Matteo Franceschetti heard a bunch of nays when he first pitched the idea for Eight Sleep. The concept of a temperature-controlled smart bed that dynamically heats and cools to optimize sleep seemed too outlandish for most investors to take seriously.

“It seemed like a crazy idea. Who really wants that?” he told me in a recent interview in One day podcast. “You keep getting nos and nos and nos and nos. Even if you're really confident in your business, obviously, these people aren't stupid, so they start putting all the downsides of the business in your mind.”

Y Combinator, one of the world's most prestigious startup accelerator programs, rejected Franceschetti's vision three separate times.

But Franceschetti, who has also competed in Formula 1 races, stayed the course, not losing sleep over the initial jitters.

“You have to be resilient and keep grinding until you find someone who really understands your vision,” he says. “To get your first check, you have to get 99 nos.”

He's received many checks since those early fundraising days, most recently an $86 million Series C investment valuing the company at $500 million, and just last week surpassing their record high of daily income with 60% on launch day for the latest iteration of their sleep technology, the Pod 4. Investors like Valor Equity Partners, Khosla Ventures and eventually Y Combinator also woke up to the idea of ​​sleep fitness.

The company also received unexpected but welcome endorsements from Mark Zuckerberg and Elon Musk. “The only thing they agree on,” jokes Franceschetti.

It's good

— Elon Musk (@elonmusk) February 28, 2023

What turned those initial naysayers into motivated investors? Here are some of Eight Sleep's secrets to success.

Connected: The No-Excuses Approach to Sleep and Work Performance for Entrepreneurs

Focus on the customer

Franceschetti admits that Eight Sleep may seem somewhat impractical as a business idea. Why do people pay more for a temperature changing Pod? But when he developed the concept for customer needs, that question was answered.

“If you ask people what their biggest problem is when they sleep, they'll all say, 'I fight with my partner about the temperature,'” he explains. One is too cold, the other is too hot, and it escalates from there.

He positions the Eight Sleep as a “pain reliever that treats nighttime temperature,” solving the need for a bed that regulates heat and cold on both sides of the bed.

Connected: Regaining control of your sleep life…from a (recovering) sleep deprived entrepreneur

I disagree with the naysayers

Startups will get a lot of rejection – it's all part of the process. But it's how you deal with negativity that can separate the survivors from the quitters.

For Franceschetti, that meant saying no to no. He stood his ground rather than take the criticism to heart, saying: “I really don't agree. You have your opinion; I have mine. Let's see who's going to be right in two years, three years from now.”

Persistence is also key. Even if an investor comes through the first time, understand that it may take two or three years to convince them to change their mind.

These days, Franceschetti enjoys meeting with investors who jumped on Eight Sleep early. “One of the best things they can say to me is: 'Matteo, I think I made a mistake when I passed. You said you'd give A, B and C. I didn't believe it, but you did.”

“Be a pain reliever, not a vitamin”

One of Eight Sleep's biggest faults in the early days was poor unit economy. Product underpricing and overspending on customer acquisition were unsustainable.

“The mistake we all make is to try to set a price as cheap as possible so you can move more units, but that's not a sustainable business,” he says.

Franceschetti advises new business owners to first identify a large market and then determine the pain point solution for it. Price your product for healthy margins from day one.

Employ as little as possible

Franceschetti says that focusing on “stupid growth at all costs” can be costly. One of the big mistakes many startups make is hiring as many people as possible to scale the business. It's not like that.

“The quality of people you hire is so important,” he says. “But more than anything, hire as little as possible. That's another mistake we made.”

Looking back, he believes you only need three to six people you trust to start a company. It's simple math. Every person you add after three people will be taxed and business will slow down.

“So stay small, save the money where you can prove it's working, and then maybe pick some other roles you want to add to your team.”

Understand the power of sleep

Franceschetti is a big proponent of healthy sleep habits—and not just because his company is built on that premise.

He is critical of entrepreneurs, as he was in the old days, who pride themselves on how little they sleep and how much they work. “Sleep deprivation is the smoking of the 21st century,” he says.

“If you want to be at your peak performance during the day, you need to take care of your health, which means three things: sleep, nutrition and fitness,” he says. Sleep is really essential because if you start sleeping two hours a night, you don't go to the gym and you start eating junk. There is no way to have a healthy diet.

“Everything starts with sleep.”