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, CoFounder @ Eight Sleep

Abstract
Summary Notes

Abstract

In this episode of "20 VC," host Harry Stebbings explores the intricacies of executive leadership, hiring practices, and company culture with Matteo Franceschetti, co-founder and CEO of Eight Sleep. Franceschetti emphasizes the importance of executives not seeking to be loved but rather to push their teams beyond their perceived limits, ensuring clarity on performance expectations. He also shares his rigorous personal regimen for peak performance, including his sleep, diet, and exercise routines, and his vision for Eight Sleep as a platform for preventative health and optimal sleep. Additionally, Franceschetti discusses the challenges of balancing work and personal life, especially with a spouse as a co-founder, and the impact of various factors like alcohol, diet, and exercise on sleep quality. The conversation also touches on the future of Eight Sleep, aiming to save lives through advanced health monitoring during sleep, and Franceschetti's admiration for iconic brands like Tesla and Nike for their customer-centric approaches.

Summary Notes

Executive Management Philosophy

  • An executive's role is to help their team achieve beyond their beliefs.
  • Clear communication about performance is crucial.
  • Speaker A requires an agenda or memo before taking any meeting.
  • They maintain a consistent approach to conducting interviews.

"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."

This quote emphasizes the importance of leadership in fostering a team's growth and potential rather than seeking personal popularity.

"I will not take a meeting with anyone in the company if I don't get an agenda slash memo."

This quote highlights Speaker A's disciplined approach to meetings, ensuring they are purposeful and well-prepared.

"I run all the interviews with the same playbook."

Speaker A values consistency in the interview process to fairly assess candidates.

The Importance of Optimal Sleep

  • Matteo Franceschetti, CEO of Eight Sleep, is dedicated to enhancing human potential through sleep.
  • He was motivated by the lack of technological advancement in sleep, despite advancements in other areas.
  • The goal is not just to improve sleep but also to compress it for efficiency.
  • Eight Sleep is working on technologies for health monitoring, potentially to detect diseases like cancer.

"Why Elon Musk is taking me to Mars, but I still spend a third of my life on a piece of dumb foam?"

Matteo Franceschetti questions why there hasn't been significant technological progress in the realm of sleep.

"We should use those 6 hours to scan your body and become the number one platform for health."

This quote reveals the ambitious vision to turn sleep time into an opportunity for health monitoring and potentially life-saving diagnostics.

The Challenges of Entrepreneurship

  • Naivety is often necessary to embark on ambitious entrepreneurial ventures.
  • Entrepreneurs must have the stamina to handle unexpected challenges.
  • Matteo shared a personal anecdote about having to fix manufacturing issues by staying in China for months.

"If I knew what we would have to go through, I don't think any human being would do that."

This quote reflects on the daunting challenges entrepreneurs face, which can often be underestimated at the outset.

"I'm flying to China... Once I have fixed it."

Matteo's recount of his decisive action to resolve manufacturing issues in China demonstrates the lengths entrepreneurs go to for their company.

Fundraising and Investor Dynamics

  • Hardware startups were popular at the time of Eight Sleep's seed round.
  • Subsequent fundraising became more challenging as hardware lost favor with investors.
  • Matteo emphasizes the importance of unit economics in evaluating hardware startups.
  • The hardest round to raise was Series A due to a conditional investment falling through.

"Hardware works. It's really, really hard to get there."

Matteo acknowledges the challenges of hardware startups but also their potential to build trillion-dollar businesses.

"If I knew what we would have to go through, I don't think any human being would do that."

This quote reflects the hindsight of the difficulties encountered in entrepreneurship, highlighting the importance of naivety and resilience.

Unit Economics and Growth Strategy

  • Matteo stresses the significance of understanding unit economics for hardware startups.
  • He imposed a strict cap on customer acquisition costs (CAC) to ensure profitability.
  • The company shifted focus to test different marketing assets more frequently.
  • They also explored new marketing channels like podcasts and influencer partnerships.

