Sleep is a mystery - we don’t definitively know what it is, why we do it, and why we need so much of it.
To spend 8 hours a day incapacitated, for every day of our lives, there has to be something important going on! But there isn’t exactly consensus - scientists still debate whether it ‘cleans’ the brain; although they can agree that if you don’t get enough, you’ll go insane.
The potential size of the sleep market is as big as it can get - we all need sleep on a daily basis. The sleep economy is made up of the products, services, devices, and applications that help you fall asleep, stay asleep, and manage your sleep. The industry has seen a flood of investment activity in recent years - and as wearables proliferate and enable our desire to monitor and optimise our bodily functions - interest and investment will intensify.
We can all attest that lack of sleep makes it harder to concentrate, increases grumpiness and stress, impairs memory and judgement, and lowers motivation to do things that are good for us - like exercise. It can also lead to poor decision making and increase desire for sugary foods.
On top of that, sleep is essential for cell repair, memory formation, emotional regulation, and hormonal balance - a good night’s sleep ensures the right amounts of hormones are released at the right times. Every organ in our body needs sleep - and accidents increase when we’re sleep deprived.
There’s more to sleep than rest and recovery. During the day, we only access 10% of our brains. In dreams, we get to explore tangential connections, identify unconsidered patterns, regulate emotions, and shape memories. As we sift through the day’s events and decide which memories to keep and which to discord, sleep has the power to shape the stories we tell ourselves - and hence, who we are. This critical, auto-biographical process happens by incorporating new data into our memory bank and identifying patterns and connections between them.
Despite its importance, our society has a large problem with sleep. Our permanent connection to our digital devices has disrupted our circadian rhythms and sleep patterns, with debilitating consequences. In Australia, 50% of adults suffer from at least one chronic problem with sleep - be that trouble falling or staying asleep, or waking up before you want to. 10% of Australian adults have insomnia. This costs us dearly - people who receive less than 6 hours of sleep per night have a 13% higher mortality rate.
What does good sleep look like?
In healthy sleep, we oscillate between REM and non-REM phases of sleep.
In healthy sleep, we yo-yo between REM and non-REM stages of sleep. This cycle repeats every 90 minutes and consists of about 5 - 6 cycles. Sometimes we skip a stage, or it gets disrupted. For sleep to work its magic, all stages need to happen.
What changes are afoot?
As venture capital investors, we always ask ‘why now?’
Since sleep has been a constant for the entire history of humanity, why do we believe we are on the precipice of an inflection point, that’ll unleash a wave of innovation in this industry? Here are some macro trends that we think will play a role in driving an evolution in the way we sleep.
Sleep is now seen as a critical pillar of wellness
Where ‘running on three hours of sleep’ may have once been glamorous in certain circles, as a society we are waking up to the importance of sleep as an input into health and wellbeing. Our chronic lack of sleep is being recognised as a global health crisis - the Centre for Disease Control and Prevention has even classified it as endemic. More people are recognising that a bad night’s sleep is just as damaging - if not more - as a night of heavy drinking or guzzling down an unhealthy meal.
Moreover - not only are sleep deficits unhealthy, they’re downright dangerous. As proof - each year at daylight savings (an event which disrupts people’s sleep), the number of car crashes goes up by 6% in the following week.
Companies are are taking notice - Calm, Headspace, and Insight Timer have invested heavily in their Sleep Series; recognising how much the world needs to be lulled to sleep by the sonorous voices of Stephen Fry or Matthew McConaughey.
Proliferation of SleepTech
There’s a range of products to optimise sleep - from lower tech smart mattresses and pillows, weighted blankets, temperature controlled bedrooms, blackout blinds to higher tech dreamscape music, light projectors, and noise modulation. Quite remarkably, there’s no leading consumer brand for sleep owning and bundling this tech!
Edible products that can help people fall asleep are gaining in popularity. Active ingredients can be found in gummies, cookies, teas, or even ice-cream. Some popular edibles include melatonin - a naturally occurring hormone that induces a feeling of sleepiness. As it turns out, blue-light exposure reduces the natural production of melatonin - one of the reasons that looking at screens right before bed can make it harder to fall asleep.
Another popular active ingredient is CBD - a cannabinoid. In some parts of the world, it’s gaining popularity as a natural sleep remedy, as it curtails the production of cortisol - the stress hormone.
