TSI #39 - The Sleep Conundrum
Brainwaves Into A Complex World
Good morning and welcome to the thirty-ninth edition of The Skeptic Investor!
A famous study by Anders Ericcson on violinists, reveals that top performers slept an average of 8.5 hours out of every 24, including a 20 to 30-minute mid-afternoon nap some 2 hours a day more than the average American. The top violinists also reported that except for practise itself, sleep was the second most important factor in improving as violinists.
In today’s round-the-clock world of electronic blue-lights and stress, sleep has come to be recognised as something that can be “put off, dosed with coffee, or ignored”. But make no mistake, loss of sleep is akin to mind loss. In his memoir White Nights, former Israeli Prime Minister Menachem Begin, recounts his sleep deprivation in a KGB prison, “In the head of the interrogated prisoner a haze begins to form. His spirit is wearied to death, his legs are unsteady, and he has one sole desire: to sleep … Anyone who has experienced this desire knows that not even hunger and thirst are comparable with it.”
In this issue, we look at how Indian startups are innovating in the sleep ecosystem and solving for one of the most enticing consumer problems in modern times. We also explore Omega events in the context of the social media bans, Charlie Munger’s thoughts on economy & investing, Bitcoin’s rediscovery of finance and lots more.
Let’s dive in!
TSI On Clubhouse
We had a fascinating Friday-night session with The Skeptic Investor community on Clubhouse. Our discussion centred on the North Star Metric and long-term growth strategies for Indian startups. We dove deep on the right growth metrics to be followed for D2C brands, community-first organisations and consumer-tech service companies like Netflix or Saavn. A special thanks to the Network Capital club, for helping us organise our first Clubhouse session.
We are planning to organise a lot more of these sessions on Clubhouse and would love for more of you to participate. Just reply to this email and we’ll send you the details.
India Needs to Sleep
When was the last time you got 10 hours of sleep? 9 hours? Okay, how about 8? If you couldn’t remember any recent instances where you got 8 hours of sleep, you’re not alone. According to one study, 93% of Indians are sleep deprived. In another study, carried out by Fitbit, India ranked as the second most sleep-deprived among 18 nations, with an average of 7 hours of sleep a night - second only to Japan. For a lot of people, this has gotten even worse during the lockdown.
We all know that we should be sleeping earlier, getting 8 hours of sleep, not using screens an hour before bed. Those things tend to be a lot easier said than done though. What else can we do? Well according to a lot of companies, we could be sleeping on more comfortable mattresses and pillows. Given that the global mattress industry is worth ~$31 billion as of a year ago, that strategy seems to be working. There’s a lot more that companies are offering though. For starters, we could also be using specialized devices to track the quality of our sleep and listening to celebrities read us bedtime stories. Currently, the Indian market has startups that are trying to solve for all of these.
More Comfortable Mattresses and Pillows?
In 2015, the US mattress industry was on a $14 billion annual retail sales pace. The sleep products market was dominated by older, more traditional companies and the top four brands had captured 70% of the market. The companies sold via regular retail channels. In a way, it was ripe for disruption. Casper, a US-based company, was one of the first companies that tried to change the industry. They launched in 2014 and had just one product - a mattress, which they marketed as the "One Perfect Mattress for Everyone." In the next few years, they expanded their product offering to include pillows, bedsheets, more mattress models, bed frames, bedside tables, a lamp and even a dog mattress.
In a 2019 funding round, Casper was valued at $1.1. billion. In 2020 the company went public at a valuation of $535 million. Since then they've failed to impress, with the pandemic cutting their public market valuation to $270 million, but by then they had substantially proved that there's a high demand for products that help people sleep better.
The Indian market soon followed. Wakefit is a D2C sleep and home solutions brand that was launched in 2016. Their vision is to “revolutionise the way India sleeps, by offering premium quality mattresses at an affordable price directly to the doorstep of the customer.” Similar to Casper, the company has expanded its offerings from mattresses to include bed frames, bed sheets, comforters, neck pillows, pillows, back cushions and mattress protectors. They also collaborate with companies for office de-stress and sleep solutions, such as nap rooms. While Casper offered free returns and refunds within a 100 nights, Wakefit offered a Rs. 1 lakh internship to people to sleep for nine hours a night for 100 nights on Wakefit mattresses in the comfort of their own homes. In December 2020, they raised Rs. 185 crore at a valuation of Rs. 1900 crore.
There are several other companies that are trying to help consumers find the perfect mattresses and pillows. Cuddl (2018), MattressBox, (2013), Sleepy Cat, (2017), Sunday (2016), The White Willow (2015), and Wink & Nod (2017) are all Indian startups that have been founded in the past few years.
But the industry has expanded far beyond mattresses and pillows.
Bedtime Stories and Music?
Take the example of Mindhouse, a mental wellness startup. While going through their data, they found that close to 25% of their users were selecting "better sleep" as their key goal. They also noticed that there were a lot more people using their app between 9 pm and 2 am during the lockdown. So they launched “Sleep Stories” - a collection of bedtime stories for adults that they claim will help you fall asleep easier. The stories are read out by Bollywood stars such as Rahul Bose, Amol Parashar and Konkana Sen Sharma. Since launching “Sleep Stories” their downloads have increased by 3X.
Dozee is another Indian startup that is trying to solve for the correction of sleep. They sell an interesting health tracker that can be used to monitor your heart rate, respiration, sleep quality, among others - all while you sleep. The difference between Dozee and other wearables? Well, the Dozee monitor is a thin sheet that you place below your mattress. This sheet is then used to capture data on micro-vibrations in the human body. They too have seen close to 3X growth in orders during the pandemic.
Companies such as the yoga startup SARVA and fitness startup GOQii are adding features to their apps that help people sleep better as well. SARVA has added several guided meditations that are focused on helping you sleep. GOQii has added an ASMR music playlist to their app, with the intention of helping people fall asleep quicker. In November, GOQii claimed that since August they had sold over 50,000 units of curated health products for sleep, including chamomile teas.
Clearly, there’s still a lot of space for growth in the space.
Opportunities
Given that as of 2020, the unorganized sector in the sleep products market accounted for 60% of the market, there’s still a lot of opportunities for new players and for existing players to grow. The challenge is to not go back to the situation that allowed for disruption in the industry. Consumers want high-quality services and products, at reasonable prices. But they also don’t want to be bogged down by too many choices. Rather than focusing on small differentiating factors, startups would do well to listen to consumer feedback and study their consumer data. Launch products the consumer would feel more comfortable in, not products that have fancier materials or imported foam for the sake of marketing. After all, isn’t comfort what sleep is all about?
Thought Leaders
Matt Levine explores the countless stories of people being unable to access their Bitcoin riches. By reminding us of the original utility of banks in the financial intermediation process, he raises questions on how Bitcoin is rediscovering financial history. Read Don’t Forget Your Bitcoins
While the idea of meat substitutes has caught a lot of traction in the past few years, the science behind it still evolving. Plant-based meat and cultured meat have been distinct streams of innovation in this direction. This detailed MIT Technology article explores how a “blended” product may actually be the first lab-grown and most “meat-like” solution to hit the market. Read here (Paywalled)
What We're Watching
Charlie Munger is an epitome of a thought-leader. His insights and mental models on everything from thinking to decision making, investing, and life principles are timeless. Just sit back and take notes, in this hour-long Caltech conversation with Charlie Munger.
Tweet of the Week - Omega Event
That's all for this edition! We hope you liked it and would love to get any feedback you may have. This newsletter is written and curated by Mishaal Nathani and Ashutosh Gehlot.
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