Alexandra Zatarain (Eight Sleep) - Getting to Product-Market Fit

This is the Entrepreneurial Thought Leader Series, brought to you by Stanford E-Corps.

Welcome to the Entrepreneurial Thought Leaders, the Stanford Seminar for Aspiring Entrepreneurs.

ETL, as you gang know, is presented by STVP, the Stanford Engineering Entrepreneurship Center,

and BASIS, the Business Association of Stanford Entrepreneurial Students.

I am Ravi Balani, a lecturer in the Management Science and Engineering Department at Stanford,

and also the Director of Alchemist and Accelerator for Enterprise Startups.

And today, I have the pleasure of welcoming Alexandra Zadarain to ETL.

Alexandra is the co-founder and Vice President of Brand and Marketing of 8Sleep,

the world's first sleep fitness company, which she has started with two other co-founders,

one of whom is actually her husband, Matteo.

As a marketer and brand builder, Alexandra has built the 8Sleep brand

and scaled the company's revenue.

From zero, from nothing, to its current state, which is in the nine figures of revenue.

She has done this by redefining a once dormant category,

changing the narrative around sleep through the creation of the sleep fitness movement.

8Sleep was named one of Fast Company's most innovative companies of 2018,

and was recognized two years in a row as a Time Best Invention of the Year.

8Sleep has also raised $65 million in funding,

from leading investors including Founders Fund, Coastal Ventures, YC, Craft Ventures, and 8VC.

And in 2017, Alexandra was named by Forbes to the 30 under 30 list in consumer technology.

And in 2020, she was named by Inc. Magazine as one of the top 100 female founders.

Zadarain is also an angel investor in female founded companies and a scout for Clio Capital.

She was raised in Tijuana, Mexico.

And she now lives in Miami.

So everybody, please join me in giving a strong, warm welcome to Alexandra from afar.

Alexandra, I'm going to, so I don't know if you can hear it, but there's a whole class there live for you at Stanford.

Lots of love emanating across from coast to coast to you in Miami.

So gang, we're going to do sort of a special ETL.

We're going to experiment with a deep dive.

The agenda for today is we're going to get a quick opening introduction about 8Sleep.

Then we're going to sort of dive deep and we're really going to go deep into understanding the nuances around product market fit.

So we're going to front load the conversation, really diving in deep on that.

And that's going to be the intention behind the scope of today is to really, really understand the nuances of getting to and finding product market fit.

And then everything that happens after that from a marketing and brand building perspective.

Time permitting, we're then going to go into more of the general questions about reflection moments and Alexandra's journey.

And then we're going to open it up.

We're going to open it up for questions from you.

So if there are more general questions that you're curious about, please note them and we're going to open it up for Q&A in about 25 minutes.

So just save those questions and we are going to, Alexandra's going to be able to see you.

We have cameras.

We're all going to be able to zoom in on you so you can have a direct dialogue with Alexandra.

So Alexandra, welcome to Stanford virtually.

Welcome to ETL.

I know 8Sleep.

I use 8Sleep.

I check my analytics every day.

Awesome.

I'm a big fan.

But I don't know.

You know, the Stanford students who are in dorms, I don't know how many of them are familiar with 8Sleep or not.

By the way, getting the context for this is that Alexandra has done something that for me is a Herculean effort.

She's going after a consumer space with a company that has a hardware element and building a platform.

And so she's taken on many things that many people say are the kisses of death in the startup journey and yet has built something that is incredibly unique.

And there aren't, in my opinion, they've gone into a space where they've created real substantive value.

So I want to unpack how they did that.

But before we go into the product market fit deep dive, Alexandra, can you share for people that aren't familiar about what 8Sleep's product is and the company's vision if that's different than the product?

Yes, of course.

I'm really happy to be here and talk more about everything we've been through at 8Sleep.

And let's start with that overview.

So we are a health and wellness company focused on sleep fitness.

What we do is we build technology products to help people sleep better because we believe that if you sleep better, you're going to live better.

You're going to perform better in your life.

You're going to be happier.

You're going to live longer.

We've been doing this for 10 years.

So I'm 9 years and 11 months into this journey, so very soon hitting that 10-year mark.

And we've been doing this way before anything around biohacking and anything around sleep was a thing.

No one was talking about sleep 10 years ago.

There was no Apple Watch in the market.

There was no Aura or Whoop.

There were no companies looking at sleep as anything relevant for our health.

So it's been exciting to see what these last 10 years have become and how we've been able to build a conversation around the importance of this aspect of health.

As you mentioned in the introduction, the company is a VC-backed company.

We build technology across multiple dimensions.

So there's the physical hardware.

There's the physical hardware of the product that I'll describe shortly.

There is the back end and the software.

There is the data, the analytics, the algorithms, and the machine learning to understand how you sleep based on sensors.

Then there is all the part around a mobile application.

There is the e-commerce.

There's operations.

So it's really, really complex.