Sleep trackers capture data, providing insights about sleep and suggestions on how to improve your sleep. They come in all shapes and sizes - like WHOOP around your wrist, the Oura ring, the Beddr forehead wearable, the Dreem headband, and the 10 Minds Motion Pillow.
Sleep tracking devices are about 95% accurate in measuring whether you’re asleep, but only 60% accurate in measuring sleep quality or stage. It primarily relies on lagging indicators such as heart rate, movement, and noise. A more accurate method would be to measure leading indicators, such as eye movement and ESG - however most people are reluctant to wear headbands to bed simply to get more accurate measurements of their sleep. As Apple and Google’s Fitbit accelerate innovation in wearables, we’re watching with interest the innovations rolled out for tracking sleep.
Sleep coaches are stepping up
So you’ve gotten a baseline picture of your sleep, and you want to improve it. It’s time to find a sleep coach! Human and AI-powered sleep coaches can help you determine how much sleep you actually need, optimise your bedtime routine, and serve as your accountability buddy to cement a healthy sleep routine.
A good night’s sleep is the best medicine
Not only is poor sleep a lagging indicator of poor health or illness, poor sleep can also increase the risk of disease or even death. Sleep deficiency is correlated with chronic conditions such as heart disease, kidney disease, high blood pressure, diabetes, obesity, and depression. Furthermore illness often disrupts sleep, fuelling a vicious cycle of degeneration. For example, getting less than seven hours of sleep makes diabetes harder to manage as both insulin resistance and hunger increases the next day.
Sleep monitoring is increasingly being used as a diagnostic tool. For example, disruption to sleep cycles can indicate early stages of Alzheimer’s disease. Monitoring sleep not only enables early diagnosis, it can track the progression of degenerative conditions. In addition, diagnosing and treating mild to moderate cases of obstructive sleep apnea can help prevent the development of cancers, while detecting changes to respiratory rates can catch COVID early.
Dreams offer a glimpse into the subconscious mind - a place of wisdom and power. Human civilisations have been interested in programming dreams for thousands of years. In ancient Egypt, people slept in sacred beds at the Serapeum of Saqqara in hope of receiving divine messages. In ancient Greece, the sick would go to sleep temples or ‘spiritual hospitals’ to channel the gods’ healing powers. Today, dream incubation is a part of spiritual practices like dream yoga.
Artists knew that dreams can enhance creativity - the connections that are formed while we dream can offer a new perspective when we wake up. The artist Salvador Dali had a creative process called ‘slumber with a key’. He would sit in a chair holding a heavy key over a plate and meditate on a problem as he dozed off. When he fell asleep, his hand with relax, and drop the key on the plate - waking him up, often with a fresh perspective.
Recently, practices called ‘dream intelligence’ have sprung up - to harness dreams to promote learning and growth. These techniques use dreams to embed positive habits or bolster the learning of new skills - like languages. Content we review right before bedtime affect our hypnagogic dreams - visceral dreams that occur just after we fall asleep. This means what we see, hear, or smell right before we sleep can be ‘programmed’ to influence our dreams - and in doing so, our thoughts and behaviours.
In one experiment, researchers exposed participants to certain kinds of content right before they fell asleep, and documented how it impacted their dreams:
- Expose participants to a VR experience where they are flying - many participants dreamt of flying
- Played a meow while the participant is sleeping - upon waking, participants were better able to locate a cat on their computer screen
- Recited the name of a snack while the participant is sleeping - upon waking, participants were willing to pay a premium for the snack
- The smell of cigarette smoke was mixed with the stench of rotten eggs and fish, and wafted over a population of smokers - participants smoked on average 30% less the following week
Dreams for sale?
Perhaps unsurprisingly, there are people trying to monetise the power of hacking dreams - marketers are experimenting with how to reach people through their dreams.
Early experiments present participants with stimulus right before they fall asleep. In small study, 18 people watched a video that showed Coors Light beer cans interspersed with with nature images, set to synth beats. The participants then fell asleep to the same soundtrack. A whopping 30% of participants claimed to have dreamt about Coors beers. In our dreams - we are defenceless prey for marketeers. The daytime savvy we’ve built to tune out the relentless bombardment of advertising material goes out the window, as we’re unable to scrutinise what’s marketing and what’s our subconscious telling us something important.