"You almost need your PNL at the unit basis."

This quote underscores the need for a detailed understanding of profitability on a per-unit basis for hardware startups.

"From now on, we don't spend a penny about this CAC."

Matteo's firm decision on capping CAC demonstrates a disciplined approach to managing growth and profitability.

Marketing Strategies and Customer Acquisition

  • Eight Sleep employs a rule of seven touchpoints for customer acquisition.
  • Word of mouth has been a powerful channel for the company.
  • Matteo advises against obsessing over price reductions as a means to lower CAC.
  • Instead, he suggests focusing on adding value while maintaining consistent pricing.

"You want to surround your customers and you want them to see your brand seven times before they pull the trigger."

This strategy aims to build brand recognition and trust before a customer makes a significant purchase.

"Our CAC is already so efficient, that is extremely hard to move it down."

Matteo highlights the efficiency of their current customer acquisition strategy and the challenge of further reducing costs.

Pricing Strategy and Product Positioning

  • Matteo discusses the importance of pricing in relation to brand perception and unit economics.
  • He shares insights from successful business leaders who have maintained profitability without relying on price reductions.
  • Eight Sleep increased prices with minimal impact on demand, reinforcing the premium positioning of the brand.

"You don't want to get in a price war. Once you get in a price war, particularly with a physical good, you're in real trouble."

This quote advises against engaging in price competition, emphasizing the importance of maintaining a strong brand and product value.

"If you raise the price, the quality is higher than other competitors."

Matteo suggests that higher prices can enhance the perceived quality and aspiration of a product.

Reflections on Fundraising and Investor Relations

  • Finding the right investor who shares the vision and understands the market potential is crucial.
  • Investor brand can significantly influence a startup's ability to attract talent and capital.
  • Matteo advises focusing on senior partners or individuals within a firm who align with the startup's vision.

"Hundreds of people passed on us, but not these guys."

This quote highlights the importance of securing investors who believe in the company's vision and potential.

"You don't want to educate the investor when you're educating investors, it's too hard to sell."

Matteo emphasizes the difficulty in convincing investors who do not already understand or believe in the market potential of the product.## Investor Belief in Team

  • Investors with belief in a team are confident that the team will resolve unit economics through hard work and operational excellence.
  • Hiring top talent is essential to fix unit economics and drive the company forward.
  • The adoption of technology that improves sleep is uncertain and relies on investors' gut feelings.

"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 operational excellence."

This quote emphasizes the importance of investor trust in a team's ability to overcome economic challenges through hard work and operational excellence.

Clarity of Thinking

  • Writing is critical for developing clarity of thinking.
  • The ability to distill complex concepts into few words is a measure of clarity.
  • Data support and clear outcomes are vital for clarity of thinking.
  • The "grandma rule" is used to ensure concepts are simple enough for anyone to understand.
  • Clarity of thought is essential for internal communication and decision-making.

"It's something I'm really obsessed about. First, the best way to develop clarity of thinking is writing."

Speaker A explains that writing is a key method for achieving clarity of thinking, which is a critical component of his approach to problem-solving and communication.

Accessible Aspiration

  • Aspirational branding uses imagery to create a premium, dream-worthy perception.
  • The value proposition and benefits must be communicated simply for broad understanding.
  • The concept of explaining a product to a friend at dinner is used to refine the pitch to be both accessible and aspirational.

"For aspirational, you use images, right? And you try to position very premium, something that you really dream of. But in terms of worth and the value proposition and the benefit. You need to be very simple."

Speaker A discusses the balance between creating an aspirational brand that is also accessible, using simple communication of value and benefits.

Mistakes in Clarity of Thought

  • Lack of sufficient thought and data leads to confusion and unclear concepts.
  • The "five whys" technique is used to probe deeper into ideas and decisions.
  • Clarity of thinking is a collaborative process that requires team support and practice.

"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."

Speaker A identifies that mistakes in clarity of thought often stem from insufficient consideration and lack of supporting data, leading to confusion.

