The WimLex Show #7

03:20

Willem: Julian, you say that two out of three Dutch people have trouble sleeping. That means you’ve got rather a large market, right?

Julian: Yes, and it’s getting better. I’m sure you’ve guys have noticed that at least once a month there’s a random news article somewhere about how badly we’re sleeping. Two out of three people aren’t getting the amount of sleep they should have, and that is a huge problem because by not sleeping, you put not only yourself but others at risk: did you know that more people are killed due to driving while drowsy than as a result of drink driving? It’s not only the people behind the wheel who die, but innocent bystanders. Then there are costs to productivity in the workplace. The most important factor, however, is the effect lack of sleep has on the immune system: it doubles your chances of cancer, leads to obesity, and makes you more susceptible to Alzheimer’s. As ridiculous as this may sound: the shorter you sleep, the shorter you live. That’s why it’s important to take sleep more seriously.

Willem: So your mother was suffering from the problem and you’re a robotics engineer, but how precisely did you come up with the product?

Julian: With my mum, it wasn’t just once or twice: she was waking up every day at 4am. Then she was taking pills to treat the condition, but they changed her personality and had all sorts of harmful side effects; at the same time, she became addicted to them. So I challenged myself to see what kind of technology was out there that could help her. What I found from the literature I read were that breathing and audio techniques were proven methods for inducing sleep. There was a paper which showed that, when a mother holds her child, their breathing and heart rates synchronise: the concept is called mirroring.

This was the concept I then translated into a range of prototypes which physically breath in and out, make sounds, and take action at the right moment. I took the prototypes to my mum to test them – She really hated the first one because it made a lot of mechanical noise! – and, after a while, it really started working for her. She started taking less pills and sleeping more. And that is where it all took off. It was an academic project that sort of got out of hand…

Willem: Can you connect your robot to other sleep tracking devices like FitBit or Apple solutions?

Julian: Not yet, but that is definitely in the pipeline – and not just for data about sleep, but from during the day, too, as it can be applied in the night. A stressful meeting in the workplace during the day, for instance, really impacts your quality of sleep during the night, but there is no product yet which connects these two spheres. What happens during the day is just as important as what happens during the night.

In fact, sleep tracking isn’t that innovative any more: your phone can do it. That’s why we want to make the next step, which is analysing data in real time to help you in the bed itself. Currently, all you see is a graph which says: “You’ve been sleeping really badly.” You even get a ‘sleep score’, which is weirdly like getting a mark at school: “You suck at sleeping!” We want to not only show you the data, but use it to offer a more tailored approach.

Alex: Can you say how many of your potential customers are sleeping badly due to stress or other external factors which you can’t treat and how many people can benefit from a smart sleep robot?

Julian: Sleep is a very mysterious, complex activity. We spend one third of our lives doing it, and we still don’t understand fully the various reasons why people don’t sleep well. So the robot is definitely not right for everybody. Problems such as sleep apnoea, restless legs syndrome, and insomnia are typical causes, but what we found is that our robot is very effective for people suffering from stress-related insomnia – and they are the biggest group. They are people who are worried during the night, who are unable to fall asleep or who wake up at 4am feeling anxious and stressed because of whatever is going on in their lives and because of the 24/7 connected economy.

I won’t really be able to put a number on this group overall because it varies from country to country, but in general, stress-related insomnia affects one out of five people; two out of five people don’t get the eight hours of sleep experts recommend.

9:20

Alex: What is the status of your company currently? Is your product already on the market? How are you financed?

Julian: We ran a Kickstarter campaign last year in November where we raised half a million and we are now in the manufacturing process. We’ve just released the first batch of 150 robots as a “soft launch” to see what is working well and what needs improvement. In December, we will then ship the 3,000 pre-orders we already have.

Alex: What is the pricing model?

Julian: Currently, we’re retailing at €550. A lot of people think that’s expensive, but it depends on how you value your sleep.

Alex: To me, it looks like a kind of ‘smart cushion’.

