Mattress startup Eight Sleep aims to detect cancer. Investors just valued it at nearly $500 million

Breaking into the mattress business is hard. Upstart Casper Sleep knows this all too well: Once valued at over $1 billion in private markets, the direct-to-consumer company is now just barely a $220 million business on the New York Stock Exchange. 

That hasn’t stopped venture capital investors from pouring millions more into a new mattress startup that is trying to differentiate itself with sensors and software aimed at improving sleep.

On Monday, Manhattan-based Eight Sleep, a company that makes mattresses rigged with sensors that monitor the heart, breathing, and temperature, raised $86 million in Series C funding led by Valor Equity Partners. Other investors in the round include SoftBank’s Opportunity Fund, Khosla Ventures, Founders Fund, and General Catalyst. 

The deal values the company at just shy of $500 million, sources with knowledge of the matter tell Fortune. 

Though comparisons to Casper come easily, CEO Matteo Franceschetti sees his startup as less in the company of the now faded unicorn, and more in a cohort of consumer hardware makers like Peloton that sell to users on promises of health consciousness.

Currently, the mattress regulates temperature and aims to monitor if a consumer is getting a restful amount of sleep. But the company has sold investors on an even loftier dream of detecting all sorts of diseases with its mattress. Within the year, the company plans to roll out features that could flag if a user is showing early signs of the flu. And later down the line, even cancer as it builds more sophisticated hardware.

“We are exploring different types of sensors that look at more biometrics than what a wearable can do, like body scanning. So our vision in the future is to be able to scan your body while you’re asleep and detect early signs of illnesses,” says Franceschetti. He envisions the mattress eventually one day capable of flagging “kidney stones, cysts, cancer.” Eight Sleep, he says, is “actively” working on the body scanning technology.

With a $2,945 smart mattress and $1,720 cover headlining its suite of products, catching a snooze with Eight Sleep is not cheap. While that limits its number of potential consumers, Franceschetti argues that its price point gives the company the ability to fit larger, more expensive, and more sophisticated sensors into its product than say Fitbit or Apple can into their watches, which also offer ways to track sleep. And to Franceschetti, Peloton’s $30 billion valuation—and the $1,495 price tag on its bikes—is a sign that consumers are willing to pay big dollars for health hardware.

Still, Franceschetti’s hopes of detecting cancer sound like something out of a sci-fi film. Which raises the big question: Could this technology work in the real world?

The short and surprising answer is, theoretically, yes, says Michael Snyder, chair of Stanford University’s Department of Genetics, when asked if a noninvasive sensor has the ability to detect cancer. It is possible, for instance, for a wearable to track changes in metabolism pointing to cancer. Apple sent ripples through the industry earlier this year when reports emerged that it was developing a terahertz sensor for glucose monitoring—a method that doesn’t pierce the skin—that could someday possibly detect skin cancer.  A recent study in the Journal of Medical Internet Research found that wearable devices can predict a COVID-19 diagnosis.

Certainly health sensors are getting smarter. But the problem is that “we haven’t seen it yet, and there is no data,” says Snyder when asked about developments in the broader industry related to disease detection. “Just because it is theoretically possible doesn’t mean it’s viable from a commercial perspective.” And if it does work, how good will it be? It doesn’t help that the world of health sensors is littered with so many stories of high-tech monitors that eventually failed to live up to their promise: Alphabet in 2018, for instance, shuttered a contact lens project that aimed to track blood sugar levels. Still, health sensors are a very promising and “very hot area,” says Snyder, adding, “what technologies will work remains to be seen.”

For now, Eight Sleep says it has seen growth as just a non–cancer-detecting connected mattress company. Franceschetti says revenue tripled in the first seven months of 2021 compared with the same period a year earlier, and the company has an estimated 50,000 units in the field. Its main customers are 25- to 45-year-olds with a household income of about $100,000. Most already have a wearable or some sort of smart fitness device like Peloton or Tonal.

Although Franceschetti compares his startup to Peloton, he believes Eight Sleep has the potential to reach a larger market than the fitness equipment maker. “Everyone has a bed while not everyone has space for a bed or a treadmill. Everyone sleeps. Not everyone is into fitness,” he tells Fortune.

And while the technology behind the startup’s goal to detect disease is still untested, Antonio Gracias, the CEO of Valor Equity Partners, knows this and sees it all as par for the course in his view of venture capital investing. Pointing to his investments in space exploration company SpaceX and electric vehicle startup Tesla, Gracias says he is no stranger to risky, far afield visions and bets: “It is going to be difficult, and the tech is not mature yet, but we do believe it is worth trying.”

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