Scorecard: How Have the Thiel Fellows Fared?
in 2011 peter thiel embarked on an audacious plan: he’d give a group of teenagers $100,000 each to forgo college—and build their own startups from scratch. it quickly generated immense buzz as applications poured in. in the end, 24 young entrepreneurs bec
ing, Proud hired Matthew Walker, director of the Sleep & Neuroimaging Laboratory at the University of California, Berkeley, as Hello’s chief scientist. Walker believes that lack of sleep is an “epidemic” in First World countries and that Sense can help fix that. After one year of use, 71% of Sense users slept longer on average than they had before, and 57% had more regular wake-up times, the company claims. Hello hopes to do even better as it tests more personalized sleep techniques.
Proud proved there was a market for sleep-centered products, at least among early adopters, with a successful Kickstarter campaign in July 2014. After racing to build a basic hardware prototype and marketable software façade, Hello launched its campaign with a slick video and a goal of $100,000. It blew past the finish line, scoring $1 million in the first four days and $2.4 million after one month, just a hair shy of VR phenomenon Ocu- lus Rift’s crowdfunding haul. That summer proved an intoxicating high, but there was so much to do to make the marketing pitch a reality that four bottles of celebratory champagne sat in the ofce refrigerator unopened until this past Thanksgiving.
Hello promised delivery by November 2014 but delayed the first shipments until February as production challenges mounted. Sense is a two-part system that includes a bedside device—an amalgam of LEDS, circuits and sensors to detect light, sound, temperature and air quality, all stuffed into a small sphere—and an accompanying battery-powered, Bluetooth-enabled “Sleep Pill,” which clips to your pillow to track movement. The team had to design many of the manufacturing tools themselves. That following June Hello brought in a $30 million cash infusion at the $250 million valuation from the likes of Temasek Holdings, a government-owned invest-
ment fund in Singapore, but the rest of the year was lost to fixing bugs and rewriting core features. In 2016, as Amazon rolled out the Echo and Google revealed Google Home, both voice-enabled wireless speakers, Proud pushed the team to add voice controls to the latest Sense, which went on sale this past November.
“The big challenge is always: Can you lock in the market enough before people develop copycats that are cheaper and roughly equivalent?” Thiel says. “This is always something a little harder for hardware than software.”
Unfortunately, even the new version feels like an unfinished product searching for a market. After trying it for a week, I enjoyed Sense’s novelty as a smarter alarm clock with limited voice commands and the ability to turn off the alarm with a wave of your hand. But for my $149, the core functionality is too inconsistent. It’s supposed to detect when you fall asleep and wake up, and analyze your tossing and turning to see how many hours you’re in deep sleep. Yet the Sense interprets data gathered from the clip on my pillow rather than a band on my wrist, so it frequently fails to register when I get up from bed and often confuses my fiancée’s movement for my own. Even if it were accurate, neither the sleep results nor other measurements are groundbreaking. Everyone already knows that blackout curtains are good for beauty rest and a barking dog is bad.
Other warning signs abound. Proud boasts about the new Hello displays in nearly 700 Target stores across the country, but the only inventory in Oakland was one Sense tucked in a side cabinet next to some Apple TVS and Linksys wireless routers. A survey of Best Buys around New York found only one with the product in stock; other stores indicated you needed to order it. And when I brought a Sense home, I nearly abandoned the set-up process after an hour of trying and failing to plug in the charging cable. Hello says a new manufacturer had constructed the USB port a millimeter off target in a few units. WHILE PLENTY OF QUESTIONS REMAIN
about Sense, Proud now treats his risky pivot as a thesis statement. He trashes devices that need to be worn (like the Apple Watch) or require direct interaction (like the home assistants from Amazon and Google). His goal is to cover the entire 24 hours of your day with a few “nonengagement” health-tracking devices like Sense. “It’s a tragedy that we can’t build and release them all right now,” Proud asserts.
He’ll need to diversify his product line soon to avoid the fate of other hardware startups like fellow Kickstarter darling Pebble, which shut down in December, and drone maker 3D Robotics, which crashed after burning through $100 million in funding. Even public companies like Fitbit (trading down 86% from its peak) and Gopro (down 90%) have struggled. “On one hand, it’s easier than ever to build a hardware product,” says Jan Dawson, analyst at Jackdaw Research. “But in some ways it’s harder than ever to be competitive and build a sustainable business.”
In the meantime, Proud must mature as the leader of a 50-employee startup trying to go toe-to-toe with companies that outnumber and out-finance him. While friends extol Proud as wise beyond his years, former Hello staffers describe him as a smart but inveterate risk-taker who often unravels in tense situations. “You could see the pressure got to him, and sometimes I would think it’s because he’s young,” a former Hello engineer says. “He would suddenly rush in saying, ‘We need to do X because people are complaining about it.’ ” Instead of patiently adhering to a long-term plan, Proud is prone to rash decisions. “The ability to take risks and be aggressive is the foundation of James’ decision making, and it may eventually come back to bite him,” says one ex-hello employee who worked closely with Proud for more than two years. “If that day never comes, he’s a genius. If it does, the warning signs were there.”
Proud doesn’t deny he can be a capricious boss. In December 2014, on the morning an engineer was set to fly to China to install the final firmware for the Sense’s first manufacturing run, Proud decided to add one more feature. His CTO, Tim Bart, told him it was insane to change anything in the code at such a late hour, but Proud was suddenly convinced that Sense should light up and play a sound when it was plugged in for the first time—like a computer booting up.
After a bruising argument, Proud got his way. The engineer finished coding the change on the cross-pacific flight, and through skill and luck avoided introducing new bugs into the final product.
Was that last minute intervention a Steve Jobs-like moment of product genius or the power trip of an enabled, immature founder? Proud’s analysis of his behavior in hindsight is simple and unapologetic: “Well, I was right.”