Julian: Yes, and because it’s a new product, a lot of people say: “This looks like a pillow – why on earth does it cost €550?!” It’s a sleep robot: we want to define a new category, just like the iPhone did. People buy up front and get a 30-night trial to see whether it works for them, and if it doesn’t, they can return it for free and get their money back.

(Alex asks Julian about the broader market context: what is already out there? Julian says that the market is booming and welcomes the proliferation of apps and other concepts to help people improve their sleep. Currently, the market is divided into medical, in which medication follows a consultation, therapy and coaching (e.g. cognitive behavioural therapy), and sleep technology – the sector in which Somnox is active. 

Julian explains the drawbacks of sleeping medication, which fails to take account of the full breadth of the human sleep cycle. He then offers an overview of some other sleep-tech solutions such as headbands which play sounds in reaction to brainwaves.)

14:50

Alex: After all the campaigns which led nowhere, I should imagine Kickstarter is relived that you are actually shipping!

Julian: Yes, and hardware is hard. Software is so much easier to design and launch, and so we are delayed: we should have been shipping this month already, now it will be December. As annoying as that is, it’s part of the journey of being a hardware entrepreneur.

Alex: And have you had global demand?

Julian: Yes, and our goal was always to go beyond the Netherlands. Sleep deprivation is, after all, a global crisis. We went to CES in Las Vegas and got a lot of coverage in the US, so around 45% of our orders come from there; 30% is from the Netherlands, and much of the rest comes from Japan. The Japanese work really hard, have a tendency to feel lonely, and sleep really badly!

(Alex asks for some clarification on the launch schedule and the level of risk involved. Julian says that what “keeps him awake at night” is how people will feel about the product after a prolonged period of use: it is clinically proven to help people fall asleep, so will they feel dependent on it after, say, 40 nights? Julian’s aim, after all, was to help people overcome addictive substances.)

18:55

Alex: What is it like trying to produce hardware? I run a software company and, let me tell you, it isn’t easy at all…

Julian: We were lucky that we found a partner in Auping, a Dutch company which is one of the number one bed and mattress manufacturers in Europe. Their mission is to help people sleep better – and they are also facing challenges in the market from the all the newcomers such as Emma, Casper, etc. These companies are fantastic digital marketers who simply import low-quality mattresses from China but manage to sell them very well.

Auping’s idea is to incorporate us a co-design – think Intel inside a Hewlett-Packard laptop – so we make use of their supply chain. That’s perfect, because we didn’t have to source each and every manufacturer ourselves, but used their suppliers in Taiwan and the Netherlands.

Willem: Beyond the 3,000 pre-orders, you must have a larger goal: what is your e-commerce strategy for achieving it?

Julian: Yes, 3,000 pre-orders shows that we might be onto something, but clearly it’s nothing on a global scale. We will start off selling through our own webshop, but Amazon will be our main channel and we have people lined up so that we immediately start off as trusted seller; we also have the 30-days trial period and free returns policy. Away from online channels, however, we need to make people experience the product, so we will have an in-store presence in Auping shops and elsewhere in the Netherlands and Asia. The robot will also be available to try for a night in some hotels!

In terms of communications, we have been in touch with a lot of journalists because there is a lot of media interest in our product: everyone sleeps, so everyone can talk about it, and it’s somewhat strange, so it makes a good story. We had a lot review requests, so now that we have the first robots, we will be hosting pyjama parties in hotels where we give the journalists keynote speeches and let them try the robot. The idea is to get both journalists’ and users’ reviews prior to the launch so that there is immediate hype around the product and that it is instantly available through channels people trust with reviews that say “It’s working for me!”

(Willem asks whether there are plans for B2B sales, too: couldn’t hospitals or airlines use the robots to help calm stressed patients and passengers? Julian replies that this is an important part of the marketing approach and illustrates this with some more detail on current cooperation with hotel chains. Somnox is also talking to Dutch air carrier KLM and companies in the healthcare sector. Sleep is an important factor in speeding up healing after operations, for instance, so there is a business case for hospitals; in care institutions, too, the sleep robot can help elderly patients. He gives an example of how one of the Somnox prototypes helped a widow suffering from dementia to sleep better, thus increasing her wellbeing and reducing medication prescriptions and nursing time.)