Marketers seem determined to break down the last bastion of our privacy. The American Marketing Association (NY) found that 77% of marketers surveyed would. like to experiment with DreamTech.
There’s some brands that have already staked tall claims to their ability to influence our dreams. Burger King’s ‘nightmare' burger’, which was rolled out for Halloween, is said to be “clinically proven to induce nightmares” - making it 3.5x more likely that someone has a nightmare after eating one.
“Someone in my dream turned into the burger,” said one study participant. “The burger then transformed into the figure of a snake.”
We believe the convergence of these trends will drive the creation of companies that reimagine how we approach sleep.
Who will win?
Making sleep cool again
Sleep needed a rebrand. Until recently, running on no sleep and five shots of espresso was seen as cool - even glamourous. As a collective, we’re only starting to change how we perceive sleep - as an expression of self-care and savvy investment in our health and performance.
Brands will win through cementing this narrative - making people feel like warriors for prioritising their sleep and optimising their routines. Clever brands will dispose of lavender sprays, cherubic imagery, and the association of sleep with grandmas. These will be replaced with sharp designs, great UX, and memorable content. Reframing the narrative will also change the value consumers assign to items associated with sleep - switching from seeing a bed to an ordinary piece of furniture to an important instrument in getting an edge on your performance and wellbeing.
Sleeping together (apart)
It’s well-established that people are motivated when they pursue hobbies alongside others; and telling other people about your plans and goals is great for keeping you accountable and on-track. We’ve seen this brought to life through apps like Strava, Fitbit, and our very own portfolio company Swing Vision.
We foresee similar communities and ecosystems being formed around sleep, featuring social challenges, sleep influencers, and other content creators. There is even an event called the World Sleep Championships where ‘sleep racers’ are paired up in a round robin style tournament, and compete to post the best sleep score.
It’s one thing to know that good sleep is important, it’s another to experience sleep that opens (or closes?) your eyes to the best rest you’ve had in your life. This is what sleep retreats are for. These relaxing experiences help you catch up on your sleep deficit, improve your sleep habits, and return to your normal life with a newfound ability to power-down on demand.
Fully featured sleep retreats run sleep diagnostics, incorporate melatonin and serotonin into meals, have sleep coaches on hand, pillow menus, sleep meditations, and special lighting designed to reset circadian rhythms.
40% of people who try sleep wearables stop using the device within 6 months. This is partially because the benefits of good sleep can be harder to quantify and observe. This makes tracking routines hard to stick to, and prolonged adherence to a healthy routine difficult to achieve.
We believe the best wearables companies will measure the impact of sleep and integrate it with a broader picture of our health and performance - connecting the dots between the impact of sleep on our mood, energy levels, appetite, concentration, and alertness. This level of granularity will help people appreciate the impact of sleep, and the motivation to stick to good habits. Companies such as Oura are starting to do this - using its sleep data to make suggestions on when to work out, when to recover, and when to focus.
Startups making waves
There are already companies starting to make waves in sleeptech. Here are just a few from around the world:
WHOOP not only measures sleep, but also recovery and strain. It triangulates between scores such as heart rate variability and resting heart rate to tell you how ready you are to perform - issuing a score of green, yellow, or red. Its users have taken to sharing these scores socially - and a green recovery score is as celebrated as clocking in a personal best on a run. WHOOP has found a cult-like love amongst athletes and other high performers.
Other trackers include Rise, which tracks sleep deficit and circadian rhythms. The app has a daily planner which uses this data to make personalised recommendations - such as when you should stop drinking caffeine, work out, limit blue light exposure, and go to sleep.
There’s a spate of inventions that help people take their sleeping game up a level: Crescent tracks your sleep and connects you to certified sleep coaches that help you methodically improve your sleep, while Dawn Health uses cognitive behaviour therapy (CBT) techniques to treat insomnia - enabling communication with therapists 24/7 via its app and access to tailored plans for conquering insomnia. Another app Sleep Cycle facilitates ‘bio-synced’ waking - detecting sleep stages and waking you up at the optimal time in your sleep cycle.
Meanwhile, Pzizz creates deeply relaxing dreamscapes that help you fall asleep, stay asleep, and wake up feeling refreshed. The app has different modalities for when you want a full night’s sleep, a nap, or a burst of focus upon waking from a power nap. Pzizz combines music, rhythm, narrative, and sounds to create the perfect scape for every use case.