Focus and Success Metrics

  • Focusing on the top three priorities and understanding what success looks like for each is crucial.
  • Many people fail to set clear success metrics, which leads to uncertainty in decision-making.

"Mine is like focus. I always tell people, write a list of the top three and then just start from one. And then also understand what success is in each."

Speaker C emphasizes the importance of focus and having clear success metrics to guide efforts and measure outcomes effectively.

Multiple Options and Decision-Making

  • Presenting multiple options and explaining the rationale for pursuing one over others is critical.
  • A desire for speed of execution should not eliminate consideration of multiple options.
  • Writing down options and recommendations facilitates quick, asynchronous decision-making.

"I suggest we do a. Doesn't matter if I'm in favor or against a. I never like to see one option. I want to see multiple options."

Speaker A stresses the importance of considering multiple options in decision-making to ensure the best course of action is chosen.

Speed of Execution

  • Speed is balanced against quality to achieve efficient output.
  • Operational excellence is measured by output, which is influenced by quality and velocity.
  • The concept of "barrels" and "ammunition" is used to describe team members' roles in achieving output.
  • Opposing metrics are used to maintain balance and drive performance.

"For us, everything happens in writing async so we don't lose time."

Speaker A explains how asynchronous communication and decision-making contribute to the speed of execution without compromising the quality of work.

Challenges with Opposing Metrics

  • Balancing growth goals with customer acquisition cost (CAC) creates productive tension.
  • Opposing metrics are necessary to prevent unbalanced focus on a single aspect of performance.

"We don't do anything at eight sleep. If there is not an opposite metric."

Speaker A highlights the practice of using opposing metrics to ensure balanced and effective operational excellence.

Mistakes in Operational Excellence

  • Mistakes often relate to the balance between quality and speed.
  • A focus on software quality can delay new features, while neglecting bugs can impact product focus.
  • The 48-hour rule is used to prioritize urgent fixes without compromising long-term product plans.

"The times it's probably connected to the opposite metrics. Like you want to ship quality of software."

Speaker A reflects on past mistakes in operational excellence, attributing them to an imbalance between opposing metrics.

Importance of Speed of Execution

  • Speed of execution is critical for learning and adapting quickly.
  • The definition of quality should not equate to perfection but meet a threshold that allows for rapid improvement.
  • Y Combinator's advice on shipping early and iterating is embraced.

"It is without compromising quality? So, yes, and then you said the opposite metrics of quality."

Speaker A confirms the significance of speed in execution, provided it does not compromise the essential quality of the product or service.

Velocity in Company Culture

  • Creating a culture that celebrates rapid execution is essential.
  • Senior executives from larger companies may need encouragement to prioritize speed and boldness.
  • Celebrating achievements that exemplify company speed fosters this cultural value.

"I think it's literally part of the culture. We call it eight slip speed."

Speaker A describes how the concept of "eight slip speed" is ingrained in the company culture to promote rapid execution as a core value.

Response to Subpar Work

  • Setting aggressive deadlines and simplifying requirements can drive faster execution.
  • The focus is on learning quickly to make adjustments as necessary.
  • The company's response to subpar work involves increasing pace and discussing strategies to improve.

"I wrote a memo about this last Sunday to all my executives, and I say, I want to increase our pace by 30%."

Speaker A reveals the proactive approach taken when work does not meet expectations, which includes setting higher goals for pace and efficiency.

Hardware vs. Software Quality

  • The need for perfection varies between hardware and software due to the retractability of software.
  • Emphasizing learning from velocity allows for quicker adjustment in both hardware and software.
  • Being too rigid with long-term roadmaps is not conducive to startup agility.

"It changes. You will never have 100% confidence when you ship a hardware that everything is perfect."

Speaker A discusses the different expectations for quality and perfection in hardware compared to software, acknowledging the inherent uncertainties in hardware production.