25:40

Willem: So your proof of concept is in data. How do you collect and use data – not just for your sales, but also to help convince a broader audience that your product actually helps?

Julian: So as we all know, “data is the new oil”, but consumers are now more aware of their data and the value in it. Two years ago, you could get everything you needed from them in return for a free app, but that’s changed. As a company, you now need to be either Apple or Google. Apple’s USP is that users get to keep their data, while Google says: “You have something for free, but we want your data.” Those are the two models, and we want to be like Apple. So although there is a huge opportunity with the data, we feel like other people in this space – Philips, for instance – are already doing that; we want to differentiate ourselves. We collect a lot of data through our sensors and through the survey every morning, but it’s for research purposes, for statistical analysis so that we can make the robot smarter over time – and we get your express personal consent to do that. As such, it becomes a unique selling point. 

Willem: Do you have policies in place regarding data, then? How compliant are you? After all, the data you have relates to very personal situations…

Julian: The bedroom is the most private room in a house, so you don’t want data gathered about you there being published across the web or used for advertising. Health data – which is what we gather – is one of the most high-risk and high-security classes of data, and that means that we need to be top-grade compliant. So we don’t use Amazon servers, for example, but rather dedicated CE-certified data storage. Our robots, too, which record movement, sound, heart and breathing rates, and surveys, asks for explicit consent for every step we take. The data remains local and is only uploaded if you allow us to.

(Changing the subject, Alex asks how Somnox got contacts in companies with which it is cooperating such as KLM. Julian says that it was an unintended result of communication aimed at consumers: corporates also saw the opportunity and contacted Somnox on their own initiative. The young start-ran an intensive PR operation, however, adds Julian, recounting how one of the founders flew over to New York just to deliver a prototype to The Verge – unannounced! Around half of the revenue in the Kickstarter campaign came on or just after the day on which the resulting article was published. Moreover, because other journalists use The Verge as a source, news of Somnox spread: soon, Forbes got in touch, and then niche blogs picked up on the story. Julian stresses the importance of media: now Somnox has been featured in the Wired 25 global innovators of the year and was invited to a San Francisco conference at which all of the tech giants were present.)

33:30

Alex: About your business model: at a retail price of €550, I’m guessing that you’re profitable from the first purchase onwards. Most mattress start-ups, however, (and forgive the comparison, but you are in the same industry) fail because they can’t motivate a second purchase. After all, you generally change mattresses every 5-7 years and even if you need one for another room, as a customer, you are unlikely to offer repeat business. So as a business, you can’t send customers weekly mattress newsletters. Aren’t you headed towards the same dead end here? What else can you sell people once they are happy with the sleep robot? Sleeping seminars…?

Julian: Customer lifetime value is one of the things that is really important. As you say, companies like Calvin have this problem: their mattresses are good for 30 years of use! What we can do is to offer our customers tailored advice on the basis of the measurements we take. So as an upsell, you subscribe to our coaching programme: there are courses, seminars, tips and tricks about lifestyle and sleep. We also offer accessories and have designed the product in such a way that you will be able to buy an upgrade for Version 2.0. 

Alex: Will there be any changes to hardware?

Julian: Yes, and we want to make it into a circular product embedded in a sleep as a service concept. 

Alex: “Sleep as a service”…

Willem: Now that is what I call a “SaaS solution”!

Julian: What we are currently piloting is a service whereby you can rent a device for a couple of months for x-amount of money – a device that we are able to repair and re-cover, for instance, so that it is hygienic and can be used for a different person. These are the kinds of ways we want to avoid the risks affecting many of the mattress start-ups.

Alex: It’s a difficult space to be in, though. Even Casper has now been reduced to creating mattresses for dogs… That’s why I’m interested in your retail strategy, and somewhere, you will probably need to implement a bricks-and-mortar experience. 