And we've managed to survive and thrive now after a very, very laborious journey that has definitely been a roller coaster.

What we sell and what we are best known for is the technology.

So the technology is the pod.

So many of you may have heard about the pod.

And the pod is a product that you install onto any mattress, and it helps you sleep better through temperature regulation.

And our most recent product that we launched two weeks ago also through the management of your sleep position and mitigation of snoring.

So what we're essentially doing is we are putting sensors on your bed through this cover that you add to your bed.

And those sensors are telling the pod who you are as a sleeper.

It builds a blueprint of you as a sleeper.

And what you need to sleep better in terms of temperature or sleep position.

And we take actions in real time to make sure that we give you that environment so that you sleep better.

And now we have clinical evidence of that improvement in sleep.

So we have multiple studies we've released.

But we also have our first peer-reviewed study that was published earlier this year that proves what we're doing through this technology is actually giving people more sleep every night, higher levels of recovery.

So their HRVs are higher, more deep sleep, more REM sleep, et cetera.

So we're in that journey.

We're in that journey towards becoming not just a company that helps you sleep better but a company that's turning your bed into a preventative health device thanks to all of this information that we're seeing about you and your body every single night.

Terrific.

Okay.

That was fantastic.

So, Gang, I hope you picked up on a couple interesting tidbits there is that this is a multifaceted product.

And it's a multifaceted business model.

There's both the hardware component, which is this mattress, but it also has therapeutic impact.

It also has service elements.

After you buy the pod, you also are going to there's analytics that also affect and shape behavior.

And so what we want to dive into is how do you actually construct a company.

And it's very rare for us to have somebody who's gotten the company to this state and was there at the very beginning, free revenue when there's absolutely zero dollars.

So we're going to dive deep now into getting to product market fit, especially with something as complex as probably evolved in a way that you wouldn't have anticipated or maybe you did upfront.

Before I dive into the nuances of product market fit, just a basic question.

Is this a company that you had envisioned where you're at today when you started nine and a half years ago where the vision is sort of a high fidelity match to the present moment?

Or is it a company that co-evolved as you discovered it as you went through the challenges of product market fit and discovery and scaling?

Yeah, it's a great question because it's a bit of both.

The vision for product market fit.

The vision for what we want to solve through technology has stayed the same.

That's very much the core to our DNA at Eight Sleep.

What we believe makes us unique in the entire landscape of anyone building anything in sleep is that we believe technology can be used to help people sleep better.

There's a lot of conversations out there, you know, just tech is bad for you and you shouldn't bring it into the bedroom and whatnot.

We've always been very bullish about what it could do for improving sleep.

And to what we believe.

I think what we've seen in the beginning is that it can do it through two main things.

One is understanding each individual.

We believe that sleep is very personal.

And the science would prove that.

Right?

Everyone is different.

And every single night of your own sleep is different and requires different things.

And so technology can help us understand that.

And second to that is that we can also take actions.

So we go beyond what a wearable does and we can actually create these interventions in your sleep through temperature or now through your sleep position.

keep tackling all the other things that we can do around your sleep to help you sleep better.

So that has stayed true. However, the business model, you were talking about this right now,

we have a bit of a different business model that we had at the beginning. We have a different type

of product offering. We have different pricing. So that has changed. And that is what I love

talking about the most. And that's very much connected to product market fit because that,

that was my own journey. I started Eight Sleep and I knew nothing about what I know today

is that actually the more of like making this a business beyond just a product has

really evolved from day one to where we are today. Okay. So again, Alexandra is really

building two things. She's building a product and she's also building a company that can become

sustainable. And so we're going to unpack the parts on, on product market fit, which is generally

the product, but it's also thinking about that fit with the market. And then that also can apply

to the business model. So let's go, let's dive into that before we go into the mechanics of what

you did to get the product market fit. Can you describe when you know you found product market

fit? Yes. I,

I, I always say that you feel it. So it's not something you just see in the data,

but you feel this shift. At Eight Sleep, we've been through what we describe as sort of like

two very differentiated faces. There's like the first five years and the latter five years of

the company. And the, the marked difference is when we found, when you really found product

market fit. And it doesn't mean that we didn't make revenue pre product market fit. It just

feels very different once you have it. And what it feels like is that instead of you,

pushing this boulder up this, this mountain, um, you're actually being pulled by this force.