Lessons in Talent Management

  • Hiring executives from large companies can be challenging due to differences in company scale and culture.
  • Executives' past successes may not align with the current company's needs or culture.
  • The importance of agility and willingness to work intensively is emphasized for startup employees.

"I mean, I think one of the biggest lesson is you really need to pay attention with when you hire executives from big companies."

Speaker A shares lessons learned regarding the challenges of integrating executives from large corporations into a startup environment.

Hiring Process and Candidate Evaluation

  • The hiring process involves multiple steps and homework assignments to assess candidates' commitment and skills.
  • Strong hires must receive at least three strong endorsements from the interviewing panel.
  • The default position is not to hire unless a candidate is exceptionally convincing.

"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."

Speaker A explains the thorough and deliberate approach to hiring, which includes a comprehensive evaluation process to ensure the right fit for the company.

CEO's Role in Hiring Decisions

  • The CEO's personal connection with a candidate is a factor in hiring decisions.
  • A structured interview playbook helps identify red flags and compare candidates consistently.
  • The CEO provides detailed feedback, especially when deciding not to hire a candidate.

"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 50% pass."

Speaker A expresses the weight of his role in hiring decisions and the importance of cultural fit, even if it means rejecting a candidate after a thorough process.## Ramp Time and Leaving Time

  • Ramp time and leaving time are critical factors in evaluating a candidate's work history.
  • Understanding the context of job transitions is essential, such as if a former boss provided an opportunity or if there was a reduction in force (riff).
  • Patterns of frequent job changes, especially due to company failures, may indicate poor judgment in company selection.

"If it was your former boss, that gives you the opportunity of a lifetime and you live after 18 months. I understand. Right. If there was a riff, fine."

This quote emphasizes the importance of context behind job switches, suggesting that a move prompted by a former boss's opportunity is understandable, while a reduction in force is also a reasonable explanation for leaving.

Importance of Career Judgement

  • Judging a company before joining is a critical skill, reflecting on a candidate's career decisions.
  • Repeated involvement in company downsizing or failures may raise questions about the candidate's decision-making abilities.
  • The rationale behind joining a company, especially when transitioning from a large corporation to a questionable startup, is scrutinized.

"Then what I start questioning is, how did you judge the company? Why did you pick this company?"

This quote highlights the significance of a candidate's ability to assess and choose their employers wisely, which is a key factor in their career progression.

Title Negotiation and Job Performance

  • Negotiation for job titles often correlates negatively with job performance.
  • Exceptional employees typically do not prioritize titles; they focus on their work quality and contributions.
  • Titles can sometimes be adjusted for top performers with an exceptional track record, following a rigorous performance review process.

"So usually it's bad. Some of the best people, they don't really care about title."

The speaker suggests that a strong focus on job titles can be a red flag, as the most capable employees are usually more concerned with their impact than their titles.

Development of Frameworks and Playbooks

  • Frameworks and playbooks for business operations are developed over time, not present from day one.
  • Studying best practices from successful individuals and organizations aids in creating effective business frameworks.
  • Implementation of frameworks can occur at any stage, even midway through a company's life cycle.

"I didn't have them since day one. I literally spent a lot of time studying on a weekly basis."

This quote reveals that the speaker did not start with a complete set of business frameworks but developed them through dedicated study and adaptation over time.

Compensation Strategies

  • Compensation reviews are conducted annually, with increases based on performance levels.
  • The strategy involves three tiers: top performers, satisfactory performers, and no change for low performers.
  • Discussions with low performers are crucial to address issues and determine if the company is the right fit for their current life stage.

"So we do it every year for people. I don't think we are very sophisticated on this."

The speaker acknowledges that their approach to compensation may not be highly sophisticated but outlines a clear strategy for annual performance-based reviews.

Agenda-Driven Meetings

  • Meetings without a pre-submitted agenda memo are not entertained.
  • Good agendas are concise, data-driven, and clear, often requiring training and practice to perfect.
  • Agendas facilitate thoughtful preparation, allowing for efficient and focused discussions during meetings.