On another matter, hough: how many people are currently on your team?

Julian: We have 18 employees, principally engineers, with around 25% commercial staff. 

Alex: And production is outsourced?

Julian: Yes. We do research and development; production is carried out by partners in Taiwan.

(Alex asks in Julian is concerned about plagiarism – on Kickstarter today, on Alibaba tomorrow! Julian’s relaxed attitude regarding this prospect can be best be summed up as “Imitation is the sincerest form of flattery”. Moreover, from a technological perspective, the Somnox product is quite hard to copy and protected by a range of patents; superior branding, he adds, is another way to inoculate the product from the dangers of cheap copies.

Taking the proliferation of FitBit imitations and indeed the equipment being used to record and film the discussion as an example, Alex outlines the challenge of maintaining a technology and branding premium as technology becomes cheaper: Wish or AliExpress are full of functional copycat technology products for $10 dollars including shipping. Julian stresses his belief in product leadership: the best technology and quality materials will, in his view, allow him to demand a lasting premium.) 

41:20

Alex: What I like about your idea is that you’re not trying to replace something – okay, except for sleeping pills! If you look at your colleague at the University of Delft, Willem Kesteloo, and his smart windows, he needs to get people to replace existing providers in the B2B market. What you have is a new consumer product and but that also has potential for business such as hotels. So you might have a win-win-win situation, here.

What about you personally: has this business made you into an expert for sleep? Do you sleep differently now?

Julian: Yes, I do. It began as an academic project, so I did a lot of research into studies about sleep, finding out about best practices – and now I’ve been in the business for three years. So I do have a lot of knowledge about sleep. I used to think it was cool to work long hours, go out for drinks, sleep two hours a night, and then go bragging about it. Now, I feel stupid about that. I take sleep way more seriously and try to get at least eight hours because I know that, if I don’t, I will make mistakes.

Having said all of that, I do not claim to be a sleep expert, because you need a medical certification for that. But I have got an overview of the discipline and what is going on in it.

Willem: So what are the three mistakes we should avoid?

Alex: Yes, give us some instagramable “Top Three Sleeping Tips”, please!

Julian: Sure. The easiest thing to do is to ask yourselves: “How do I feel in the morning?” If you feel exhausted, you should try adjusting your sleep. If you feel fine, keep going; but if you need coffee to wake up, you might want to work on your sleep.

Willem: You’re describing the consequence of mistakes, though, not what to do about them.

Julian: Well, the first thing to do is to create a sleep schedule: what time do you go to bed and what time to you get up? Ideally, it should be the same time every day, both during the week and at the weekend.

Willem: How do you deal with summer/winter time? Do you go to bed an hour earlier after the clocks go back?

Julian: No, but the time on the clock remains the same. Anyway, making sure you stick to the same time means that your body will wake up naturally – and also get sleepy naturally. That’s due to your circadian rhythms, which in turn are influenced by light. There is research that shows that even just a laser pointer on your knee in the night will affect your sleep; that’s how sensitive the human body is to light. So by creating a schedule, you will naturally wake up and go to sleep at the right time. It’s a very easy thing to do, but a lot of people don’t do it: irregular hours mess with you.

My second tip would be to create a sleep ritual to wind you down in the evening: put your phones away an hour in advance, read a book, and really tell your body: “It’s time to sleep.” Otherwise, the artificial light will tell your brain that it’s the morning! And if you’re writing e-mails 10 minutes before going to bed, your still in a tense, awake state. If you lit a candle and read a book, you would give your body a different message. 

Thirdly, as clichéd as this may sound: be careful with coffee and alcohol! A glass of wine is just like medication: it will help you get to sleep faster, but it won’t help you get quality sleep.

(Julian gives a few other pieces of advice about avoiding stress and identifying other potential causes behind bad sleep. The Somnox robot, he says, is for people who still find themselves wandering around the house at 4am even after they have solved other issues. As the podcast comes to a close, Alex offers a brief glimpse into his sleeping patterns and reiterates his confidence in the Somnox concept.)