That's what you feel that difference. You suddenly feel like you can't keep up. There's this,

this clear alignment of the stars. Um, and so for us in those first five years where I would say we

did not have that product market fit, everything was really difficult. It felt like every month we

had to figure out a new way to make a dollar, right? And maybe you had a spike when someone

wrote a press piece or when, you know,

posted on product hunt and you made this money and you think you have product market fit. And

then suddenly it just like goes away. So that's, you know, it's not, it's not growing. It's not

compounding. Um, and instead the last, last five years have looked very different. So I would say

that's, that's the main thing. You will feel it when you're pushing it, or is it pulling you as

a force? And when was the first moment? So again, just understand it was five years and that's a

common theme that we've seen. We had Databricks and it was six years for Databricks. Um, um,

can you talk, can you, do you remember the moment when that inflection occurred, when you actually

were getting pulled? Yeah. So this is where product comes in. One thing that we've learned

at eight sleep, obviously being a hardware company, our product release cycles are a little

bit different than what you've seen hard part on software. Like we were pretty good at it actually

as a startup, because we release a new hardware product every 12 to 18 months, which is pretty

quick cycles. Um, and what happened is that when we launched the very first time a product at eight

sleep, which was beginning of 2015, we launched a crowdfunding campaign that you all can probably

still find if you go on Indiegogo and we were pretty successful. This was a very, very early

version of a product that was different from what you see today, but that product was pretty

successful. It sold like 1.4 million or something like that, a million dollars in Indiegogo. So it

was like, Oh, this big success. We think like now we've made it, this is going to be huge.

And one of the things that we learned when we launched that product is that when we asked

those people who backed us in that crowdfunding campaign, what they wanted to see next from us,

what were the features that they wanted from the product to do to improve their sleep?

There were two main requests that they made that ranked like they outranked any other of the

hundreds that were put into the forum. They wanted to cool down their beds and they wanted

a vibration alarm. So they didn't disturb their partner when they woke up and that product we

had just launched, didn't do either of those. So the consumer was sending us a signal that there

were these two problems, particularly cooling down their beds.

That no other product in the market was solving. What happened is it took us from 2015 all the way

to 2019 to actually release that product that they told us in 2015 that they want.

And so that was the big inflection point. When we released what you all know now as the pod,

the very first version of the pod in 2019, the trajectory of the company completely changed.

So it took a lot of refinement on all the other aspects of product market fit, the audience and

we also worked a lot on that. But it also took the product. Bringing to market something that

we knew people wanted was critical to that inflection point.

You had the discovery of the need, but then it took four years to actually validate the offering

to make sure that it was what they wanted.

Well, it took four years just because it was very expensive to build it.

No, I'm not saying that with judgment.

And everything is a countervailing because as challenging as it is to build, that's also the reason why you guys now are in this vaulted position of, I think, having unique differentiation.

Okay, let's dive in.

Can we talk about what are the foundational elements of finding product market fit?

Yeah, I would break it down pretty simply into you've got to figure out if you're meeting market demand, right?

That's ultimately what PMF is telling you.

Like, is this something the market wants?

But the way I like to think about it is, first, what are you building?

Who is it for?

How much are people willing to pay for it?

And then the last part of it is, like, then how are you connecting all of these things?

How are you reaching that person with the message to sell them that product?

And so going back is, what are you building?

Who is it for?

How much are they willing to pay for it?

And then how do you connect with these individuals?

How do you reach them?

Okay.

And then can we talk about then how do you – so when you're initially starting, how do you do the – is it research?

I don't know if you'd call it research for product market fit because it does feel like you can always learn more.

So – and time is your most valuable asset as a founder.

So how do you calibrate how much research you should do?

When do you know it's enough when you have enough validation to move forward or it's not significant enough to be salient?

Any color you can add on that?

Yes.

I agree.

With you, you never stop doing research.

Right before I jumped on this call, I was reviewing another survey that's going out to our beta group on new products and new features.

So we do a lot of research at Eight Sleep on everything.

Now, the key on the research, which I'm a huge fan of, I enjoy a lot doing it, is that the research is not necessarily going to give you the answers.

It helps you build that intuition.

It helps inform your decisions.

It helps give you something.

It helps give you some context on what's going through your potential customers' minds.

But I have never found that research is necessarily going to tell you exactly what to do and how to do it.

It's directional.

So that is what you should think of.

When you're starting off – and I think this is the part where we made a lot of mistakes at Eight Sleep in the first five years and a big reason why, beyond that we didn't have a product that cooled down, beyond why I think it was so difficult to find product market fit in those first five years,

is that –

we were trying to build a solution for everybody.

In our minds – and this goes back to, you know, what are you building, but then who is it for?

We knew what we were building, but then the who is it for, we had completely wrong.

And that's the main mistake that I see most founders make over and over is that we – in our case, we thought we have a product for sleep.

Everyone sleeps.

So we should go out and create five different landing pages and all these different types of ads.

And we should make sure that we speak to the sleep-deprived moms, but to the executives, but also to the athletes.

And so we were trying to just catch everybody and anybody and convince anyone who slept to buy our product.

And what happens is that you get these false signals of product market fit because, of course, some of these people in all these different communities are going to be compelled to buy your product.

And so then you start thinking, I got it.

This is it.

All of these people want my product.

But that's not.

That's not going to actually compound into true market fit.

You've got to build that pull.

You've got to build the pull from the community that says, we want this.

Give it to us.

And you can't keep up.

And I think that is mistake number one.

And where research can help you, I think, is mostly to get into the psyche of all of these potential consumer groups.