Some companies are innovating on the bed itself. Bryte has engineered an intelligent and connected bed. Using ‘Restorative Intelligence’, the mattress monitors your body’s signals - like temperature and points of pressure. It uses contouring to release pressure and help you sleep better. The bed currently retails for an eye-watering $7,600 and is mostly being used by luxury hotels.
Similarly, Eight Sleep, which raised a $70 million Series C in 2021, offers dynamic heating and cooling. It retails at almost $3k, with an additional $240 annual subscription that unlocks sleep insights and offers content like sleep meditations.
Dormio is a wearable ‘glove’ that helps with incubating and inducing creative dreams.
During sleep onset, we enter a state called hypnagogia - a semi-lucid sleep state where we begin dreaming before we fall fully unconscious. Hypnagogia is characterised by phenomenological unpredictability, distorted perception of space and time, loss of sense of self, and spontaneous, fluid idea association.
The Dormio glove can detect the beginning and end of hypnagogia, and uses audio cues to ‘incept’ content into this phase of dreaming. Sleep scientists are experimenting with how these techniques can be use to treat recurring nightmares or even PTSD.
Started by Caspar mattress, the Dreamery is a room in NYC where you can pay $25 to take a power nap. Its room is complete with pyjamas, toiletries, and a coffee as you wake up. There’s also a bookshelf packed with books that will put you to sleep - with titles like ‘The Colour Atlas of Hypertension’.
10 years from now
As our understanding of sleep develops, we’ll start taking sleep more seriously. We’ll settle on a universal understanding of what sleep is and how much of it we need. There will be more education and awareness, and more tech to help us improve our sleep - and in doing so, our wellbeing and performance. Here are some of our predictions for the next 10 years:
- Sleep will become a more foundational pillar of medicine. Instead of a subject largely sidelined by med school - the importance of sleep will become as central a part of medical literature as diet and exercise. There will be more research into how to switch into and lengthen restorative sleep - which keeps us healthy and helps us heal. We’ll also see sleep nurses carers becoming more common.
- Driven by wearables and smart mattresses, homes will morph into personal sleep clinics. Data collected at home can be analysed by sleep doctors, and therapies delivered through connected tech. Sleep coaches will become true partners in sleep optimisation - helping people choose the right pillows and mattresses, fine-tuning diet, and even composing dreamscape music.
- As employers and schools start to recognise the link between sleep and performance, businesses will start incentivising and rewarding good sleep hygiene - team sleep challenges will become the new step challenges. Insurance companies will step in too - Medibank and nib already offer rebates to reaching fitness goals; we believe the same will start to be applied to sleep.
- As innovation in DreamTech accelerates, we see a role for regulators to step in to ensure advertisers follow a Dream Advertising Code. Our dreams are our last bastion of privacy - and one worth defending!
50 years from now
Speculating on the future is exciting, frightening, and amusing. Here are just some of our speculations on how things may play out:
- Just as food pyramids are taught in schools, we think kids will be taught about the science of sleep. But just as Big Diary and Big Carbohydrates sought to influence what was taught, perhaps we’ll see Big Sleep trying the same…
- Sleep ‘check-ups’ will become as routine as yearly trips to the dentist - resulting in many more diagnoses for conditions such as sleep apnea and parasomnias (sleep walking and teeth grinding), which currently go unnoticed.
- Dream incubation will be well understood and widely practiced. We’ll see people programming particular dreams and dreams available for streaming. We may even see Oscars for particularly well-directed dream content!
- The same techniques could be applied to learning - with ‘night classes’ made available to master skills and knowledge quickly. Perhaps we’ll also be able to program our unconscious time to give us an edge, or use dreams to treat conditions like PTSD, anxiety, and trauma.
- And as with all innovations - we predict there may be an initial burst of unregulated experimentation, followed by more considered regulation and selective uptake. For example, we predict we’ll experience a dystopian late-stage capitalist event where advertisers infiltrate our dreams - before we kick them out for good. Similarly, there may be a pushback against constant tracking by wearables and programmable dreams - and a return to the simple pleasure of a natural slumber.
What do you think of our predictions? Are we dreaming? Let us know in comments!