"I will not take a meeting with anyone in the company if I don't get an agenda memo."

This quote underscores the speaker's strict policy on requiring detailed agendas before meetings, emphasizing the value of preparation and structured communication.

Writing and Clarity of Thought

  • Writing is considered crucial for clarity of thought and communication within the company.
  • Effective writing leads to better understanding, decision-making, and efficiency in business operations.
  • Training and practice in agenda writing are part of the company culture, promoting continuous improvement.

"Obsessed with writing at asleep."

The speaker expresses a strong emphasis on the importance of writing skills within their company, indicating its role in fostering clear and effective communication.

Performance and Culture

  • A culture of performance, operational excellence, and no politics or ego is vital for success.
  • Rapid hiring can sometimes lead to a diluted company culture and decreased operational speed and quality.
  • Openness to mistakes, cross-pollination of experiences, and a balance between being demanding and supportive are key cultural elements.

"I think the other thing which we experienced that, too, is no politics, no ego."

The quote reflects the speaker's belief in maintaining a culture free of politics and ego, focusing instead on performance and support within the team.

Firing Practices

  • Firing is a challenging but sometimes necessary aspect of managing a team.
  • Radical candor and clear communication about performance expectations can prevent surprises and facilitate course correction.
  • Executives must be direct and provide real-time feedback to help team members understand their performance and areas for improvement.

"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."

This quote reveals the speaker's cultural background and how it initially influenced their perspective on firing, contrasting with their current approach to direct feedback and performance management.## Passion vs. Obsession

  • Matteo Franceschetti (Speaker C) discusses the fine line between passion and obsession, referencing David Goggins.
  • Passion is socially accepted and encouraged, while obsession is often seen as excessive and warranting restraint.
  • Obsession can be positive if it's directed towards beneficial goals and understood by others.

"David Goggins says the difference between passion, obsession is passion is when everyone's like, yeah, you're passionate about it. Well done, Mateo, and obsession. People are like, oh, you need to stop that. And it's this interesting difference. And obsession is actually where you want to be."

The quote highlights the distinction David Goggins makes between passion, which is widely supported, and obsession, which can be criticized despite potentially being the more desired state for achieving extraordinary results.

The Importance of Sleep Consistency

  • Speaker A emphasizes the importance of sleep duration and consistency for training the circadian cycle.
  • Consistency and amount of hours are basic yet crucial factors for quality sleep.

"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 that time and to wake up at that time, your circadian cycle can substantially be trained."

This quote outlines the fundamental aspects of sleep health, focusing on the quantity of sleep and maintaining a regular sleep schedule to support the body's natural rhythms.

Sleep Needs Across Ages

  • Speaker A suggests that sleep needs may vary with age, but generally, 7 to 9 hours is recommended for most adults.
  • Older individuals may find it harder to sleep for longer durations.

"It depends. So usually as you get older, they're just harder for you to sleep. Eight, 9 hours. A rule of thumb is between seven and 9 hours for everyone, except very, very few people that have a genetic modification and can sleep only three, 4 hours."

The quote provides a general guideline for sleep duration across different age groups and acknowledges exceptions due to genetic variations.

Body Temperature Regulation for Sleep

  • Adjusting body temperature before bed can significantly improve sleep quality.
  • Saunas, hot baths, or showers can increase body temperature, which then drops and signals the body to prepare for sleep.

"One thing is usually playing outside eight sleep. But playing with your own body temperature before bed is really impactful."

Speaker A advises on the effectiveness of using body temperature manipulation as a method to enhance sleep readiness, which can be done through various means like saunas or hot baths.

Ideal Room Temperature for Sleeping

  • Speaker A corrects the misconception about keeping the room at a constant temperature throughout the night.
  • Body temperature naturally fluctuates during sleep, and room temperature should ideally accommodate these changes.

"The thing there, which is a typical mistake, is you hear a lot of people say, oh, you should sleep at 68 degrees. That is wrong."