You're not – research is not going to tell you this is the one.

You've got to use it to develop that intuition and understand them at a deeper level.

It's almost like you're doing.

It's almost like you're doing psychological research instead of just as market research for sizing the opportunity.

You want to understand truly why would these individuals want your product?

And then the third piece comes in and PMF, which is how much are they willing to pay for it?

You're also looking for a group of people who not only tell you they want it, but who are willing to pay you what you need to be paid for, which is something also a lot of entrepreneurs forget about.

Otherwise, you're not going to be able to get your business off the ground.

And so that is that, please, Celia.

And what are some of the – do you have a filter for determining who your target audience is?

Is it who will pay?

Steve Blank is a fan of having this hierarchy of discerning target audiences.

And for him, it is somebody who not – it basically raises based on the ability to pay.

And then it's even somebody who's already thought about the product in advance and can give you the requirements.

If the data from the research – so I guess there's two questions.

First of all, on the research side, is there a type of research that is the best to help?

And if so, how does that work?

best to help inform which target audience to go after? Is it surveys? Is it observation studies?

It sounds like it might be psychographic investigations. Is it all equally good

without one being saliently the best? I guess that's question number one. And then question

number two is, can we dive into then how do you identify what's the salient filter to determine

who is the target audience? Yeah. So on your first question, I'm a huge fan of doing calls

with people or meet face-to-face. So really like you're having a conversation individually,

not focus groups, with people at the beginning who you believe could be within your consumer

segment, right? And then from those calls, all you're doing is you need to go into it with a

lot of curiosity. So in our case, what we did is when we started the company, we

Mattel and I moved to San Francisco where our other co-founder Max was based. And we had this

apartment in Soma and we would basically invite people, that was our office, and we would invite

people, anyone that we knew to just come in and talk about their sleep. We just wanted to learn

what were the problems that people had in their sleep? What were they're struggling with?

And we would just listen. And it's like therapy, right? You're just like asking all these questions

and all these whys, and you're trying to get to the why. Why do you want to do this? Why do you

do what you do today? Why do you use these products? What have you bought in your sleep?

What mattress do you have? What lamp do you have in your nightstand? Anything and everything. So

you're trying to build this profile in your mind because you don't want to make decisions about

your business just based on who you are and your view of the world, right? And from those

conversations, there were a lot of interesting themes that started coming up. Temperature started

surfacing as a big thing. Couples fighting around temperature started surfacing as a huge thing. So

we're like, oh, this is interesting. So we may have already had an idea of what we wanted to build in

our product. But by listening to people talk about their problems, we started to shape the narrative

for how we could pitch this product to the consumers. And we started to understand that

there were certain types of people, maybe in certain ages or with certain lifestyles or with

certain incomes that were more interested in our product or were willing to pay for our product.

And so what happens is I always describe it as like, it's not perfect science. There's a bit of

that art and that intuition where you start triangulating all of this information. So you

got to speak to good number of people, especially initially, right? 20, 50, 100. Like just spend

time in those potential communities. Start seeing where the signals take you. And maybe as you find

that some communities may be more prone to buy your products, spend more time with them. Start

really focusing on them and going deeper and deeper and deeper. And then spend the time

constructing what this profile of these individuals is. And from there, what I like to do is then I

take it into something a bit more quantitative. And so initially for a startup, especially in the consumer space,

then you start building things like, well, why don't we put a little bit of money in ads and

run some ads and then go to landing pages and see what happens. And do people give us their email?

And is there some interest or at the time way back, you know, you launch on crowdfunding and

you see what happens. So you start trying to get signals at scale because obviously those

one-to-one conversations are only going to take you so far. And so you start with this broad base

of conversations to identify underlying needs or drivers without predetermining what your market

segment is going to be. And then you're coalescing patterns and matching those needs to,

is it a user profile or a persona that maps to a price point and a messaging strategy?

Is that what's happening? Yes. Now your price point and your messaging strategy,

Art, I don't believe, and I've never seen this happen at Eight Sleep, is something that you're

going to get a positive signal from.

Research. You have to put it out there. It's the only way to really know if you got it right.

So you can get some indications from willingness to pay in some bands, right? Or some messages

resonating more than others, but the best signal will be when you actually put something out in

the wild and you see whether people are actually paying for it and which messages are resonating

the best. Okay. So the research isn't going to give you validation. It's just going to give you

hypothesis generation and then you're validating it. How? So walk us through that. How do you,

how do you, how do you, how do you, how do you, how do you, how do you, how do you, how do you,

how do you validate the messaging? How do you validate the price point? How do you validate

the other key drivers that you think the founders need to validate?

