The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:00:33 · Harry Stebbings
[00:00:33] S1: This is 20 VC with me, Harry Stabbings, and in the hot seat today, we have Matteo Francescetti. What a fantastic surname. Now he's done loads of shows, and the joys of doing a second show with someone is you get to ask questions that no one else can answer. The really kind of risque ones which push someone to a place where they might not feel that comfortable and definitely haven't gone before. That's what happened today. We go into places where Matteo has never answered questions. We have a totally off the cuff, very unfiltered discussion with probably one of the most impressive founders in hardware having scaled the business to multibillion dollar valuations, single digit churn rates, incredible global business that now open even in China. This is one of the most unfiltered versions of Mateo and Eight Sleep that you have seen yet. But before we dive into the show today, we used AlphaSense on an investment that helped us close an $8,000,000 deal. $8,000,000, baby. That's a lot of money. That's why I'm genuinely excited to have them as a partner on 20 VC. AlphaSense combines AI with one of the world's deepest libraries of market intelligence, including expert interviews, broker research, earnings calls, company filings, and real time news. Every answer is grounded in this incredibly trusted evidence and fully traceable to the original source, which is so important. So you can make really high conviction decisions with confidence. But the best part, they're building super analyst and always on AI analyst. So instead of starting your day with another search, you'll start with work you already done, your coverage monitored, the important development surfaced, and your investment brief already waiting for you. See for yourself. Head to alphasense.com/20vc. That's alpha-sense.com/20vc. While AlphaSense sharpens the strategy, MongoDB scales the product. MongoDB has always been the database developers love. Well, now it's the data platform AI agents need. Agents need accurate context, fast. MongoDB stores, searches, and reasons over your data in real time. JSON native database, vector search, and Voyage AI embeddings all in one place. One system instead of 10. No data pipelines to maintain. Ugh. This sounds too good to be true. Build and scale from your first user to billions of vectors. Run on any cloud, on prem, or your laptop even.
00:02:58 · Harry Stebbings
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00:04:53 · Matteo Franceschetti, Harry Stebbings
[00:04:53] S0: Yeah. Thank you for having me. [00:04:55] S1: I think that hiring today is harder than it's ever been just because of the prizes on offer at OpenAI Anthropic and some of the other places. Even the shiny new hot startups. How do you think about that? Am I wrong? Has it changed in terms of talent competitiveness? [00:05:10] S0: We are back to 2021, and that I think is becoming a problem in The US, meaning salaries are going out of control, competition. What [00:05:18] S1: makes you say that? Like engineer salaries? [00:05:21] S0: Any salary, even for product managers, are out of control right now. They get insane offers from any company. Obviously, there is a lot of money going around. And so we are focused more and more on hiring in Europe and outside The US. Because the other problem is not even the salary, and it's not even attracting them on T0, but it's retention, because then they keep receiving offers. [00:05:44] S1: If you are a cool company with a cool brand, then they keep receiving offers over and over at a higher salary. Have you lost people to OpenAI and Anthropic? I've invested in many companies and they're just like, God, we're getting eaten alive by OpenAI, Anthropic, Cognition, you name these hot companies. [00:06:00] S0: Yeah, a couple. The other ones could be AI companies that are doing extremely well or they just raise money, and it's normal competition. But sometimes the delta in salary and in comp is so big that at that point, there is nothing you can do.
00:06:00 · Matteo Franceschetti, Harry Stebbings
[00:06:00] S0: Yeah, a couple. The other ones could be AI companies that are doing extremely well or they just raise money, and it's normal competition. But sometimes the delta in salary and in comp is so big that at that point, there is nothing you can do. [00:06:14] S1: We mentioned Cognition a couple of times. We were talking earlier about your angel investing as well. How has being an angel investor changed how you think about operating? [00:06:23] S0: It's a game changer for me. And I think that is something is not shared enough, particularly on X. The amount of learnings that you get from being an investor is insane, because it's, essentially, you build your own intelligence. As you receive investor updates, you understand how the market is moving, what are the valuation, what are the multiples, what kind of profiles they are hiring, what channels might be working. I receive these from companies that are not competitive with Eight Sleep, but as a founder, you just get a sense of the market, and [00:06:53] S1: I find that super valuable. What's been the biggest lesson from angel investing? [00:06:56] S0: The biggest learnings is always on fundraising, right? You see how much they're raising at what valuation, what multiples, what investors, that's one. The other biggest lesson is for other companies that are still consumer to see channels, what channels work for them, or what markets work for them.
00:06:56 · Matteo Franceschetti, Harry Stebbings
[00:06:56] S0: The biggest learnings is always on fundraising, right? You see how much they're raising at what valuation, what multiples, what investors, that's one. The other biggest lesson is for other companies that are still consumer to see channels, what channels work for them, or what markets work for them. [00:07:14] S1: What do investors not understand about hardware that they should? You're advising me. I'm your buddy. I have a fund, and I want to invest in hardware. What do you like, dude, before you do it, you should know this. [00:07:26] S0: Probably the founders in the first year of the company, or in the first probably, let's say three months, they don't fully understand what the cost of producing that device will be. They don't understand the return rate. And so everything they tell you about BOM and COGS will probably be off by at least 50%. [00:07:42] S1: Does CAC go down over time? It really depends. [00:07:46] S0: And so that is another thing you want to assess, which is word-of-mouth. In our case, word-of-mouth keeps compounding. We are around 40% of our revenue, even at our size, which start being really big, is 40%. 40% of your revenue, you say, is word-of-mouth? Yep. What's your second biggest channel? Then you start getting into paid media. [00:08:05] S1: And that's just Meta? [00:08:06] S0: Yeah, then it becomes Meta, Google, TikTok, and all those channels. [00:08:10] S1: Can I ask, how do they compare? I'm a hopefully specialist at this point. No one that I speak to has managed to make TikTok work. Have you?
00:08:10 · Harry Stebbings, Matteo Franceschetti
[00:08:10] S1: Can I ask, how do they compare? I'm a hopefully specialist at this point. No one that I speak to has managed to make TikTok work. Have you? [00:08:19] S0: We did. Actually this year, in the past six months. How? It's usually a matter of amount of content that you can generate with TikTok influencers. [00:08:28] S1: So it's about getting a UGC program in place? Yep. Is there a big budget for you tied to it? [00:08:33] S0: The way we usually approach these channels is we start unlocking a small budget per week. We start looking at the CAC, and we've set a cap to the CAC, and then they can deploy as much as they can within that CAC. But then as they prove it, they can deploy more money. So, to me, they could deploy 100,000,000 if they're within CAC, the cap of the CAC. The important thing you need to do regularly, probably every six months, is an incrementality test. And so we might turn off TikTok in certain states in The US or in certain geos, and we start AB testing what is the growth rate or is the revenue rate. So we wanna see how much each channel is incremental, because we don't look at the from the platform. We have our own models now that determine the CAC of each channel. [00:09:20] S1: Sorry, can you tell me about that? You have your own models to determine the CAC from each channel. Why is that?