💤 Dreem-ing of Electric Sheep
The Sleep Tech Spectrum: Mattress Delivery to Measuring Brain Waves in Space
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It could be the fact that SpaceX sent its first all-civilian crew into orbit or that I'm nearly finished with the final installment of the Three Body Problem sci-fi series, but today is space-themed. Just as we seek to unlock the mysteries of the universe, so too are we actively trying to decode the internal expanse that is our brain. We spend roughly a third of our lives asleep and for centuries have attempted to interpret our dreams to unlock deeper insights about our lives. Today, wearable technology and personalized healthcare is converging with the "grey matter" that is critical to our ability to concentrate, emote, share and evolve. This week, we have a look at an off-shoot of the health-tech ecosystem, "Sleep-Tech," and its various forms ranging from mattress delivery to measuring brain waves.
Introduction: Sleepwalk with Me
If you believe, they put a man on the moon
Freek-a-Leek-Onomics (Mattress Margin)
Whoop, There It Is!
42Ms to 0Gs
Introduction: Sleepwalk with Me
Personally, I'm a big fan of sleep. I believe in the power of an afternoon nap and always aim to get my eight hours a night. But my obsession goes deeper than just the casual snooze. In high school, I was a prolific sleepwalker. Several times a week, my Mom would find me wandering the kitchen or living room, mumbling to myself in the dark, and gingerly guide me back to bed, careful not to wake me. I also talked in my sleep, which wasn't problematic until I had a roommate during my freshman year of university. Despite my atypical, somnial behavior (or perhaps because of it), I developed an interest in the science of sleep and particularly the power of dreams. I recall watching a movie called Waking Life in my sophomore Existentialism class (I know… pretentious) that introduced me to the concept of lucid dreaming. In fact, I commissioned my best friend and all-around engineering geek to build me a pair of LED powered goggles meant to activate lucid dreams. In the end I just woke up with really dry eyes, but the jokes on me, that same friend (Hi, Jeff!) has gone on to build and sell multiple machine learning startups.
In the past 15 or so years, two things have happened: I no longer sleep walk and technology has advanced to a point where real sleep tracking devices are viable, accurate and affordable. To explore this emerging market, there's no place better to start than a French wearable device company whose product is taking off... Literally.
If You Believe, They Put a Man on the Moon
Disclaimer: no French Tech startup put a man on the moon. But one did send their product to space with a real French astronaut. In what might be the highest ratio of marketing stunt to valid scientific research, French Tech startup Dreem was able to secure a spot in Thomas Pesquet's carry-on luggage to the International Space Station. So what exactly does this wearable do that's important enough to make the flight manifest?
Dreem is spearheading the Sleep Tech movement with it's wearable headband that monitors brain activity, heart & respiratory rate for patients with sleep disorders to effectively measure and correct for their condition. In most sleep clinics, they use a monitoring technology called polysomnography (PSG), where the patient is hooked up with a series of sensors and cords to track the very same metrics overnight. If you look at the two products side-by-side, it's fairly clear why the Dreem device is such a game-changer. Ergonomically, it's a drastic shift. Scientifically, they have the data to confirm that their measurements are just about equally accurate.
Originally, Dreem was a DTC wearable product that anyone could purchase on their website for personal use. However, following a leadership change, the team pivoted to a B2B2C approach, partnering with sleep clinics and clinical trials to support the medical and scientific community while building a strong, data-backed foundation for their product. Sleep disorders are incredibly common but tend to be difficult to treat. A sleep clinic is usually a last resort after changing eating/exercise/screen time habits or doing some traditional therapy. The device itself is paired with a mobile app designed to incorporate Cognitive Behavioral Therapy techniques in a prescriptive manner (not dissimilar to Teale), depending on your diagnosis and the readings from your device measurements. The results are pretty astonishing:
91% of users fall asleep faster and more easily
Users fall asleep 21 minutes faster than before using the device
78% of users have fewer nocturnal awakenings (average of -2.5 less)
When it comes to severe diagnoses, Dreem has an outsized impact too. Insomnia, for example, is typically treated with either CBT therapy or pills (or some combination thereof). The Dreem program was able to reduce, on average, severity below the Clinical Insomnia Threshold. In fact, 71% of users no longer met the clinical cutoff for insomnia.
Dreem has been around since 2014 (with high caliber investors like Xavier Niel) and expanded internationally recently to an office in New York. Their story illustrates the scientific side of the Sleep Tech spectrum but also introduces an important concept. Sleep Tech is Health Tech. As this notion becomes more widely accepted, and startup valuations soar, more and more companies want in on the action. Even those that aren't historically technology forward.
Freek-a-Leek-Onomics (Mattress Margin)
If you aren't familiar with early 2000's crunk music and/or Petey Pablo, then the section title reference is probably lost on you (for the better). To make this section even more bizarre, most of the info I collected is from someone in the Sleep Tech industry who requested not to be named. We can refer to them as the Lord of Dreams. They were very insightful and helped frame the following analysis.