Yeah. So at that point is when you just need to put something out there, right? You can't work

on it by yourself for too long. And so the best signals come from launching something,

which is the scariest part. I'm sure a lot of founders stop right before then,

or they take too long to ship, but you have to figure out a way to put something in the wild

where you are actually charging, because we also, a lot of times make the mistake of underpricing

or giving things out for free. And that gives you only false signals, right? So determine your price,

put it out there and see what happens. So what we did at Eight Sleep, and I think it's pretty

common for companies working in the consumer space is build a website, build a landing page,

start taking pre-orders or orders, depending if you have your product ready to go.

And you've got to read the signals that you get at that point.

Where are these people coming from? And we can talk in a second about how you find these

individuals, but where are they coming from to your website? Which referral sources are converting

the best? Are there any commonalities between people who are purchasing in terms of their

demographics or their behavior on site? And so just looking at all of that data is going to

validate the potential messages or pricing strategies that are working the best.

But I always add, even now at Eight Sleep,

add a component of research post-purchase, which is pretty critical, because I still believe in the

power of that qualitative feedback is much more relevant to keep informing those hypotheses than

just seeing the signals that may come through like analytics on your website. And so what I

always suggest to do is if you put up a landing page and you're taking pre-orders, or maybe you're

just getting email signups, reaching out to those people with a follow-up email and just saying,

how did you hear about us? Or, hey, why are you interested?

Offering people a gift card in Amazon for $10 and getting on the phone and asking some more

questions, because all that information will keep refining the profile that you've built of

who your customer is or your potential customer is. And so it's really, really valuable to still

close the loop there. And so just so our aspiring founders can quantify this. How many interviews,

I know it's qualitative and it's not quantitative, so this might be a false question, but

nevertheless, just to get the details.

How many interviews do you think you had to do when you did that broad swath approach

to get to your first hypothesis that actually worked?

Was it 100 people that you're interviewing?

Probably at least 100 that we met in person and asked about their sleep.

And then what happened is we launched our crowdfunding campaign.

At that point, we sold like 6,000 units or something.

So then we had a group of these 6,000 people that we continuously bombarded with surveys

and, hey, join a call, I'll give you a gift card or whatever,

just to expand the potential group of people that we could grab from for our research.

Oh, interesting.

So you did 100 people.

That got you basically like a 6,000-person focus group from the crowdfunding campaign.

And then even at that point, at what point had you figured out the target audience

that you needed to go after initially?

We did not figure out our real target audience until five years in.

That's what I would honestly say.

Until five years in.

Yeah.

Because if you think about it, that's when we found product market fit.

So I don't think that any time before that, we really had nailed it.

I think we were still in that phase of experimentation and pivoting and trying to refine it.

And just nothing was fitting perfectly.

And I think this is actually pattern matches with the great companies.

They all take that long, actually, if you're doing something that's challenging and difficult.

But I want to just make this very sober and real.

Is there anything that you learned that strikes you as something that if you knew it,

sooner, it would have condensed that five years down to a year or two years?

Yes, absolutely.

It's my favorite mantra for brand building, which is you can't be all things to all people.

And speak to us about that.

Yeah, it's like it's you've got to have the guts to actually go very, very, very narrow in your customer segment,

which feels counterintuitive, right?

A lot of times when founders are speaking to investors, you're trying to paint the picture.

You're in a really big market and all this TAM.

And so you're thinking big.

But when you're actually going about acquiring your customers, you have to think very niche.

The riches are in the niches, they say, too, right?

And I think that was a big mistake that cost us for a long time because what we kept trying to do, as I mentioned before, is everyone sleeps.

So why don't we just speak to everyone?

And so let's create all these different messages because we understand everyone sleeps, but there's all these different profiles.

So let's create all these different.

Messages and all these different landing pages and all these different ads and let's spend money on all these different newsletters and let's work with all these different influencers, right?

So you basically start diluting your effort, your startup, your five people, and you have a limited amount of money.

So when you start spreading it across, trying to reach all these different five or 10 different personas, you can imagine that the impact that you get is not going to take you very far.

Instead, what happened for us in 2019 when we launched the pod is prior to launching, we went through an exercise of completely.

Repositioning the brand and really understanding who is our customer, how do we hone into just one segment, and then from there, everything became easier.

I don't want to say that everything in the business is easier, but from a customer acquisition and understanding where we should deploy our money, who we should be speaking to, even what press do we want to show up in, what stories do we want to tell, just all of that aligned because we knew exactly who we wanted to talk to.

And is that.

You know, I love that the riches is in the niches.

When you're identifying that first niche, is there a bias towards, you know, there's one school of thought that says go to the extremes, the extreme users that really, really love the product.

And then there's another school of thought that would say go to the mainstream, the average user, because that's how you scale.

And I don't know if either of those are actually what you did, but do you have any reaction to that, to those choices?

Is that the right way to think about it?

If not, is it something else?

How do you identify with that initial?

I know we've asked this already, but any more comments?

Tell her on identifying what that initial segment is.

Yeah.

So we didn't do either.

And I can tell you all what we did, but I've definitely would go for the extreme.

I think you want to go for the people who would really love your product.