This quote challenges the common advice on room temperature for sleeping, explaining that a fixed temperature does not account for the body's natural temperature variations during the night.

Impact of Children on Sleep

  • Speaker A acknowledges the challenges parents face in maintaining sleep quality with young children.
  • He shares an anecdote about a company executive who manages to maintain a high sleep score despite having a newborn.

"So there is a sleep fitness workup 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."

The quote illustrates how even with the demanding responsibility of caring for children, it is possible to prioritize and manage sleep effectively, as demonstrated by an executive's ability to maintain high sleep scores.

Effects of Diet on Sleep

  • Alcohol has a significant negative impact on sleep quality, despite the common belief that it aids in relaxation.
  • Carbohydrates can help in falling asleep but may affect the overall quality of sleep if consumed in large quantities.

"Alcohol is massively going to 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."

Speaker A explains the paradox of alcohol consumption before sleep, highlighting the discrepancy between perceived relaxation and the actual detrimental effects on sleep biometrics and architecture.

Individual Responses to Stimulants

  • The response to stimulants like caffeine before bed is highly individual.
  • While the general recommendation is to avoid caffeine close to bedtime, some people may not be as affected.

"Yeah, it's very subjective. In general, the rule of thumb is you shouldn't because it takes around 8 hours for the coffee to really leave your body."

The quote acknowledges the variability in individuals' tolerance to caffeine and suggests adhering to a general guideline to avoid it several hours before sleep.

Exercise and Sleep

  • Speaker A prefers morning exercise to avoid disrupting sleep preparation, as exercising later can elevate heart rate and body temperature.
  • The timing of exercise can be crucial for optimal sleep quality.

"So first depends when you exercise. I stop exercising after 05:00 p.m. I will never exercise, but I exercise every morning."

This quote emphasizes the importance of scheduling exercise at a time that does not interfere with the body's natural progression towards sleep.

Personal Discipline and Balance

  • Speaker A adheres to a disciplined routine of sleep, exercise, and nutrition, with occasional allowances for relaxation.
  • Consistency over time is more important than occasional deviations from routine.

"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?"

Speaker A conveys the significance of maintaining a consistent routine in various aspects of life, suggesting that occasional lapses are less impactful when viewed in the broader context of long-term habits.

Work-Life Balance in a Partnership

  • Speaker A shares his experience working with his partner and co-founder, emphasizing the importance of respecting boundaries and communication.
  • Balancing work discussions and personal time is vital in maintaining a healthy relationship.

"So you can't bother me all the time. And so you can't talk about work."

This quote reflects the need to establish clear distinctions between work and personal life, especially when business partners are also life partners.

Preventative Health and Sleep Technology

  • Speaker A envisions beds as powerful platforms for preventative health, with the ability to save lives by monitoring biometrics.
  • Eight Sleep has already contributed to saving lives by alerting customers to abnormal biometrics.

"Your bed will become the most powerful preventative health platform in the future and will save your life."

The quote expresses Speaker A's belief in the transformative potential of sleep technology to serve as a critical tool for health monitoring and intervention.

Future of Health Monitoring and Data Ownership

  • Speaker A anticipates advancements in sleep technology that will enable preventive body scans within a few years.
  • Data ownership is expected to follow the standard market practices of consumer health devices.

"But how long do it is before you are having preventive body scans in your sleep? Three years, five years, ten years, no less."

Speaker A provides a timeline for the integration of advanced health monitoring into sleep technology, suggesting a near-future scenario where comprehensive health data can be collected during sleep.

Legacy and Impact of Eight Sleep

  • Speaker A aims for Eight Sleep to become a public company that saves and improves millions of lives through sleep and preventative health.
  • The goal is to build an iconic global brand that honors and cares for its customers.

"In ten years, we have saved a million lives and improved millions of lives right between sleep and preventative health."

This quote outlines Speaker A's long-term vision for Eight Sleep, highlighting a commitment to health and wellness on a global scale, with an emphasis on the company's legacy and customer impact.

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