As you may have noticed, my interpretation of "tech" is a fairly loose one. Even so, when I dedicate an entire portion of this essay to the Mattress Industry, you may think I've gone off the rails. But hear me out. At this stage, every company is a tech company. If you used to sell something in a store, you are now selling it online. If customer service was handled face to face, it's now handled with a chat bot. If you used to fax and sign contracts, now you use Docusign and store it in The Cloud. By this logic, a mattress company (traditionally very unsexy and not very technical) is now an eCommerce company powered by savvy digital marketing strategies. If you're reading this, you've undoubtedly seen the proliferation of verticalized eCommerce, revitalizing and repositioning the often unremarkable household items you didn't think twice about: furniture, cookware, wristwatches, sunglasses, and even subscription CBD seltzer. Well, the mattress boom happened several years ago, arguably with Casper, which spawned copy-cats worldwide.
So why the boom in mattress companies? And with so much competition, how will the market evolve? Here are some key insights:
Mattress companies are very high margin: a company like Sleep Number does over $1B in sales per year at a 45% margin; it's also a cash flow positive business, where you pay the supplier roughly 10 weeks after the end customer pays you
Books like Why We Sleep have popularized the fact that sleep is a critical component of health (just like diet and fitness) — we are in the market creation phase for sleep tech
There are basically two ends of the spectrum. On one side, is the physical product (i.e. mattress) and the other is gadgets/technology. Both sides are attempting to move towards the other (mattresses want to become "sleep tech" and devices want to backward integrate into mattresses/pillows etc.)
Verticalized eCommerce can capture sizable valuations, but adding Sleep/Fitness tech into the mix tacks on an astronomical multiple. As sleep continues to merge into the health and fitness category, there are some pretty interesting implications around go-to-market strategy, acquisitions, and monogamous customer relationships (read: subscriptions). Ultimately, there's a gravitational pull towards the center fusing together health/fitness/sleep with personalized, tech-enabled tools for behavioral changes and tracking functionality.
As these categories continue to blend/blur it will be fascinating to see the winners & losers. All other things being equal, mattresses are fairly undifferentiated. Each of these startups take a slightly different angle, whether it be for performance, design, or comfort. But at the end of the day, it's a mattress (a product you purchase once per decade). So the natural progression towards fitness/wearable technology makes sense. In the opposite direction, companies like Apple who own users' entire data ecosystem (we could call it your fitness graph, like a social or attention graph) need to get into your home via channels outside of your watch and phone. Which is exactly why they may be interested in purchasing a high-growth fitness, diet, or sleep tech product. Withings, another French Tech company, has gone horizontal with connected health tech products, in which it owns the full stack (physical product + software/mobile app). They started with scales and watches but recently moved into a sleep apnea monitoring product that slides beneath your mattress and analyzes your sleep patterns.
I don't know what happens next, but I do know that I've reached an age where I compulsively monitor my health data with a suite of connected devices and shamelessly tweet about them (full disclosure: I own a Tediber Mattress, a Withings Scale and an Apple Watch).
Whoop, There It Is!
This is more of a postscript than a full chapter. But I think it's important to examine a recent fundraising round that is indicative of the advances to come in this space. Whoop, a fitness tracking wristband & mobile app, recently raked in $200M from SoftBank, making them the most valuable standalone fitness monitoring start-up in the world ($3.6B valuation). The device has no screen, but rather collects data constantly and uploads to an interface via mobile app where you can analyze your performance. It's like a faceless Apple Watch. In fact, the device itself is so simple, they give it to you for free in exchange for a paid subscription for their coaching services (i.e. mobile app). Unlike the Apple Watch, it purports to be much more prescriptive in response to the data it collects (i.e. a coach). Whoop is going up against well capitalized giants that have gotten into the health & fitness market simply because it's there for the taking. I view this as a strong signal for the following:
As the price of wearable technology decreases, virtually everything will contain sensors and collect personal health data
Startups that can turn this data into actionable insights and changed behaviors will win out in the long run
Early adopters of fitness trackers were scoffed at, yet it became a hugely popular "appendage" (like many Apple devices) in less than 5 years
As sleep becomes generally accepted as a core pillar of health, we'll see more and more consumer grade tools to track and improve sleep habits
Proximity to the source (i.e. you) is the most critical part of the data supply chain, winners will be able to collect, analyze, and recommend based on tools they create with apps they build for specific health purposes
This will drive innovation across verticals and eventually lead to a flurry of acquisitions/mergers to gain & retain market share
42Ms to 0Gs
Sleep tends to be last on the hierarchy of needs for the modern person. We eat well, exercise, constantly evaluate our mental health but often ignore (and in some cases glorify) the impact of sleep deprivation. As the narrative shifts, and sleep becomes a central part of the public health discussion, we'll see a larger emphasis on integrating sleep data into the overall picture of our wellbeing. The fact that in less than a decade, Dreem was able to raise €41.8M and send their sleep headband to outer space is emblematic of the exciting future of Sleep Tech.
🛌 If you're reading this and it's past your bedtime, this is a friendly reminder to go to sleep!
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