People who are going to turn into the biggest advocates ever and are for whom you're solving a problem that is so big, they can't live without your products.

Now, I think that is definitely where you probably would find more success and you may feel like you're going to tap out of that segment fast.

But it's going to take a while.

And then once you do, you can move on.

But at least you've built a foundation of a real community that is loyal and loves what you're doing.

Now, how we did it at Eight Sleep was a little bit different.

We took an approach that is sort of we call DNA based, meaning we had been through five years that were torture.

We're like, this is impossible.

We can't keep trying to find a new customer segment and trying to refund our messaging.

And trying to change our brand every six months.

Right.

So we looked inwards and we said, OK, who are we as founders and why are we building this company?

And what are the core beliefs that we have about sleep, technology and sleep, health, the long term vision of the company?

So putting it all out there, it was kind of like therapy.

And by describing that DNA and that soul of the company.

Is when we came.

Came about with that concept of sleep fitness, we said, well, we're actually a mission driven company and we are building our own category because the way that sleep is being talked about is not what we believe is correct or how we should be thinking or talking about sleep.

So here's our point of view, which is what brand is.

It's just what is your point of view?

And with that point of view, then we went to the second phase, which is who's our customer and the decision of who we target it was based on.

Who do we believe this?

Message will resonate with the best.

That is that was the thinking is if this is who we are, this is what we're building, this is why we're building it.

Who's our community?

So I always describe it the way we build the eight sleep brand is like a movement.

So we we think about it more like we're a movement.

We believe that sleep is like fitness.

We believe that sleep is something that you should be prioritizing, measuring, optimizing that just like fitness.

You can get.

Better at.

You're not a bad sleeper, a good sleeper.

It's a journey that technology can help you achieve sleep fitness.

Right.

And so then we go out there as founders and Mateo, who's my co-founder and our CEO is the leader of that movement because this is his story.

This is why we started the company and we're just trying to find people to join this movement and that's how we identified that initial customer segment and that's what changed everything for us.

And so what we identified is that essentially who we needed to speak to were individuals who.

Already believed, just like us, that sleep is actually important for their health and their well-being.

We didn't have to convince them about that.

There are other people in the world to whom we have to convince them that sleep is important, but we're going to focus first on people who already know the importance of sleep.

And second, they're already doing something about it.

They are investing in wearables.

They are investing in other products.

They're spending in their sleep and their mattresses and their pillows and their linens.

And no, they're trying to build good habits, even if they may not be perfect.

So it was easier to evangelize to them because, again, we think about it as a movement.

And then once we understood that and then we started mapping them more in terms of demographics and income, like all that other stuff came after for us, the most important trait in who we're speaking to is actually this relationship with their sleep.

So we say.

That is what brings our customer relationship together.

Yeah, is their belief that sleep is important and that they're already investing in it.

They're already.

Doing something about it.

That is what brings all of our customers, even today, five years after together.

And then there are other traits around, you know, their income that maybe, you know, obviously you see some patterns, but the reality is the most important one is that relationship to sleep.

And it's self-fulfilling.

It's actually the founders have to inject themselves in the process to actually identify that initial niche.

It's not this passive customer interviewing prospect because you actually influence the outcome.

Your passion is what actually creates the tribe to create the movement.

So you guys are revolutionaries effectively.

That's what you're doing.

You guys are disrupting the status quo.

This is so good.

And I know we're running out of time.

So I want to give ample time for the students to ask any questions.

I sort of want to end it on if you can.

I've heard you describe that the startup journey is like chewing glass and it's continually like that.

I don't know if that's true or not.

But you guys are vaulted in this position of being one of these amazing companies.

You raised $65 million, all these things.

Can you describe anything that you want to delineate about what the reality of being a founder is like versus the myth that you think people don't talk enough about?

Yeah, I think Elon's the one that got that phrase first on it's like chewing glass.

Yes, it is.

It's really painful and it does not get easier.

I think that that's something that we need to do.

Mateo and I, he's also my husband, right?

So we're co-founders.

We think about the company all the time.

And we say often is it definitely does not get easier.

And I think that that's the one thing that a lot of us get wrong is that you think that something will happen at some point and things will get easier for you as a founder.

They don't.

That's why you have to be really passionate about what you're building.

And there has to be a bigger reason why you're going through all this pain than just money.

There's easier ways to make money, right?

And it's not going to be someone you hire.

It's not going to be something that happens in the world or a new product you launch.

Nothing.

It's just going to continue to be a hard journey.

So you better get used to going through that hardship and having fun while you do it as well.

Terrific.

Thank you, Alexandra, for sharing.

I want to open it up.

So getting students, this is your time.

Hi, Alexandra.

I have a question on the release cycles.

I think you mentioned that there are 12 takes.

I think you mentioned that there are 12 to 18 months, and at first I thought that was really long, but then I remembered it's a physical product, and that's really fast.

So I was wondering, can you walk us through the stages of those 12 to 18 months?

What's usually happening along the way?

