episode ofShopify Masterswith Matteo Franceschetti, the co-founder and CEO of Eight Sleep. Listen to the full episode to find out:

• How Matteo made the gradual transition from lawyer to entrepreneur and his experience running and selling his first company
• The two-pronged product strategy Eight Sleep uses to generate repeat purchases and upgrades
• How Eight Sleep uses live customer service demos to replicate the in-person buying experience for online shoppers
• How Matteo thinks about delegation and extending responsibilities to executives at Eight Sleep

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