Yes, it's a great question.

We just released something a couple of weeks ago, which is the POT4 and POT4 Ultra.

It's the first time that we launched two products at the same time and what that looks like.

So I think that one was around.

It was around like 15 months, and where we start is what is the problem we're trying to solve?

So as a mission-driven company, we measure our success and our ability to help people sleep better.

So then we think, okay, what is the next problem that we can solve for sleep?

And sometimes that means that we just want to make our current product better, because maybe there's something about our current product that is not hitting the mark.

For example, it's not quiet enough.

And it's really important for the product to be quiet.

It's not silent because noise disrupts your sleep.

Okay, let's solve that.

Great.

That's something we want to tackle with the next product iteration between POT3 and POT4.

Sometimes it's like, hey, what if we actually solved snoring, which was a new feature that we just released, right?

And so we basically have these conversations at the executive level where we have the representation of head of R&D and head of hardware and software and myself and CEO and ops, right?

And so there's basically every area of the business represented, and we brainstorm about all these ideas.

A lot of times it comes from a tail.

And I do think it's a big part of the role of the CEO of, like, being the person who's, like, spending their time thinking about that vision and the potential and all that.

And then he, like, throws these ideas, and then we're all, like, reacting and, like, figuring out what's doable and all that.

And each person brings their perspective, right?

So it's important to say R&D says, here's what's possible.

Can we actually detect snoring with a certain level of accuracy with the sensors that we have, which are non-wearables?

Can we actually mitigate snoring with an adjustable base, and how do we validate that?

And me, I'm thinking, well, what is going to be an interesting solution?

What is going to be an interesting story to position to the market to make money off of these products?

And that kicks off then the journey of what usually starts through hardware.

So hardware takes the longest time.

So we have our hardware team based in San Francisco.

And then we have our team in China that manages also all of our vendors and suppliers for manufacturing.

And so then that's, like, sort of our larger hardware team that kicks off the work.

Like, they're the first ones to get to action because their timelines are really long.

And what happens is that they first build initial prototypes.

So once the team has content,

they have a concept and an idea of, like, here's what the potential solutions could be, right?

They all, like, all the engineers get together and say, like, here's how we could solve snoring,

and here's how we could make the product more silent and more comfortable and whatnot.

They get to work, and they start building prototypes.

And what actually takes long in this process is the part where you're building a prototype, testing it,

and then finding things to work on, and then building the next one.

And so that is one of the things that at 8sleep,

we've gotten really good at compared to most companies,

is that we do a lot of those iterations really quickly.

And it's probably because we just maintain this approach as a startup of just keep iterating,

just keep going.

And we're very, very nimble and just, like, very agile in how we make those iterations.

We're not looking for perfection in every one of those.

We're looking to validate key points about the product.

And so, you know, the normal development cycle,

of hardware, then you have the different milestones that are the big ones.

Like, you have, you know, your prototype that looks like it,

your product that works like it, your prototype that both looks and works.

And then you have your prototype that's actually manufacturable.

And so you go through those typical milestones.

And then at some point, you also kick off, of course,

all of the firmware development and then all of this part around software

and then all the part around what the user will see in the interaction with the app.

Alexander, thank you for that.

And can I ask a follow-up question,

which is that many VCs tell founders to stay away from hardware because of the distribution challenges,

the lowered margins, the capital intensity.

What's your view? Would you do a hardware company again

if you could choose between a hardware or a pure software alternative?

I love hardware.

I love it because I think there's such a thrill from building something that

people receive at home and unbox and touch and put in their room and get to use every day.

Like, I think that's the biggest gift that this whole journey has given me.

Even because as a founder, you get to define so many aspects of this product, right?

So if any of you has a pod at home, like, that color and the design

and whether you like it or not in that packaging, you can blame me, right?

Like, it's so amazing to have that influence.

And so I really love it.

Now, I wish the investor community was much more open to supporting it

because it is definitely harder to raise money in hardware.

There's fewer VCs and investors willing to back it

because few of them understand it or have been through it.

So that is the difficult part.

But I also think that you have to go into that journey with that understanding that it's going to be harder.

So figuring out your unit economics earlier is pretty key compared to a business,

you know, in fintech or nowadays.

You know, in AI where they're going to be throwing money more easily than you are.

So that's always been a harder challenge for us.

Even though we've raised a lot of money,

it's definitely been much more difficult than if we were just a software company.

Thank you.

Next question.

Thank you, Alexandra.

I have a question.

How do you see the future of your company?

There are more and more mattress, sleep mattress company now emerging.

Okay.

You want to be on both sides, both the hardware and the software.

So do you envision like a partnership with them, a collaboration?

What are your thoughts on that?

So there's two sides to this answer.

The first, collaborations, yes and no.

When we were earlier on, we explored them and we realized it's probably not the right path for us,

mainly because the way...

What we are trying to achieve with our business is different than when these other companies

that do bedding or pharma products or, you know, those mattresses, what they do.

Their goal is different than our goal.

Their goal is to sell products.

Our goal is to help people sleep better.

And so unless we found a partner that wanted to measure their success in the same way that we do,

it wouldn't make a lot of sense.

Now, you're right that there's competition, right?

When we are a company that's positioning itself as we are the solution

for all your sleep problems, there's a lot of other companies positioning themselves like that.

And so how we think about it is you need to...

You know, in business, you think of a moat, and there's some key aspects for us to build that moat.

One is innovation.

There's nothing like new product introduction for a company that builds products.

You've got to stay ahead of the curve.

We have to be the most innovative company.

We have to be the company that delivers products that are really good,

that people love, that actually solves their problems, that we have proof with scientific research and clinical evidence.

That these products are actually giving better sleep, right?

So all of that is a big part of where we invest our money.

And the second is that brand promise.

So it's not enough to just be a product.

But when you're a consumer business, people need to really understand what you stand for

and what you're giving to them in their lives.

They want to feel a part of something.

And they want to feel like this company they're giving all this money to, not just once,

but now with our business model also every year, is giving them something of value.

It's a part of the lifestyle.

They want to live or they want to be a part of that eventually builds community around their own likes.

And so that is another key piece that we invest in as well, more from like brand and product experience.

And I think if we do those two well, it's going to be harder for other companies to just imitate.

They may take other parts of customer segments, though.

There's definitely a lot of people that sleep in the world.

So there's space for multiple companies to exist that do similar things.

But for us,

we're very focused on owning our existing customer niche and scaling it from there.

Terrific.

Thank you.

Thank you for that detail.

Ding, we have time for one more question.

Yep.

Hi, thank you so much for your time today.

I just wanted to ask you about,

have there been any very memorable verticals that you guys have failed to explore as a company,

like a target demographic?

And could you give us like,

like a reason why you thought intuitively it might work,

but it turned out not to?

Yes.

And this is actually very interesting because it's a good example to explain that failure in a customer segment doesn't mean that that customer segment wouldn't work.

It may mean that you're approaching it in the wrong way.

So I'll give you the example.

We, our product keeps you cool all night if you want it to keep you cool.

I warm mine up,

but a lot of people love it because it keeps you cool.

And so it's very intuitive that you think like people who are experiencing hot flashes,

like women going through perimenopause would love this product,

right?

And that is not a customer segment that if you go to our website today,

you would think we speak to,

right?

And so for years,

we hear stories of people who buy our product,

who are going through perimenopause and pools,

love it because it solves that problem.

And we have kept trying to speak to that segment and haven't been fully successful at doing it.

And so that's what I mean with,

you know,

it's people are buying and it solves your problem.

They love it,

but we haven't found the perfect way to actually market to them.

And we believe,

it's for a few reasons.

One,

the brand is not built around them,

right?

So we're performance brand,

they're sleep fitness.

There's a lot of things that you just see and get from the emotions of what the brand evokes that may not be resonating with them.

So it may require us to either do a sort of a parallel branding exercise or,

you know,

adjust some things on the main brand for it that maybe we're not ready to do yet.

We don't want to compromise on yet.

Two,

we have this thing that Matteo talks about often,

which is like the rule of the seven touch points,

but for a product,

that cost $3,000,

you have to touch the customer multiple times in order to convince them to purchase.

And we deploy all of our money on reaching a certain customer segment.

And whenever we've tried to reach that other segment of,

you know,

women in their mid forties to early fifties,

we have failed and we have probably failed because we're not doing a good job at both that brand and messaging being appealing,

but also it's surrounding them and proving to them that this product is built for them.

And other people like them are using it and loving it.

And so we always like try and we kind of fail.

But we also know that in order for it to succeed,

you need to go all in.

We need to put in a certain amount of effort and time and money and say,

we're really going to test this and we're going to give it enough time because for us,

we know that it can work because it's evident that people use it.

But sometimes the product and the marketing need to just speak in the same direction.

Awesome. Great answer.

Thank you, Alexandra.

And thank you for the question.

Gang, I have to wrap it.

I wish we had more time,

but gang, can we all give Alexandra another round of applause?

Please applause, applaud loudly so she can hear it.

Hope she can hear it.

Okay. Yes.

So thank you, Alexandra,

for sharing your experience and insights to the students all the way on the other side of the country at Stanford with Stanford's ETL course,

MS&E 472 and with our ETL viewers and listeners around the world. To our audience,

thank you for tuning in.

To the last session of the academic year of the Entrepreneurial Thought Leader Seminar.

We're going to see you back in October,

October 2nd when we kick off the fall ETL series and the fall lineup will be listed at ecorner.stanford.edu.

And you can also find more videos,

podcasts and articles about entrepreneurship and innovation there.

Thank you, everybody.

The Entrepreneurial Thought Leader Series is a Stanford eCorner original production.

To learn more, please visit us at ecorner.stanford.edu.